UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
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Soliciting Material Pursuant to §240.14a-12 |
The Providence Service Corporation
(Name of Registrant as Specified In Its Charter)
Not Applicable
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1275 Peachtree Street, Sixth Floor
Atlanta, GA 30309
_________________
April 27, 2018
Dear Stockholder:
We are pleased to invite you to attend the 20182020 Annual Meeting of Stockholders (the “Annual Meeting”) of The Providence Service Corporation (the(“Providence” or the “Company”), which will be held on Tuesday, June 12, 2018,16, 2020, at 11:10:00 a.m. eastern time,Mountain Daylight Time, at 700 Canal4700 South Syracuse Street, ThirdFourth Floor, Stamford, CT 06902.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our website at www.prscholdings.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.
At the Annual Meeting you will be asked to consider and vote on the proposals described in the accompanying notice of annual meeting and Proxy Statement, as well as such other business as may properly come before the meeting.
Your vote is important, and we encourage you to vote promptly. For record holders, regardless of whether or not you are able to attend the Annual Meeting in person, please follow the instructions contained in the notice of annual meeting on how to vote via the Internet, by telephone, or request a paper proxy card to complete, sign and return by mail so that your shares may be voted. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares.
On behalf of the Board of Directors and management of the Company, I extend our appreciation for your continued support.
Daniel E. Greenleaf | ||
President and Chief Executive Officer | ||
Table of Contents
Page | ||
VOTING PROCEDURES | 1 | |
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 4 | |
6 | ||
10 | ||
19 | ||
PROPOSAL 2 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION | 37 | |
PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 38 | |
| REPORT | 39 | |
39 | ||
STOCKHOLDER PROPOSALS FOR | 40 | |
40 | ||
40 | ||
40 | ||
1275 Peachtree Street, ThirdSixth Floor
_________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 2018
_________________
TO OUR STOCKHOLDERS:
Notice is hereby given that the 20182020 Annual Meeting of Stockholders (the “Annual Meeting”) of The Providence Service Corporation (the “Company”) will be held at 700 Canal4700 South Syracuse Street, ThirdFourth Floor, Stamford, CT 06902,Denver, CO 80237, at 11:10:00 a.m. eastern timeMountain Daylight Time on Tuesday, June 12, 2018.16, 2020. The Annual Meeting is being held for the following purposes:
1. | To elect |
2. | To hold a non-binding advisory vote to approve named executive officer compensation; |
3. | To ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company to serve for the |
4. | To transact such other business as may properly come before the Annual Meeting or any |
Only stockholders of record of the Company’s common stock, $0.001 par value $0.001 per share, and Series A convertible preferred stock,Convertible Preferred Stock, $0.001 par value $0.001 per share, as shown by the transfer books of the Company, at the close of business on April 18, 2018,22, 2020, are entitled to notice of, and to vote at, the Annual Meeting or any adjournments, postponementsadjournment, postponement or reschedulingsrescheduling thereof.
All stockholders are cordially invited to attend the Annual Meeting in person. However, to ensure your representation at the Annual Meeting, you are urged to vote your shares in advance using one of the methods outlined in the accompanying Proxy Statement and proxy card.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our website at www.prscholdings.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on Tuesday, June 12, 2018.
By Order of the Board of Directors, |
 |
Kathryn Stalmack | |
April 29, 2020 Atlanta, Georgia | |
Senior Vice President, General Counsel & Corporate Secretary |
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
1275 Peachtree Street, ThirdSixth Floor
PROXY STATEMENT
2020 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of The Providence Service Corporation (the “Company”), a Delaware corporation, for use at the 20182020 Annual Meeting of Stockholders (the “Annual Meeting”) of the Company, to be held at 700 Canal4700 South Syracuse Street, ThirdFourth Floor, Stamford, CT 06902,Denver, CO 80237, at 11:10:00 a.m. eastern timeMountain Daylight Time on Tuesday, June 12, 2018,16, 2020, and at any adjournments, postponementsadjournment, postponement or reschedulingsrescheduling of the meeting, for the purposes set forth herein and in the attached notice of the Annual Meeting. Accompanying this Proxy Statement is the Board’s proxyProxy for the Annual Meeting, which you may use to indicate your vote on the proposals described in this Proxy Statement.
We intend to hold the annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our website at www.prscholdings.com for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date.
As is the practice of many other companies, the Company provides proxy materials by a “notice and access” process through the Internet. Those stockholders who wish to receive paper proxy materials may request them. This Proxy Statement and accompanying proxy will be mailed to Company stockholders who request paper proxy materials on or about April 27, 2018.
Only stockholders of record, as shown on the transfer books of the Company, at the close of business on April 18, 201822, 2020 (the “Record Date”), will be entitled to notice of, and to vote at, the Annual Meeting or any adjournments, postponementsadjournment, postponement or reschedulingsrescheduling thereof. On the Record Date, there were 13,020,299
Sending in a signed proxy will not affect a stockholder’s right to attend the Annual Meeting and vote in person since the proxy is revocable. All proxies which are properly completed, signed and returned to the Company prior to the Annual Meeting or voted by Internet or telephone, and which have not been revoked, will, unless otherwise directed by the stockholder, and other than with respect to broker non-votes, as discussed below, be voted in accordance with the recommendations of the Board set forth in this Proxy Statement. A stockholder may revoke his or her proxy at any time before it is voted by following the instructions under “Voting Procedures—Changing or Revoking Your Vote”.
The principal executive offices of the Company are located at 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902,Atlanta, GA 30309 and the telephone number of the Company is (203) 307-2800.(404) 888-5800. References to the “Company”, “Providence”, “we”,“Company,” “Providence,” “we,” “us” or “our” and similar terms mean The Providence Service Corporation and, except as otherwise specified herein, its subsidiaries. When such terms are used in reference to the Common Stock or Preferred Stock, they refer specifically to The Providence Service Corporation.
VOTING PROCEDURES
The presence, in person or represented by proxy, of the holders of a majority of the outstanding shares of Common Stock and Preferred Stock (on an as-converted basis) entitled to vote at the Annual Meeting will constitute a quorum for the transaction of business at the Annual Meeting. Withheld votes, abstentions and broker non-votes (that is when a nominee holding shares of Common Stock or Preferred Stock cannot vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner) will be included in the number of shares present at the Annual Meeting for the purpose of determining the presence of a quorum.
A holder of Common Stock is entitled to cast one vote for each share of Common Stock held of record on the Record Date on all matters to be considered at the Annual Meeting. A holder of Preferred Stock is entitled to that number of votes equal to the whole number of shares of Common Stock into which such holder’s aggregate number of shares of Preferred Stock are convertible as of the close of business on the Record Date. As of the Record Date, each share of outstanding Preferred Stock was convertible into approximately 2.51 shares of Common Stock.
If you hold your shares in “street name” (that is, your shares are held in an account at and registered in the name of a brokerage firm, bank, broker-dealer or similar organization), your broker may vote your shares under certain limited circumstances if you do not provide voting instructions before the Annual Meeting, in accordance with the NASDAQ rules of the New York Stock Exchange that are applicable to the Nasdaq Stock Market (“NASDAQ”) that govern the banks and brokers. These circumstances include voting your shares on “routine matters,” such as the ratification of the appointment of our independent registered public accountants described in this proxy statement.accountants. With respect to this proposal, therefore,routine matters, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted. The election of directors and the non-binding advisory vote approving executive compensation, however, are not considered routine matters under NASDAQ rules relating to voting by banks and brokers.matters. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
Approval of Proposal 1 requires a majority of the votes cast for each director nominee. Abstentions and broker non-votes are not considered votes cast with respect to the election of directors and thus will have no effect on the election of directors. In accordance with the Company’s amendedAmended and restated bylaws,Restated Bylaws (“Bylaws”), cumulative voting is not permitted for the
Approval of Proposal 2 requires the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions are considered present and entitled to vote on Proposal 2 and will have the same legal effect as votes against such proposal. Broker non-votes are not entitled to vote on Proposal 2 and will not count as votes against such proposal at the Annual Meeting.
Approval of Proposal 3 requires the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions are considered present and entitled to vote on Proposal 3 and will have the same legal effect as votes against such proposal. There will be no broker non-votes associated with this proposal, as the ratification of our independent registered public accounting firm is a routine matter. As a result, if your shares are held in “street name” and you do not give your bank or broker instructions on how to vote, your shares willmay be voted by the broker in its discretion.
Notice
and Access. The Company uses the Internet as the primary means of furnishing proxy materials to stockholders. Stockholders will receive a Notice of Internet Availability of Proxy Materials (the “Notice”) with instructions for accessing the proxy materials and voting via the Internet. The Notice will also provide information on how stockholders may obtain paper copies of our proxy materials.The Company’s proxy materials are also available at www.proxyvote.com.
Stockholder of Record
. If you are the stockholder of record with respect to your shares (that is, your shares are•
In Person. You may vote in person at the Annual Meeting by requesting a ballot from a Company representative when you arrive.•
Internet. You may vote by Internet at www.proxyvote.com. You will be prompted to enter your Control Numbers which are located on the Notice and then follow the instructions on the Notice to vote.•
Telephone. You may vote by telephone at (800) 690-6903. You will be prompted to enter your Control Numbers which are located on the Notice and then follow the instructions on the Notice to vote.•
Mail. If you requested printed copies of the proxy materials by mail, you may vote by proxy by filling out the voting instruction form included with your proxy materials and returning it in the envelope provided.The deadline for registered stockholders to vote by Internet, telephone or mail is 11:59 p.m. eastern timeEastern Time on June 11,
Beneficial Owner of Shares Held in Street Name
. If you are the beneficial owner of shares held in street name (that is, your shares are held in an account at and registered in the name of a brokerage firm, bank, broker-dealer or similar organization), you may vote using the following methods:•
In Person. You must obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that authorizes you to vote your shares held in street name at the Annual Meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy.You must bring a copy of the legal proxy to the Annual Meeting and ask for a ballot from a Company representative when you arrive. In order for your vote to be counted, you must hand both the copy of the legal proxy and your completed ballot to a Company representative to be provided to the inspector of election.
•
Internet and Telephone. Please check your proxy card or contact your respective organization to determine your availability to vote by Internet or telephone.•
Mail. If you requested printed copies of the proxy materials by mail, you may vote by proxy by filling out the voting instruction form included with your proxy materials and returning it in the envelope provided.Changing or Revoking Your Vote.
After voting, you may change your vote one or more times by completing and returning a new proxy to the Company, by voting again either by Internet or telephone as described in this Proxy Statement, or by voting in person at the Annual Meeting. You may request a new proxy card from the Company’s Corporate Secretary at the address below. You may revoke a proxy before its exercise by filing written notice of revocation with the Company’s Corporate Secretary atIf you hold your shares through a brokerage firm, bank, broker-dealer or similar organization, please refer to your proxy card or other information forwarded by such organization to learn how you can revoke your proxy and change your vote.
Failure to Provide Voting Instructions
. Other than with respect to broker non-votes, if you submit a signed proxy card or vote by Internet or telephone, but do not indicate how you want your shares voted, the persons named in the enclosed proxy card will vote your shares of Common Stock or Preferred Stock, as the case may be:•
•
•
•
with respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote the proxies in their discretion in accordance with their best judgment and in the manner they believe to be in the best interest of the Company.Solicitation of Proxies.
The entire cost of soliciting proxies, including the costs of preparing, assembling and mailing this Proxy Statement, the proxy card and any additional soliciting materials furnished to stockholders, will be borne by the Company. In addition to solicitation by mail, officers, directors or employees of the Company may solicit proxies in person or by telephone, facsimile or similar means without additional compensation. Upon request, the Company will pay the reasonable expenses incurred by record holders of the Common Stock or Preferred Stock who are brokers, dealers, banks or voting trustees, or their nominees, for sending proxy materials and the Annual Report on Form 10-K for the fiscal year ended December 31,The Company is not presently aware of any matters that will be brought before the Annual Meeting that are not reflected in the attached Notice of the Annual Meeting. If any such matters are brought before the Annual Meeting, the persons named in the enclosed proxy will act or vote in accordance with their best judgment.
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of the Record Date, with respect to the beneficial ownership of Providence’s Common Stock and Preferred Stock by (a) each stockholder known by us to own beneficially more than 5% of our outstanding voting power of Common Stock and Preferred Stock, (b) each of Providence’s directors and nominees for director, (c) each of Providence’s executive officers named in the “Summary Compensation Table” which follows, who were named executive officers on the Record Date and (d) all of Providence’s directors and executive officers as a group. Except as otherwise specified, the named beneficial owner has sole voting and investment power with respect to the shares.
| Name and Address | No. of Shares of Common Stock Beneficially Owned (1) | No. of Shares of Preferred Stock Beneficially Owned (1) | Percent of Total Voting Power (1) | ||||||
| BlackRock, Inc. (2) | 1,476,678 | — | 9.8 | % | |||||
| Coliseum Capital Management, LLC (3) | 1,653,755 | 765,916 | 23.8 | % | |||||
| Dimensional Fund Advisors LP (4) | 977,794 | — | 6.5 | % | |||||
| Renaissance Technologies LLC (5) | 1,002,700 | — | 6.7 | % | |||||
| Directors | |||||||||
| Todd J. Carter (6) | 7,048 | — | * | ||||||
| David A. Coulter (6) | 13,441 | — | * | ||||||
| Richard A. Kerley (7) | 31,169 | — | * | ||||||
| Kristi L. Meints (7)(8) | 55,917 | 1,000 | * | ||||||
| Leslie V. Norwalk (9) | 9,101 | — | * | ||||||
| Christopher S. Shackelton (10) | 1,653,755 | 765,916 | 23.8 | % | |||||
| Frank J. Wright (6) | 7,242 | — | * | ||||||
| Named Executive Officers | |||||||||
| R. Carter Pate | — | — | * | ||||||
| William Severance (11) | 7,184 | — | * | ||||||
| David C. Shackelton (12) | 15,167 | 76 | * | ||||||
| Sophia D. Tawil | 1,099 | — | * | ||||||
| James M. Lindstrom (13) | 84,156 | — | * | ||||||
| Matthew Umscheid | 2,390 | — | * | ||||||
| All current directors and executive officers as a group (11 persons) (14) | 1,801,123 | 766,992 | 24.8 | % | |||||
Name and Address |
| No. of Shares of Common Stock Beneficially Owned (1) |
| No. of Shares of Preferred Stock Beneficially Owned (1) |
| Percent of Total Voting Power (1) | ||
BlackRock, Inc. (2) |
| 1,858,404 |
|
| — |
|
| 12.4% |
Coliseum Capital Management, LLC (3) |
| 869,091 |
|
| 765,916 |
|
| 18.6% |
Dimensional Fund Advisors LP (4) |
| 843,324 |
|
| — |
|
| 5.6% |
Renaissance Technologies LLC (5) |
| 930,699 |
|
| — |
|
| 6.2% |
American Century Investment Management, Inc.(6) | 701,230 | 4.7% | ||||||
The Vanguard Group (7) | 744,093 | 5.0% | ||||||
Directors | ||||||||
Todd J. Carter (8) |
| 10,857 |
|
| — |
|
| * |
David A. Coulter (8) |
| 20,466 |
|
| — |
|
| * |
Richard A. Kerley (8) |
| 34,978 |
|
| — |
|
| * |
Leslie V. Norwalk (8) |
| 12,910 |
|
| — |
|
| * |
Christopher S. Shackelton (9) |
| 869,091 |
|
| 765,916 |
|
| 18.6% |
Frank J. Wright (8) |
| 12,780 |
|
| — |
|
| * |
Daniel E. Greenleaf (10) | — | * | ||||||
Named Executive Officers | ||||||||
R. Carter Pate (11) |
| 258,563 |
|
| — |
|
| 1.7% |
Kevin M. Dotts (12) |
| 3,493 |
|
| — |
|
| * |
Kathryn Stalmack (13) |
| 5,842 |
|
| — |
|
| * |
Suzanne G. Smith (14) |
| 1,816 |
|
| — |
|
| * |
William Severance | 1,960 |
| — | * | ||||
Laurence Orton | — | — | * | |||||
All current directors and executive officers as a group (10 persons) (15) |
| 971,873 |
|
| 765,916 |
|
| 19.3% |
* | |
Less than 1 % | |
(1) | |
The securities “beneficially owned” by each stockholder are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they may include securities to which the stockholder has or shares voting or investment power or has the right to acquire within 60 days of the Record Date. Beneficial ownership may be disclaimed as to certain of the securities. As of the Record Date there were |
(2) | |
This information is based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. (55 East 52 nd Street, New York, NY 10055) on |
(3) | |
This information is based on ownership information reported in the Schedule 13D/A filed with the SEC on |
(4) | |
This information is based on the Schedule |
(5) | |
This information is based on the Schedule 13G/A filed with the SEC by Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation (800 Third Avenue, New York, NY 10022) on February |
(6) | This information is based on the Schedule 13G/A filed with the SEC by American Century Investment Management, Inc., American Century Companies, Inc. and Stowers Institute for Medical Research (4500 Main Street, Kansas City, MO 64111) on February 11, 2020. |
(7) | This information is based on the Schedule 13G/A filed with the SEC by The Vanguard Group (P.O. Box 2600, V26, Valley Forge, PA 19482-2600) on February 12, 2020. |
(8) | The shares reported include |
(9) | |
Includes shares of Common Stock and Preferred Stock held by |
(10) | The shares reported do not include 32,391 restricted stock units. |
(11) | The shares reported include |
(12) | |
Includes |
(13) | Includes 5,842 shares of |
(14) | Includes 1,816 shares of |
(15) | Includes 29,597 shares of |
PROPOSAL 1 – ELECTION OF DIRECTORS
The Company’s second amendedSecond Amended and restated certificateRestated Certificate of incorporation,Incorporation, as amended, provides that the number of directors be between fivefour and eleven, as determined by the Board. The Board iscurrently has seven directors divided into three classes, approximately equal in size, serving staggered three yearthree-year terms. Each class must be as nearly equal in size as possible. At each annual meeting of stockholders, the successors to the directors whose terms will then expire will be elected to serve from the time of their election and qualification until the third annual meeting following their election or until their successors have been duly elected and qualified, or until the earlier of their death, resignation or removal. On April 24, 2018, the Board approved a reduction in the size of the Board from eight to six directors effective immediately following the Annual Meeting.
Under the Company’s amended and restated bylaws,Bylaws, to be elected in an uncontested election, a director nominee must receive a majority of the votes cast for each director nominee. In an uncontested election, thean incumbent director nominee must submit an irrevocable resignation that is subject to (i) that director receiving less than a majority of the votes cast in the uncontested election, and (ii) acceptance of the resignation by the Board in accordance with the policies and procedures adopted by the Board for such purpose. In the event an incumbent director does not receive a majority of the votes cast in an uncontested election, the Nominating and Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation or whether other action should be taken. The Board is required to act on the Nominating and Governance Committee’s recommendation no later than 90 days following certification of the stockholder vote. If any incumbent director does not receive a majority of the votes cast, the Board will publicly disclose its decision regarding accepting or not accepting a resignation within four business days of reaching its decision.
The Board proposes the election of Todd J. CarterDavid A. Coulter, Leslie V. Norwalk and Frank J. WrightDaniel E. Greenleaf as Class 32 directors. The director nominees were nominated by the Nominating and Governance Committee of our Board, which nomination was confirmed by the Board. Each nominee has consented to serve as a nominee for election to the Board, to be named in the Proxy Statement and to serve as a member of the Board if elected by the Company’s stockholders. Information regarding each nominee is set forth below.
The Board has no reason to believe that the Board’s nominees are unable to serve or will not serve if elected. If for any reason a nominee becomes unable to serve or for good cause will not serve if elected, the Nominating and Governance Committee of our Board may designate a substitute nominee, in which event the shares represented by proxies returned to us will be voted for such substitute nominee. If the Nominating and Governance Committee designates a substitute nominee, we will file an amended proxy statement that, as applicable, identifies the substitute nominee, discloses that such nominee has consented to being named in the revised proxy statement and to serve if elected, and includes certain biographical and other information about such nominee required by the applicable rules promulgated by the SEC.
If elected, Todd J. CarterDavid A. Coulter, Leslie V. Norwalk and Frank J. WrightDaniel E. Greenleaf are each expected to serve until the 20212023 annual meeting of stockholders or until his or her successor is duly elected and qualified. Mr. CarterCoulter, Ms. Norwalk and Mr. WrightGreenleaf are presently directors of the Company.
Unless directed otherwise, the persons named in the enclosed proxy intend to vote such proxy for the election of the listed nominees or, in the event of death, disqualification, refusal or inability of a nominee to serve, for the election of such other person as the Board may recommend in the place of such nominee to fill the vacancy.
The Board unanimously recommends that the stockholders vote “FOR” election of Todd J. CarterDavid A. Coulter, Leslie V. Norwalk and Frank J. Wright
The following table sets forth certain information with respect to the current directors and the director nominees as of the Record Date.
| Name | Age | Class | Term Expires | |||
| Todd J. Carter† | 54 | 3 | 2018 | |||
| David A. Coulter | 70 | 2 | 2020 | |||
| Richard A. Kerley | 68 | 1 | 2019 | |||
| Kristi L. Meints | 63 | 3 | 2018 | |||
| Leslie V. Norwalk | 52 | 2 | 2020 | |||
| Christopher S. Shackelton | 38 | 1 | 2019 | |||
| Frank J. Wright† | 70 | 3 | 2018 | |||
Name |
| Age |
| Class |
| Term Expires |
Todd J. Carter |
| 56 |
| 3 |
| 2021 |
David A. Coulter† |
| 72 |
| 2 |
| 2020 |
Richard A. Kerley |
| 70 |
| 1 |
| 2022 |
Leslie V. Norwalk† |
| 54 |
| 2 |
| 2020 |
Christopher S. Shackelton |
| 40 |
| 1 |
| 2022 |
Frank J. Wright |
| 72 |
| 3 |
| 2021 |
Daniel E. Greenleaf† | 55 | 2 | 2020 |
† = Director Nominee
The process undertaken by the Nominating and Governance Committee in selecting qualified director candidates is described below under “Corporate Governance—Director Nomination Process—Director Nominee Selection Process”.Process.” Certain individual qualifications and skills of our directors that contribute to the Board’s effectiveness as a whole are described in each director’s biography.
Director Nominees
David A. Coulter
Director Since: 2016
Board Committees: Compensation Committee and Nominating and Governance Committee member
Mr. Coulter is a Special Limited Partner of Warburg Pincus. During the past 11 years, he served in roles at Warburg Pincus, including Vice Chairman as well as Managing Director and senior advisor focused on the firm’s financial services investment activities. Prior to that, Mr. Coulter held a series of positions at J.P. Morgan Chase and was a member of its Office of the Chairman. He also served as Chairman and Chief Executive Officer of Bank of America Corporation. Mr. Coulter is a director of Triton International Ltd. and Varo Money, Inc. He is also a board member of Lincoln Center, Carnegie Mellon University, Third Way and the Northern California Asia Society. Mr. Coulter received a bachelor’s degree and master’s degree from Carnegie Mellon University.
Mr. Coulter’s experiences as both a senior executive of publicly traded financial services corporations, and as a director of public and private companies, provides the Board approved a reductionwith extensive executive experience with regard to matters of interest to financial institutions, including risk, compensation, corporate governance and mergers and acquisitions.
Leslie V. Norwalk
Director Since: 2015
Board Committees: Chairperson of the Nominating and Governance Committee, Audit Committee member
Since September 2007, Ms. Norwalk has served as Strategic Counsel to Epstein Becker & Green, P.C. From 2001 to 2007, Ms. Norwalk served the Bush Administration in the sizeCenters for Medicare & Medicaid Services (CMS). From 2006 to 2007, she was the Acting Administrator, where she managed the operations of federal health care programs, including Medicare and Medicaid. For the four years prior to that position, she was the agency’s Deputy Administrator. Prior to serving the Bush Administration, Ms. Norwalk practiced law with Epstein Becker & Green, P.C. where she advised clients on a variety of healthcare policy matters. She also served the first Bush administration in the White House Office of Presidential Personnel and the Office of the U.S. Trade Representative. Ms. Norwalk is currently a director on the public company boards of Magellan Health Inc., NuVasive Inc., Neurocrine Biosciences, Inc., and Arvinas Inc. She also serves as an Advisor to several private equity funds. She received a bachelor's degree from Wellesley College and a juris doctor degree from George Mason University School of Law.
Ms. Norwalk’s significant healthcare regulatory and policy expertise, including her experiences with the Bush Administration on Medicare and Medicaid matters, provides healthcare industry expertise to the Board. Ms. Norwalk will be able to help guide the Company’s strategy, particularly as the healthcare regulatory environment continues to evolve.
Daniel E. Greenleaf
Director Since: 2019
Daniel E. Greenleaf has been a director since December 2019. Mr. Greenleaf currently serves as the President and Chief Executive Officer of the Company. Prior to joining the Company, from September 2016 through August 2019, Mr. Greenleaf served as President and Chief Executive Officer of BioScrip, Inc., the largest independent provider of infusion and home care management solutions, where he spearheaded the turnaround and successful merger of BioScrip with Option Care Health (Nasdaq: OPCH). Prior to BioScrip, from December 2013 through September 2016, he served as Chairman and Chief Executive Officer of Home Solutions Infusion Services, where he led the turnaround and eventual sale to BioScrip. Prior to joining Home Solutions Infusion Services, from April 2008 through November 2012, Mr. Greenleaf was the President and Chief Executive Officer of Coram Specialty Services, where he was instrumental in growing Coram to become the top-performing home infusion company in the country prior to its sale to CVS. Before joining Coram, Mr. Greenleaf served as President and Chief Operating Officer of VioQuest Pharmaceuticals, a publicly traded pharmaceutical company and as President of U.S. Operations for Celltech Biopharmaceuticals. Mr. Greenleaf holds a Bachelor of Arts in Economics from Dennison University and a Master of Business Administration from the University of Miami. Mr. Greenleaf is a military veteran, having served as a captain and navigator in the United States Air Force.
Mr. Greenleaf’s significant experience in the healthcare industry, and in particular his experience as Chief Executive Officer of BioScrip, Home Solutions and Coram, are particularly relevant to Mr. Greenleaf’s service on the Board. Further, as the only Board from eight to six directors effective immediately followingmember who is also a member of the Annual Meeting.Company’s management team, Mr. Greenleaf provides management’s perspective in Board discussions about the operations and strategic direction of the Company.
Directors
Christopher S. Shackelton
Director Nominees
Chairman of the Board
Christopher S. Shackelton was appointed Chairman in 2012 and served as Interim CEO in 2015. Mr. Shackelton is managing partner and co-founder of Coliseum Capital Management, a private investment firm that invests with a long-term orientation in undervalued companies. Previously, Mr. Shackelton worked at Watershed Asset Management and Morgan Stanley & Co. Mr. Shackelton also serves on the boards of Lazydays Holdings, Inc., an operator of recreational vehicle dealerships, and Universal Technical Institute, a technical training school for the transportation industry, as well, from time to time, private companies. Mr. Shackelton was previously Chairman of Rural/Metro Corp, an emergency ambulance company, from December 2010 to June 2011 and served on the boards of BioScrip Inc., an infusion services company from March 2015 to August 2019, LHC Group Inc., a nursing care company from November 2012 through August 2017, Advanced Emissions Solutions Inc., a clean energy technology company, from August 2014 through May 2016, and Interstate Hotels Inc., a global hotel management company, from February 2009 through March 2010. Mr. Shackelton is actively involved in multiple charitable organizations. Mr. Shackelton received a bachelor's degree in Economics from Yale College in 2001.
Christopher Shackelton's experience creating stockholder value for a wide range of companies provides the Board with valuable business leadership and strategic focus. Mr. Shackelton brings financial, investing and accounting experience from other public company boards on which he led mergers and acquisitions, financings, restructurings and other initiatives. Furthermore, Christopher Shackelton's in-depth knowledge of the healthcare industry is particularly beneficial to the Board.
Richard A. Kerley
Director Since: 2010
Board Committees: Chairperson of the Compensation Committee and Chairperson of the Audit Committee
Mr. Kerley served as the Senior Vice President, Chief Financial Officer and member of the board of directors of Peter Piper, Inc., a privately held pizza and entertainment restaurant chain, from November 2008 to December 2014, when he retired. From July 2005 to October 2008, Mr. Kerley served as the Chief Financial Officer of Fender Musical Instruments Corporation. From June 1981 to July 2005, Mr. Kerley was an audit partner with Deloitte & Touche LLP. Prior to becoming a partner at Deloitte & Touche, Mr. Kerley served as an audit manager and staff accountant from August 1971 to June 1981. Mr. Kerley also serves on the board of Cavco Industries, Inc., one of the largest producers of manufactured homes in the United States, and served on the board of The Joint Corp., a publicly traded operator, manager and franchisor of chiropractic clinics from September 2015 until June 2019. He received a bachelor’s degree in accounting from Marshall University in 1971.
Mr. Kerley served as a senior financial executive with experience in a variety of operational issues, financial budgeting, planning and analysis, capital investment decisions, mergers and acquisitions, operational and financial controls, internal and external reporting, financings and public offerings and filings with the SEC. This strong financial background provides the Board with financial expertise, including an understanding of financial statements, finance, capital investing strategies and accounting.
Todd J. Carter
Director Since
: 2016Board Committees
: Compensation Committee memberTodd J. Carter is Co-President and Chief Executive Officer of GCA Savvian Advisors,Global, a global independent investment banking firm, and serves on the firm'sfirm’s board of directors. He has served in these roles since 2008, and is a co-founder of the firm. Previously, Mr. Carter served as Chairman, President and Chief Executive Officer of Savvian Inc. and Perseus Group. Prior to 2003, he was President of Robertson Stephens & Company Inc., a global investment banking and asset management firm, and served on the firm’s board of directors. Earlier in his career, Mr. Carter was employed by McKinsey & Company and Smith Barney Inc. Additionally, Mr. Carter has served on a number of company, advisory and non-profit boards of directors. Mr. Carter received a bachelor’s degree from the University of Texas and a master of business administration degree from Harvard University.
Mr. Carter brings to the Board global investment banking experience, including his service as founder and chief executive officer of a large independent global investment bank, and his extensive financial expertise and experience in the transaction advisory industry, as well as a broad span of expertise in the financial advisory and mergers & acquisitions sectors.
Frank J. Wright
Director Since
: 2016Board Committees
: Audit Committee and Nominating and Governance Committee memberMr. Wright is founder of the PharmaTrust, a firm that provides advisory services to companies and investors engaged in healthcare services and pharmaceutical development and manufacturing. Mr. Wright has almost 40 years of experience in the chemical and pharmaceutical industries. He served as a senior executive of Alexion Pharmaceuticals LLC from 2012 to 2014, as President of European operations, and is a co-founder of Aptuit, an integrated drug development services company. Prior to that, Mr. Wright held a variety of executive positions in multiple pharmaceutical companies, including Glaxo Wellcome (now GlaxoSmithKline). He is a director of Exela Pharma Sciences and ZenQMS LLC, and retired in 2017 as a Director of Laurus Labs Private, Limited and Laurus Synthesis Inc. where he served for 10 years. Mr. Wright received a mechanical engineering degree from the University of Strathclyde, Glasgow.
Mr. Wright has almost 40 years of operational experience in the chemical and pharmaceutical industries, including as the founder of an advisory services firm engaged in healthcare services, pharmaceutical development and manufacturing adding value to the Board. Mr. Wright’s executive leadership and experience provides the Board with needed operational expertise.
Non-director Executive Officers
The following is a brief summary of the background of each current executive officer who is not a director:
Kevin M. Dotts, 62,56, has served as Interim Chief Executive Officer (“Interim CEO”) since November 2017. Mr. Pate joined Providence from Carter Pate, LLC, a resource for management and boards of directors seeking expertise and interim C-suite services, where he was the founder and served as Chief Executive Officer. From 2011 to 2014, he served as the Chief Executive Officer of one of the largest privately owned passenger transportation contracting firms based in the United States. Prior to that, Mr. Pate spent nearly two decades at PricewaterhouseCoopers (“PwC”), most recently serving as Global & U.S. Managing Partner, Capital Projects, Infrastructure & Government Practice. During his tenure at PwC, Mr. Pate held multiple leadership positions and advised Fortune 500 companies and G-20 governments. He currently serves as Chairman of the Board of Directors for BioScrip, Inc. and Board Chair of Compensation for Advanced Emissions Solutions, Inc. Author of “The Phoenix Effect” (now in five languages), Mr. Pate was recently named a “Board Governance Fellow” by the National Association of Corporate Directors. Mr. Pate holds a bachelor’s degree in accounting from Greensboro College and a masters of accounting and information management from the University of Texas at Dallas.
Kathryn Stalmack, 43, joined the Company is August 2019. Ms. Stalmack has extensive experience as a corporate transactional and is a member of the Georgia Society of CPAs and American Institute of CPAs.
Suzanne G. Smith, 52, has more than two decades of accounting and finance experience in a variety of industries. Prior to joining the Company Ms. Tawil worked at Cravath, Swaine & Moore LLPin February 2019, she most recently served as a Senior Attorney since December 2014,Chief Accounting Officer of Cumulus Media from May 2017 until February 2019. Previous appointments include Vice President and as a Corporate AssociateController of staffing firm, EmployBridge from September 2006 to December 2014.2015 through April 2017, interim Chief Financial Officer for Acuity from June 2015 through August 2015, and Senior Vice President and Corporate Controller of Serta Simmons Bedding from June 2014 through May 2015. Ms. TawilSmith was also previously Treasurer at WestRock Company. Ms. Smith graduated from The Ohio State University with a Bachelor of Science in Human Ecology and received a bachelor’s degreeMaster in Business Administration with a concentration in Finance from Barnard College, Columbia University andGeorgia State University. She is a juris doctor degree from University of Pennsylvania Law School.
CORPORATE GOVERNANCE
Board Leadership Structure
The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands that there is no single, generally accepted approach to providing Board leadership and recognizes that, depending on the circumstances, other leadership models might be appropriate. Accordingly, the Board periodically reviews its leadership structure.
The Board reviewed its leadership structure andhas determined to separate the roles of Chief Executive Officer (“CEO”) and Chairman of the Board between two individuals. The Board believes this leadership structure is appropriate because it strengthens the Board’s independence and enables the CEO to focus on the management of our business.
Independence of the Board
The Board believes that independence depends not only on our directors’ individual relationships, but also on the Board’s overall attitude. Providing objective, independent judgment is at the core of the Board’s oversight function. Under our corporate governance guidelines, the Board, with the assistance of legal counsel and the Nominating and Governance Committee, uses the current standards for “independence” established by NASDAQ to evaluate any material relationship a director may have with the Company to determine director independence. A director is not considered “independent” unless the Board affirmatively determines that the director has no material relationship with the Company or any subsidiary in the consolidated group (other than as a director of Providence or one of our consolidated subsidiaries). Any relationship that falls below a threshold set forth by the standards for “independence” established by NASDAQ and our corporate governance guidelines, or is not required to be disclosed under Item 404(a) of Regulation S-K,applicable SEC rules, is automatically deemed to be an immaterial relationship. Our Board has affirmatively determined that Mr. Carter, Mr. Coulter, Mr. Kerley, Ms. Meints, Ms. Norwalk and Mr. Wright are independent directors.
The Board’s Role in Risk Oversight
The Board has an active role, as a whole and at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each. The Company’s Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee oversees management of financial risks. The Nominating and Governance Committee manages risks associated with the independence of the Board, potential conflicts of interest as well as legal and regulatory compliance. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through attendance at committee meetings or committee reports about such risks. In addition, members of senior management regularly provide reports to the Board about their respective areas of responsibility and any risks thereof. These reports include actions taken by senior management to monitor and control such risks.
Compensation Risks
Prudent risk management is necessary to deliver long-term, sustainable stockholder value. The Compensation Committee believes that the Company’s executive compensation program supports the objectives described above without encouraging inappropriate or excessive risk-taking. In reaching this conclusion, the Compensation Committee considered in particular the following attributes and risk mitigation features of our compensation program:
our program’s emphasis on long-term, equity-based compensation discourages risk-taking that produces short-term results at the expense of building long-term stockholder value;
the maximum payout levels for bonuses and equity-based compensation are capped by the Compensation Committee or are tied to multi-year performance levels designed to support the Company’s strategy;Committee;
we cap the payment amounts under our annual cash incentive compensation plan, and the Compensation Committee can exercise negative discretion to reduce annual cash incentive compensation payments; and
the Compensation Committee uses an independent compensation consultant that performs no other services for the Company. Company, except at the direction of the Compensation Committee;
the Compensation Committee has the authority to make retroactive adjustments to incentive compensation pursuant to the Company’s clawback policy; and
the Compensation Committee reviews, in consultation with the Company’s outside compensation advisors, data contained in our peers’ proxy filings, to arrive at a compensation program that is consistent with our peers and aligns with the interests of the Company’s stockholders.
Communication with the Board
Stockholders may communicate with the Board as a whole, the non-management directors or any individual director, by sending a letter to The Providence Service Corporation, c/o Corporate Secretary, 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902.Atlanta, GA 30309. In the letter, the stockholder must identify him or herself as a stockholder of Providence. The Corporate Secretary may require reasonable evidence that the communication is being made by or on behalf of a stockholder before the communication is transmitted to the individual director or to the Board as a whole. Depending on the subject matter, the Corporate Secretary will either (i) promptly forward to the Chairperson of the Audit Committee and the General Counsel any communication alleging legal, ethical or compliance issues by management or any other matter deemed by the Corporate Secretary to be potentially material to the Company or (ii) not forward to the Board, any committee or any director, any communications of a personal nature or not related to the duties of the Board, including, without limitation, junk mail and mass mailings, business solicitations, routine customer service complaints, new product or service suggestions, opinion survey polls or any other communications deemed by the Corporate Secretary to be immaterial to the Company.
Meetings of the Board of Directors and Committees
During 2017,fiscal year 2019, the Board held 13 meetings, the Audit Committee held nine9 meetings, the Compensation Committee held eight8 meetings and the Nominating and Governance Committee held four4 meetings. During 2017,fiscal year 2019, all directors attended at least 75% of all of the meetings of the Board held during the period for which he or she was a director anddirector. Additionally, all directors attended at least 75% of the meetings of each committee of the Board held during the period in which he or she served on such committee.
Members of the Board and its committees also consulted informally with management from time to time and acted at various times by written consent without a meeting during 2017.fiscal year 2019. Additionally, the independent members of the Board met in executive session regularly without the presence of management.
The Board has an internal policy that all of the directors should attend (either telephonically or in person) the annual meeting of stockholders, absent exceptional cause. All but two of the directors who were directors at the time of the meeting attended the 20172019 annual meeting of stockholders.
Committees of the Board of Directors
The Board has three separately-designatedseparately designated standing committees: anthe Audit Committee, athe Compensation Committee and athe Nominating and Governance Committee, each as described below.
Audit Committee.
The Audit Committee is currently composed ofThe Board has determined that each member of the Audit Committee is independent as defined by the applicable NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).applicable SEC rules. The Board has determined that Ms. Meints and Mr. Kerley are eachis an “audit committee financial expert” as defined under Item 407 of Regulation S-K.
Compensation Committee.
The Compensation Committee currently consists of Mr. Kerley (Chairperson), Mr. CarterThe primary function of our Compensation Committee is to assist our Board in discharging its responsibilities relating to compensation of our executives. These responsibilities include reviewing our general compensation philosophy for executive officers, overseeing the development and implementation of compensation programs for executive officers and reviewing compensation levels, including incentive and equity-based compensation, for executive officers, all other employees, directors and Board committee members. Our Compensation Committee determines and approves compensation for our executive officers and administers our incentive and equity-based compensation plans. In doing so, it considers recommendations made by our CEO meeting in executive session with the Compensation Committee. Our Compensation Committee also reviews, and makes recommendations to the Board regarding, the compensation of our CEO. Neither our CEO nor any of our other executive
Since 2015 the Compensation Committee has engaged an independent compensation consultant, ClearBridge Compensation Group LLC (“ClearBridge”), a nationally recognized consulting firm, to review the executive compensation programs (including executive pay levels) and assist in structuring short-term and long-term incentive programs for executive and operational management. ClearBridge reports directly and solely to the Compensation Committee. ClearBridge does not provide any other services to the Company, except at the direction of the Compensation Committee. The Compensation Committee assessed the independence of ClearBridge pursuant to the applicable rules and concluded that ClearBridge’s work did not raise any conflict of interest that would prevent it from independently representing the Compensation Committee.
The Board has determined that each member of the Compensation Committee is independent as defined in applicable NASDAQ listing standards.
Nominating and Governance Committee.
The Nominating and Governance Committee currently consists of Ms. Norwalk (Chairperson), Mr. CoulterThe primary functions of our Nominating and Governance Committee are to identify individuals qualified to become members of our Board, recommend to our Board a slate of director nominees for election at our next annual meeting of stockholders, monitor legal and regulatory compliance, and develop and recommend to our Board a set of corporate governance principles. These corporate governance principles are set forth in our Corporate Governance Guidelines which can be found on our website at www.prscholdings.com/corporategovernance and are available in print to any stockholder who requests a copy by writing to our Corporate Secretary.
The Board has determined that each member of the Nominating and Governance Committee is independent as defined in applicable NASDAQ listing standards.
The Audit, Compensation and Nominating and Governance Committees are each governed by a written charter approved by the Board. A copy of each committee’s charter is available on our website at www.prscholdings.com/corporategovernance
. Providence intends to disclose any amendments to these charters required by the SEC or listing standards of NASDAQ at the same location on our website. The information contained on our website is not part of, and is not incorporated by reference in, this Proxy Statement or any other report we file with or furnish to the SEC.Director Nomination Process
Director Qualifications
Nominees for director are selected on the basis of outstanding achievement in their careers and other factors, including: board experience; education; whether they are independent under applicable NASDAQ listing standards and theapplicable SEC rules; financial expertise; integrity; ability to make independent, analytical inquiries; understanding of the business environment; industry experience; and willingness to devote adequate time to Board and committee duties. The proposed nominee should also be free of conflicts of interest that could prevent such nominee from acting in the best interest of Providence and our stockholders. Additional special criteria apply to directors being considered to serve on a particular committee of the Board. For example, members of the Audit Committee must meet additional standards of independence and have the ability to read and understand Providence’s financial statements.
Director Nominee Selection Process
In evaluating potential director nominees, including those identified by stockholders, for recommendation to our Board, our Nominating and Governance Committee seeks individuals with talent, ability and experience from a wide variety of backgrounds to provide a diverse spectrum of experience and expertise relevant to a diversified business enterprise such as ours. Although we have no minimum qualifications, a candidate should represent the interests of all stockholders, and not those of a special interest group, have a reputation for integrity and be willing to make a significant commitment to fulfilling the duties of a director. Our Nominating and Governance Committee will screen and evaluate all recommended director nominees based on the criteria set forth above, as well as other relevant considerations. Our Nominating and Governance Committee will retain full discretion in considering its nomination recommendations to our Board. In identifying, evaluating and nominating
To become a nominee, an incumbent director must also submit an irrevocable resignation to the Board that is contingent upon (a) thatsuch director receiving less than a majority of the votes cast in the uncontested election, and (b) acceptance of that resignation by the Board in accordance with the policies and procedures adopted by the Board for such purpose. The incumbent director must also complete and submit a questionnaire with respect to his or her background and execute a written representation and agreement (the “Director/Prospective Director Agreement”).
The Director/Prospective Director Agreement requires directors and nominees to disclose certain types of voting commitments and compensation arrangements and represent that the director or nominee, if elected, would be in compliance with all applicable corporate governance, conflicts of interest, confidentiality, securities ownership and stock trading policies and guidelines of the Company, and also provides for the immediate resignation of a director if such person is found by a court of competent jurisdiction to have breached the Director/Prospective Director Agreement in any material respect.
The Nominating and Governance Committee will consider properly submitted stockholder recommendations for director candidates. Director candidates recommended by stockholders are given the same consideration as candidates suggested by directors and executive officers. The Nominating and Governance Committee has the sole authority to select, or to recommend to the Board, the nominees to be considered for election as a director.
The officer presiding over the annual meeting of stockholders, in such officer’s sole and absolute discretion, may reject any nomination not made in accordance with the procedures outlined in this Proxy Statement and Providence’s amended and restated bylaws.Bylaws. Under Providence’s amended and restated bylaws,Bylaws, a stockholder who desires to nominate directors for election at an annual meeting of stockholders must comply with the procedures summarized below. Interested stockholders may review Providence’s amended and restated bylaws are available,Bylaws, at no cost, aton the SEC’s website, www.sec.gov, as Exhibit 3.2 to Providence’s Annual Report on Form 10-K filed with the SEC on March 12, 2010, or upon the stockholder’sby submitting a written request directed to the Company’s Corporate Secretary at the address given in the paragraph below. See “Stockholder Nominations” below for a description of the procedures that must be followed to nominate a director.
Stockholder Nominations
According to Providence’s amended and restated bylaws,Bylaws, nominations by stockholders for directors to be elected at a meeting of stockholders which have not previously been approved by the Board must be submitted to our Corporate Secretary in writing, either by personal delivery, nationally-recognizednationally recognized express mail or United States mail, postage prepaid, at 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902,Atlanta, GA 30309, not earlier than the close of business on the 120th calendar day, and not later than the close of business on the 60th calendar day, prior to the first anniversary of the immediately preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is more than 30 calendar days earlier or more than 60 calendar days later than such anniversary date, notice by the stockholder in order to be timely must be so delivered or received no earlier than the close of business on the 120th calendar day prior to the date of such annual meeting and not later than the close of business on the later of the 60th calendar day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 70 calendar days prior to the date of such annual meeting, the 10th calendar day following the day on which public disclosure of the date of such annual meeting is first made by the Company.
Each notice of nomination is required to set forth:
As to each person whom the stockholder proposes to nominate for election or reelection as a director:
the name, age, business address and residence address of such person;
the principal occupation and employment of such person;
the class and series and number of shares of each class and series of capital stock of the Company which are owned beneficially or of record by such person (which information shall be supplemented not later than ten (10) calendar days after the record date for the meeting to disclose such ownership as of the record date);
such person’s executed written consent to being named in the proxy statement as a nominee and to serving as a director if elected;
all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made with the SEC in connection with the solicitation of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act (or pursuant to any law or statute replacing such section), and the rules and regulations promulgated thereunder;
a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such person being nominated, on the one hand, and the stockholder and any Stockholder Associated Person, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the stockholder making the nomination and any Stockholder Associated Person were the “registrant” for purposes of such rule and the person being nominated were a director or executive officer of such registrant. A “Stockholder Associated Person” is, with respect to any stockholder, (a) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (b) any beneficial owner of shares of Common Stock of the Company owned of record or beneficially by such stockholder, and (c) any person controlling, controlled by or under common control with such Stockholder Associated Person; and
a questionnaire regarding his or her background and an executed Director/Prospective Director Agreement.
As to the stockholder giving the notice:
the name and record address, as they appear on the Company’s stock ledger, of such stockholder and the name and address of any Stockholder Associated Person;
(a) the class, series and number of shares of each class and series of capital stock of the Company which are, directly or indirectly, owned beneficially and/or of record by such stockholder or any Stockholder Associated Person, documentary evidence of such record or beneficial ownership, and the date or dates such shares were acquired and the investment intent at the time such shares were acquired, (b) any derivative instrument (as defined in the amended and restated bylaws) directly or indirectly owned beneficially by such stockholder or any Stockholder Associated Person and any other direct or indirect right held by such stockholder or any Stockholder Associated Person to profit from, or share in any profit derived from, any increase or decrease in the value of shares of the Company, (c) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any shares of any security of the Company, (d) any short interest (as defined in the amended and restated bylaws) indirectly or directly held by such stockholder or any Stockholder Associated Person in any security issued by the Company, (e) any rights to dividends on the shares of the Company owned beneficially by such stockholder or any Stockholder Associated Person that are separated or separable from the underlying shares of the Company, (f) any proportionate interest in shares of the Company or derivative instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, and (g) any performance-related fees (other than an asset-based fee) thatto which such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of the Company or derivative instruments, if any, as of the date of such notice, including without limitation, any such interests held by members of such stockholder’s or any Stockholder Associated Person’s immediate family sharing the same household (which information, in each case, must be supplemented by such stockholder and any Stockholder Associated Person not later than ten (10) calendar days after the record date for the meeting to disclose such ownership as of the record date);
a description of all arrangements or understandings between such stockholder and/or any Stockholder Associated Person and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by such stockholder;
any material interest of such stockholder or any Stockholder Associated Person in the election of such nominee, individually or in the aggregate, including any anticipated benefit to such stockholder or any Stockholder Associated Person therefrom;
a representation from such stockholder as to whether the stockholder or any Stockholder Associated Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the person and/or (2) otherwise to solicit proxies in support of the election of such person;
a representation that such stockholder is a holder of record of stock of the Company entitled to vote at such meeting, that such stockholder intends to appear in person, or by proxy, at the meeting to nominate the person or persons named in the notice;
whether and the extent to which any agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of such stockholder or any Stockholder Associated Person with respect to any shares of the capital stock of the Company, without regard to whether such transaction is required to be reported on a Schedule 13D or other form in accordance with Section 13(d) of the Exchange Act or any successor provisions thereto and the rules and regulations promulgated thereunder; and
any other information relating to such stockholder or any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made with the SEC in connection with the solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act (or pursuant to any law or statute replacing such section) and the rules and regulations promulgated thereunder.
In the event that a special meeting of stockholders is called for the election of directors, a stockholder’s nomination must be delivered to the Company not earlier than the close of business on the 120th calendar day prior to the date of the special meeting and not later than the close of business on the later of the 60th calendar day prior to the date of the special meeting, or, if the first public disclosure made by the Company of the date of the special meeting is less than 70 days prior to the date of the special meeting, not later than the 10th calendar day following the day on which public disclosure is first made of the date of the special meeting. The stockholder submitting a notice of nomination with respect to the election of directors at a special meeting must include, in its timely notice, the same information as set forth above.
A majority of the Board may reject any nomination by a stockholder not timely made or otherwise not made in accordance with the terms of the Company’s amended and restated bylaws. If a majority of the Board reasonably determines that the information provided in a stockholders’stockholder’s notice does not satisfy the informational requirements in any material respect, the Corporate Secretary will promptly notify such stockholder of the deficiency in writing. The stockholder will then have an opportunity to cure the deficiency by providing additional information to the Corporate Secretary within such period of time, not to exceed ten (10) days from the date such deficiency notice is given to the stockholder, as a majority of the Board reasonably determines. If the deficiency is not cured within such period, or if a majority of the Board reasonably determines that the additional information provided by the stockholder, together with the information previously provided, does not satisfy the requirements in any material respect, then a majority of the Board may reject such stockholder’s nomination.
Compensation of Non-Employee Directors
In assessing compensation elements and making compensation decisions with respect to our non-employee directors, the Compensation Committee engaged ClearBridge in 2017 to provide independent advice and recommendations. The non-employee director compensation program (as described below) was approved in 2017, and no changes have been made to the program since that time. The Compensation Committee also relies on information about the director compensation practices of a peer group of companies of similar size to the Company in related industries (see “Executive Compensation—Detailed Discussion and Analysis—Approach for Developing the Executive Compensation Program”), as well as its own judgment and prior experience, in determining director compensation.
As compensation for their service as directors of the Company in 2017,2019 (and consistent with the program approved in April 2017), each non-employee member of the Board received an $85,000 annual cash retainer. For service as committee Chairs,chairs, the Chairperson of the Audit Committee received an additional retainer of $35,000 and the Chairpersons of the Compensation Committee and Nominating and Governance Committee each received an additional retainer of $20,000. For service as Chairman of the Board, the Chairman of the Board received an additional retainer of $35,000. Members of the Audit Committee, the Compensation Committee and the Nominating and Governance Committees (other than the Chairpersons) received an additional retainer of $15,000, $7,500 and $7,500, respectively. Payment of the retainers were made on a monthly basis in advance of each month of service. The Company’s target value of the equity retainer for non-employee members of the Board in 20172019 was $130,000, based on the closing stock price of the Company’s stock on the grant date. On March 3, 2017, Mr. Carter, Mr. Coulter, Mr. Kerley, Ms. Meints, Ms. Norwalk and Mr. Wright were each awarded 3,097 shares of restricted stock under the Company’s
On February 16, 2018,14, 2019, Mr. Carter, Mr. Coulter, Mr. Kerley, Ms. Meints, Ms. Norwalk and Mr. Wright were each awarded 2,017 shares of1,857 restricted stockshare awards under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) for their 2018 annual equity award. On February 16, 2018,14, 2019, Coliseum Capital Partners, L.P. was granted 2,0171,857 stock equivalent units in lieu of an award to Christopher Shackelton. All awards vest in equal installments1/3rd on each of the first, second and third anniversariesanniversary of the grant date.
On February 13, 2020, Mr. Carter, Mr. Coulter, Mr. Kerley, Ms. Norwalk and Mr. Wright were each awarded 1,952 restricted share awards under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) for their annual equity award. On February 13, 2020, Coliseum Capital Partners, L.P. was granted 1,952 stock equivalent units in lieu of an award to Christopher Shackelton. All awards vest on the first anniversary of the grant date. Because Ms. Meints willthese grants were made in 2020, such grants are not continue to serve as a director followingincluded in the Annual Meeting, her unvested restricted stock and unexercised option awards will be forfeited in accordance with their terms. In recognition of her contributions to the Company during her 15 years of service as a director, the Company granted to Ms. Meints 3,895 deferred share units that will settle into shares of our Common Stock in March 2019, and extended the exercisability of her outstanding options through such date.
Non-employee directors are also reimbursed for reasonable expenses incurred in connection with attending meetings of the Board and meetings of Board committees. The following table shows for the fiscal year ended December 31, 2019, certain information with respect to the compensation of our non-employee directors:
2019 Director Compensation Table
| Name | Fees Earned Or Paid in Cash ($) (1) | Stock Awards ($) (2)(3) | Option Awards ($) | Total ($) | ||||
| Todd J. Carter | 88,085 | 129,981 | — | 218,066 | ||||
| David A. Coulter | 93,689 | 129,981 | — | 223,670 | ||||
| Richard A. Kerley* | 120,000 | 129,981 | — | 249,981 | ||||
| Kristi L. Meints* | 131,250 | 129,981 | — | 261,231 | ||||
| Leslie V. Norwalk* | 108,750 | 129,981 | — | 238,731 | ||||
| Christopher S. Shackelton† (4) | 121,250 | 129,981 | — | 251,231 | ||||
| Frank J. Wright | 101,875 | 129,981 | — | 231,856 | ||||
| † Board Chairman at December 31, 2017 | ||||||||
| *Committee Chair at December 31, 2017 | ||||||||
Name |
| Fees Earned Or Paid in Cash ($) (1) |
| Stock Awards ($) (2) |
|
| Total ($) |
Todd J. Carter |
| $ 92,500 |
| $ 133,611 |
|
| $ 226,111 |
David A. Coulter |
| $ 100,000 |
| $ 133,611 |
|
| $ 233,611 |
Richard A. Kerley* |
| $ 140,000 |
| $ 133,611 |
|
| $ 273,611 |
Leslie V. Norwalk* |
| $ 120,000 |
| $ 133,611 |
|
| $ 253,611 |
Christopher S. Shackelton† (3) |
| $ 120,000 |
| $ 133,611 |
|
| $ 253,611 |
Frank J. Wright |
| $ 107,500 |
| $ 133,611 |
|
| $ 241,111 |
Columns that do not apply have been deleted. † Board Chairman at December 31, 2019 |
*Committee Chair at December 31, 2019 |
(1) | Mr. Coulter elected to receive 100% of his |
(2) | Represents the aggregate grant date fair value of the stock and stock equivalent units granted in |
Name | Unvested Restricted Share Awards |
Todd J. Carter | 4,234 |
David A. Coulter | 4,234 |
Richard A. Kerley | 4,234 |
Leslie V. Norwalk | 4,234 |
Frank J. Wright | 4,234 |
The aggregate number of unvested stock equivalent units outstanding for each non-employee director as of December 31, 2019 is shown below:
Name | |
Unvested Stock Equivalent Units | |
Christopher S. Shackelton (3) | 4,234 |
(3) | ||||
Number of stock options | |||||||||
| Grant Price | Exercise Price | Richard A. Kerley | Kristi L. Meints | ||||||
| 5/17/2011 | $ | 14.16 | 667 | 2,000 | |||||
| 6/14/2010 | $ | 16.35 | — | 7,814 | |||||
| 6/9/2008 | $ | 26.14 | — | 10,000 | |||||
| Total | 667 | 19,814 | |||||||
All of Christopher Shackelton’s compensation for service on the Board inures to the benefit of |
Stock Ownership Guidelines for Non-Employee Directors
Pursuant to our stock ownership guidelines, our non-employee directors are expected to own shares of our Common Stock with a value equal to three times their annual retainer (excluding compensation for board or committee chair, committee member or lead director positions held). Because Christopher Shackelton assigns all of his Board compensation to CCMCCP as described above, he is excluded from these stock ownership guidelines.
The following will countcounts towards meeting the required holding level:
shares held directly or indirectly;
any vested restricted stockshares or stock unitsRSUs held under our annual equity-based compensation program;
any unvested time-based restricted stockshares or stock unitsRSUs held under our annual equity-based compensation program (calculated on an assumed net after-tax basis); and
shares owned jointly with or in trust for, immediate family members residing in the same household.
Non-employee directors are not permitted to sell compensatory shares of our Common Stock until they have reached the required holding level, except if such sale is effected to satisfy tax obligations or to pay the exercise price of options. This holding requirement does not apply to shares purchased by a non-employee director in the market or from the Company for cash unless acquired by exercise of a compensatory option. In the event a non-employee director does not achieve his or her holding level set forth above and sells shares of our Common Stock in violation of the stock ownership guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances.
Delinquent Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of the Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of Providence. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish Providence with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished tofiled with the CompanySEC and written representations that no other reports were required, the Company believes that all Section 16(a) executive officers, directors and individuals who are greater than 10% beneficial stockholders of Providence complied with applicable Section 16(a) requirements during the fiscal year ended December 31, 2017, other than William Severance who inadvertently had2019, except that Mr. Pate, Mr. Dotts, Ms. Stalmack and Ms. Smith each filed one late filing of a Form 4 on January 3, 2018 that should have been filed no later than February 3, 2017 and Christopher Shackelton, CCM and certain affiliated entities, Todd J. Carter, David A. Coulter, Richard A. Kerley, Kristi L. Meints, Leslie V. Norwalk and Frank J. Wright, each who inadvertently had one late filing of a Form 4 on March 15, 2017 that should have been filed no later than March 7, 2017.
Certain Relationships and Related Party Transactions
Policy Regarding Certain Relationships and Related Party Transactions
Pursuant to its written charter, the Audit Committee has adopted a Related Person Transaction Policy that, subject to certain exceptions, requires the Audit Committee (or the chair of the Audit Committee in certain instances) to review and either ratify, approve or disapprove all “transactions” with “related persons,” which have the meanings given to such terms in Item 404(a) of Regulation S-K.
In determining whether to approve or ratify a transaction with a related person under the policy, the Audit Committee is to consider all relevant information and facts available to it regarding the transaction and take into account factors such as the related person’s relationship to the Company and interest in the transaction (direct or indirect), the terms of the transaction and the benefits to the Company of the transaction. No director is to participate in the approval of a related person transaction for which he or she is a related person or otherwise has a direct or indirect interest.
The Audit Committee is also to reviewreviews and assessassesses ongoing related person transactions, if any, on at least an annual basis to determine whether any such transactions remain appropriate or should be modified or terminated.
Each year our directors and officers complete Directors’ and Officers’ Questionnaires, which, among other things, are designed to elicit certain information relating to transactions with the Company in which the officer or director or any immediate family member of such officer or director has a direct or indirect interest. We also make inquiries quarterly of officers and directors to identify any additional related person transactions that have arisen since the last inquiry as a means to ensure all potential transactions subject to the policy are captured. These questionnaires are reviewed by our General Counsel and any such transactions or other related person transactions are brought to the attention of the Audit Committee as appropriate.
Retention of Advisors
In 20172018 the Company retained Epstein, Becker & Green, P.C. (“EBG”) to provide healthcare regulatory advice in respect of disclosures being made in our 2017 Annual Reportperiodic SEC filings and EBG Advisors, Inc. (“EBG Advisors”), an affiliated entity, to provide healthcare advisory services to the Company, both for customary fees. The Company made the decision to retain EBG and EBG Advisors after reviewing several potential healthcare regulatory advisors, and engaging in interviews with four potential firms and determined EBG and EBG Advisors were best positioned to meet the Company’s needs. In 2017,2019 and 2018, respectively, the Company paid $11,829$108,339 and $153,078$15,740 to EBG and in 2018, the Company paid $50,000 to EBG Advisors respectively, for such services. The amounts represent less than 1% of total revenue for both EBG and EBG Advisors, respectively. Leslie Norwalk, a member of our Board, is Counsel at EBG.
Ms. Norwalk receives a fixed base salary for her employment at EBG and no additional variable compensation. The Company has received a letter from EBG advising that the Company’s engagement of the applicable advisor, and Ms. Norwalk'sNorwalk’s relationship with the Company and her membership on the Board was not and will not be taken into consideration when calculating her compensation or accounted for in any way as it relates to her compensation. The Board has determined that Ms. Norwalk qualifies as independent under the applicable NASDAQ and SEC standards.
Indemnification Agreement
On May 9, 2018, the Company was obligated to pay for the legal expenses of certain entities affiliatedentered into a registration indemnification agreement with CCM, in connection with Haverhill Retirement System v. Kerley et al., C.A. No. 11149-VCL (the “Haverhill Litigation”). CCM acts as an investment adviser to certain stockholderseach of the Company, and Christopher Shackelton is a manager of and has an interest in CCM. In addition, in accordance with the Company’s certificate of incorporation,Coliseum Stockholders, pursuant to which the Company was also obligatedagreed to pay forindemnify the legal expenses of certain of our current and former directors and officers in connection with the Haverhill Litigation; a portion of such expenses was paid by our insurance carriers. The Company expensed $245,000 during the year ended December 31, 2017 for such legal expenses. For more information on the Haverhill LitigationColiseum Stockholders, and the Company’s indemnification obligations, see Item 3. “Legal Proceedings” inColiseum Stockholders agreed to indemnify the 2017 Annual Report, and Note 18, Commitments and Contingencies,Company, against certain matters relating to our consolidated financial statements included therein.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Mr. Kerley (Chairperson), Mr. Carter and Mr. Coulter and Ms. Meints.Coulter. No person who served as a member of the Compensation Committee during the fiscal year ended December 31, 20172019 was a current or former officer or employee of Providence, or engaged in certain transactions with us, which was required to be disclosed by regulations of the SEC. None of Providence’s executive officers served as a director or member of the compensation committee of another entity, one of whose executive officers served as a member of our Board or as a member of our Board’s Compensation Committee.
Equity Compensation Plan Information
The following table provides certain information as of December 31, 20172019 with respect to our equity basedequity-based compensation plans.
Plan category |
| Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) |
|
| Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights |
|
| Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column) |
| |||
Equity compensation plans approved by security holders |
|
| 729,601 |
|
| $ | 64.72 |
|
|
| 1,306,243 |
|
Equity compensation plans not approved by security holders |
|
| — | �� |
|
| — |
|
|
| — |
|
Total |
|
| 729,601 |
|
| $ | 64.72 |
|
|
| 1,306,243 |
|
(1) The number of shares shown in this column represents the number of shares available for issuance pursuant to stock options and other stock-based awards that were previously granted and were outstanding as of December 31, 2019 under the 2006 Plan.
| Plan category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column (1)) | |||||||
| Equity compensation plans approved by security holders | 606,695 | $ | 48.70 | 1,938,666 | ||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||
| Total | 606,695 | $ | 48.70 | 1,938,666 | ||||||
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis explains the executive compensation program for the following individuals, who are referred to as the Named Executive Officers (“NEOs”):
Daniel E. Greenleaf – President and Chief Executive Officer
Kevin M. LindstromDotts – Former CEO*
Kathryn Stalmack – Senior Vice President, General Counsel & Corporate SecretarySecretary*
Suzanne G. Smith – Former Senior Vice President – Strategic Services*Chief Accounting Officer*
• | R. Carter Pate – Former Interim Chief Executive Officer* |
William Severance – Former Executive Vice President, Office of the Providence CEO*
• | Laurence Orton – FormerInterim Chief Accounting Officer and Senior Vice President Finance* |
*Mr. Pate served as the Company’s Interim CEO from November 15, 2017 until December 11, 2019, when Daniel E. Greenleaf was appointed CEO of the Company. Mr. Pate served as a Special Advisor to the President and CEO until the end of his contract term, December 31, 2019. Ms. Stalmack has served as Senior Vice President, General Counsel & Corporate Secretary since August 19, 2019. Ms. Smith joined the Company in February 2019 and was named Chief Accounting Officer (reporting to the CFO) and current Interim CFO*
Executive Summary
Overview
The Providence Service Corporation owns subsidiaries and investmentsis a Delaware corporation formed in 1996 that are primarily engaged inis the provision of healthcare services in the Unites States and workforce development services internationally in the following segments:
Providence also owns a minority investment in CCHN Group Holdings, Inc. and its subsidiaries (“Matrix”). Matrix is a nationwide provider of a broad array of assessment and care management services that improve health outcomes for individuals and financial performance for health plans. Matrix’s national network of community-based clinicians deliver in-home services while its fleet of mobile health clinics provide community-based care with advance diagnostic capabilities. These solutions combined with Matrix’s advanced engagement approach, helps health plans manage risks, close care gaps and connect members to care.
Fiscal year 2019 was a year of challenging headwinds impacting our financial results as well as one of positive and important transitions for the Company. As described in our Annual Report on Form 10-K, the Company’s operating results in 2019 were impacted by increasing utilization under at risk contracts and increased transportation costs on a per trip basis. These factors caused Adjusted EBITDA to be lower for fiscal 2019 than in fiscal 2018. These negative factors were partially offset by contracts renegotiated during 2019 and by top-line revenue growth. The result of this challenging environment was that the Compensation Adjusted EBITDA (as defined below) target for the payment of amounts under the Company’s annual incentive plan (described below) was not achieved and as a result, the portion of the annual bonus tied to Adjusted EBITDA was not achieved for 2019.
Fiscal year 2019 was also one of transition in our business having completed the Organizational Consolidation and with certain non-NET businesses having been divested, the Company focused on growing its NET services segment, integrating Circulation’s technology into the Company’s technology offering, and renegotiating pricing for certain contracts. In addition to the positions and compensation of certain of our NEOs.
Stockholder Say-on-Pay and Say-on-Pay Frequency and Company Response
In establishing and recommending 20172019 compensation for the NEOs, the Compensation Committee considered the results of the Say-on-Pay vote and the vote on the frequency of future Say-on-Pay votes (the “Say-on-Pay Frequency” vote) at the 20172019 annual meeting of stockholders. In advance of that meeting, we reached out to certain stockholders to discuss certain key governance issues. At that meeting, our stockholders approved our executive compensation for the 20172019 fiscal year with approximately 79%82% of the votes cast in favor. Approximately 83% of votes cast in our Say-on-Pay Frequency vote were in favor of our Board’s recommendation to conduct future Say-on-Pay Frequency votes every year. Our Board recognizes that executive compensation is important to stockholders and takes this into account when reviewing the compensation program throughout the year. We believe that we have established a compensation plan that directly aligns the compensation paid to NEOs with value delivered to stockholders.
Detailed Discussion and Analysis
Compensation Committee Philosophy
Providence has a strong philosophy that compensation should be earned based on performance. As a result, we believe that compensation programs offered to NEOs should support the achievement of our strategic and financial goals and creation of stockholder value over the long term primarily by rewarding both capital allocation and operational excellence strategies. Accordingly, our guiding compensation principles for 2017fiscal year 2019 focused on:
attracting, retaining, and retainingmotivating high-performing leaders;
aligning the interests of our executives with those of our stockholders;stockholders, and incentivizing stockholder value creation;
linking a meaningful portion of executive compensation to achievement of key financial, operational, and capital allocation performance goals; and operational performance; and
maintaining a significant portion of compensation based on at-risk opportunities, including in equity awards tied to stock price.price and achievement of key transactions and projects.
2019 Compensation Components
The specific components of the 20172019 compensation program for NEOs were as follows:
Component | Description | Purpose | |
Base Salary | Fixed cash | Provide competitive fixed compensation to attract and retain executive talent. Reviewed to reward for individual performance, and to consider market competitiveness. | |
Annual Incentive Program | The Annual Incentive Program (“AIP”) approved in 2019 for our NEOs | Provide financial incentive to the executives to |
Component | Description | Purpose |
Interim CEO Bonus Plan | Mr. Pate, given that his position as Interim CEO was scheduled to come to close at the end of 2019, had a separate short-term incentive plan from the broader AIP above. | Provided a mix of financial and individual goals that were better aligned with the interim nature of his role with the Company. |
Long-Term | Mr. Dotts and Ms. Smith, along with other executives that were not NEOs, received stock option and restricted share awards from the Compensation Committee in September 2019. Mr. Greenleaf, received long-term equity awards of | Long-term incentive grants to certain executives |
Benefits and Perquisites | We provide certain benefits generally available to all employees and we provide additional benefits for NEOs. Perquisites for NEOs relate to certain enhanced insurance and other non-cash benefits. See “Benefits and Perquisites” for further detail. | Provide |
Post-Termination Compensation | Certain NEOs are eligible for certain payments post-termination, as specified in “Potential Payments Upon Termination or Change in | Provide an appropriate level of payment in the event of a change in control or termination. |
Other Policies | Stock Ownership Guidelines Clawback Anti-Hedging / Anti-Pledging | Enhance alignment |
Approach for Developing the Executive Compensation Program
The compensation of our CEO (including(as was the compensation for our Interim CEO)CEO before his departure from the Company) is determined and approved by the Compensation Committee.Committee, subject to the approval of the Board. Our CEO annually reviews the performance of each NEO, other than himself, relative to the annual performance goals established for the year. Our CEO then makes recommendations to the Compensation Committee with respect to all aspects of the compensation of the other NEOs who report directly to him, but does not participate in the final deliberations of the Compensation Committee has the final decision with respect thereto.to executive compensation. The Compensation Committee exercises discretion in modifying compensation recommendations relating to the other NEOs that were made by our CEO and approves all compensation decisions for such NEOs. Mr. Severance’s compensation is determined by our CEO following a review of Mr. Severance’s performance relative to his annual performance goals established for the year. Our CEO exercises discretion in modifying and approving such compensation recommendation under delegation from the Compensation Committee.
Since 2015, the Compensation Committee has engaged ClearBridge to assess the competitiveness of pay for the executive officers and provide independent advice and recommendations to the Compensation Committee regarding executive compensation. In order to avoid conflicts of interest, ClearBridge only does work for or authorized by the Compensation Committee. The Compensation Committee annually reviews ClearBridge’s independence as contemplated by the Compensation Committee’s charter and applicable NASDAQ rules, and in February 20182020 determined that there were no conflicts of interest.
We believe it is appropriate for NEO pay to be competitive with the market for comparable executives. To achieve this objective, we assess market data for a peer group of companies established by the Compensation Committee from time to time.
We periodically review our peer group for competitive compensation benchmarking analysis. The peer group is comprised of health services related-companies that are comparable in terms of business mix and size (e.g., revenue, EBITDA, and enterprise value)market capitalization). In 2017,As part of Providence’s transition in 2019, we reviewed the peer group was reviewedto determine if any adjustments were necessary. Based on that review, we added Hanger, Inc. and adjusted twice. Provided below are theremoved Civitas Solutions (acquired and no longer public), RadNet Inc., and Amedisys, Inc. The following is a list of our current 12 company peer groups used in early 2017 for compensation decisions and the current peer group.
2019 Peer Group | ||||
Addus HomeCare Corporation | Ensign Group | |||
Allscripts Healthcare Solutions, Inc. | HMS Holdings | |||
American Renal Associates Holdings, Inc. | LHC Group | |||
Capital Senior Living Corporation | Option Care Health, Inc.(1) | |||
CorVel Corporation | ||||
National HealthCare Corporation | ||||
Hanger, Inc. | Tivity Health | |||
(1) Current peer group reflects the following changes from the early 2017 peer group:
In addition to market data, the Compensation Committee takes into consideration other factors, including an individual’s role, tenure, experience, skills and performance when making compensation decisions.
2019 Executive Compensation Program Decisions
The following decisions were made in 2017fiscal year 2019 regarding each of these compensation components:
Base Salary
The Compensation Committee has periodically reviewed and set salaries for NEOs at levels intended to be competitive, as further discussed under “—Approach for Developing the Executive Compensation Program”,Program,” and to provide the appropriate level of fixed compensation for each individual’s role at the Company. In determining the NEOs’ base salaries, the Compensation Committee has considered the internal pay comparisons within the executive group at Providence,the Company, individual performance, overall financial performance of the Company, and market data, as appropriate. Salaries for our NEOs as of year-end were as follows:
Name | 2017 Base Salary(1) | |||
| R. Carter Pate (2) | $ | 700,000 | ||
| James M. Lindstrom (2) | $ | 650,000 | ||
| David C. Shackelton | $ | 450,000 | ||
| Sophia D. Tawil | $ | 350,000 | ||
| Matthew Umscheid | $ | 350,000 | ||
| William Severance (3) | $ | 309,000 | ||
Name | 2019 Base Salary(1) | |||
Daniel E. Greenleaf | $ | 850,000 | ||
Kevin M. Dotts | $ | 450,000 | ||
Kathryn Stalmack | $ | 375,000 | ||
Suzanne G. Smith | $ | 285,000 | ||
R. Carter Pate | $ | 750,000 | ||
William Severance | $ | 450,000 | ||
Laurence Orton | $ | 300,000 | ||
(1) Reflects base salaries for our NEOs during fiscal 2017.
2019 Cash Bonus Awards
Annual Incentive Program
For 2017, all of our NEOs exceptfiscal year 2019, Mr. Pate (given his interim role)Dotts and Mr. Severance,Ms. Smith participated in the AIP, and each of them hadwhich provided for a bonus opportunity based two-thirds75% on consolidated financial performance, measured by earnings per share,EBITDA, as adjusted by the Compensation Committee for the AIP (“Compensation Adjusted EPS”EBITDA”), and one-third25% on individual goals established by the Compensation Committee.Committee, provided, however, that the AIP was self-funded and therefore if the Compensation Adjusted EBITDA threshold was not achieved, no amount would be payable, despite an executive’s achievement of their individual goals. As described below, for 2017,fiscal year 2019, the Compensation Committee determined that on the basis of the Company’s financial results, the Company did not achieve its Compensation Adjusted EPS achievement,EBITDA target and individual performance achievement, these NEOstherefore no AIP was paid for Mr. Dotts, Ms. Smith or the other participants in the AIP. Since Mr. Greenleaf and Ms. Stalmack were retained later in the year, they were not eligible for the AIP. Finally, Mr. Severance and Mr. Orton were entitled to the maximum AIP payoutsin 2019, as provided in the retention agreements described below. The Compensation Committee created a separate 2019 short-term incentive plan for 2017. This payout is reflectiveMr. Pate that consisted of 75% individual goals set by the Compensation Committee (including, without limitation, the successful fulfillment of Mr. Pate’s role as the chairman of the Audit Committee of Matrix’s Board of Directors, and completing the consolidation of the Company’s performanceConnecticut and Arizona offices into the Atlanta corporate headquarters by June 30, 2019) and 25% based on Compensation Adjusted EBITDA if he remained at the Company for all of 2019 or until such date in 2019 as the Board believed his services were no longer necessary. As described above, the Compensation Committee determined that the Company did not achieve the Compensation Adjusted EBITDA target, but that given that Mr. Pate had achieved his individual goals, he would receive 75% of his short-term incentive plan payment for 2019. Ms. Smith was paid a $15,000 signing bonus when she joined the Company in February 2019.
For Mr. Pate, the 2019 bonus opportunity under his short-term incentive plan was $750,000 or 100% of his 2019 base salary. As determined by the Compensation Committee, Mr. Pate received 75% of his bonus opportunity in 2019.
Named Executive Officer |
| Target Incentive Plan Opportunity as % of Salary |
|
| Maximum Incentive Plan Opportunity as % of Salary |
| ||
Kevin M. Dotts – AIP | 75% | 150% |
| |||||
Suzanne G. Smith –AIP | 50% | 100% | ||||||
R. Carter Pate - Short-term plan | 100% |
| 125% |
| ||||
William Severance – AIP | 75% | 75% | ||||||
Laurence Orton – AIP | 50% | 50% | ||||||
Our 2019 Compensation Adjusted EBITDA target was $100.3 million, as shown in the “—2017 Business Highlights” section above.
Compensation Adjusted EBITDA | Threshold | Target | Maximum | Actual |
Targets and FY2019 Actual | $95.3 million | $100.3 million | $110.3 million | $64.4 million |
Payout % | 50% | 100% | 200% | 0% |
Compensation Adjusted EBITDA under the AIP is calculated by modifying Adjusted EPSEBITDA for LogistiCare and its subsidiaries to include budgeted restructuring and related chargesneutralize impact of changes in accounting rules, and exclude expensesimpact of acquisitions from actual results, earnings related to taxes,divested businesses after the date of divestment, one of the Company’s subsidiaries’ long-term incentive plans, unbudgeted restructuringseverance of executive officers, losses and related charges, transaction expensesgains on unbudgeted sales of assets, the impact of “marking-to-market” of cash settled equity awards, and cash-settled equity awards.items of an “Unusual Nature” on a case by case basis. (For a complete discussion of the method of calculating Adjusted EPS,EBITDA, see the Form 8-K filed with the SEC on March 9, 2018.February 27, 2020.)
Retention Bonuses
Upon the conclusion of these NEOs’ AIP opportunity was determined as a percentage of base salary, as follows:
| Named Executive Officer | Target AIP Opportunity as % of Salary | Maximum AIP Opportunity as % of Salary | ||||
| James M. Lindstrom | 90 | % | 180 | % | ||
| David C. Shackelton | 75 | % | 150 | % | ||
| Sophia D. Tawil | 75 | % | 150 | % | ||
| Matthew Umscheid | 75 | % | 150 | % | ||
| Compensation Adjusted EPS | Threshold | Target | Maximum | Actual |
| Targets and FY2017 Actual | $1.71 | $1.90 | $2.28 | $2.93 |
| Payout % | 50% | 100% | 200% | 200% |
Long-Term Incentives
Equity Grants
In an effort to retain, motivate, and continue to align the Company’s NEOs with shareholdersstockholders and shareholderstockholder value creation, the Compensation Committee granted the 2018 annual LTIlong-term incentive awards in December 2017September 2019 in the form of stock options.options and restricted share awards to certain executives and other employees. The Compensation Committee determined that an award consisting of both (1) stock options werewhich align executives’ interests with stockholders given their inherent performance-based value and (2) restricted share awards with their inherent retention value was the best vehicle mix to meet the Company’s objectives during 2019, given the CEO transition period including continued alignmentthe Company was experiencing with shareholdersrespect to executive turnover. Given their level, the Compensation Committee felt it appropriate to grant Mr. Dotts and Ms. Stalmack awards that were weighted more towards performance and consisting of 75% stock options and 25% restricted share awards. For Ms. Smith and other executives/employees, the Compensation Committee felt it was important to more evenly balance performance and retention objectives during this transition, as wella result their awards consisted of 50% stock options and 50% restricted share awards. Mr. Greenleaf received awards in connection with the execution of his employment agreement as retentionCEO of senior executives.the Company consisting of RSUs, stock options with an exercise price equal to the Company’s common stock price on the date of grant (“Market Priced Options”) and stock options with an exercise price equal to 115% of the closing price of the Company’s common stock on the date of grant (the “Premium Priced Options”). Premium Priced Options further enhance the performance orientation of the program as they require a minimum 15% increase in the stock price prior to the executive being able to share in the stock price appreciation. The Compensation Committee considered various multiple factors in determining the stock optionvalue of the individual equity grants, including: individuals’ roles, performance, historical LTI grants, and market data. Additional detail on the optionequity grants is provided below.
| Named Executive Officer | Grant Date | Exercise Price | Stock Options (# of shares granted) | ||||||
| David Shackelton | 12/16/2017 | $ | 56.89 | 5,053 | |||||
| 12/14/2017 | $ | 56.42 | 97,615 | ||||||
| Sophia Tawil | 12/16/2017 | $ | 56.89 | 1,937 | |||||
| 12/14/2017 | $ | 56.42 | 37,420 | ||||||
| William Severance | 12/16/2017 | $ | 56.89 | 1,786 | |||||
| 12/14/2017 | $ | 56.42 | 34,504 | ||||||
On March 31, 2019, options to purchase 73,875 shares of Common Stock granted to Mr. Pate in November 2017,2018 vested as a result of him meeting certain personal goals, including those relating to financial reporting, the Organizational Consolidation, and the mentorship of senior executives. Options to purchase 73,875 shares of Common Stock granted to Mr. Pate in 2018 were subject to vesting based on a budget goal as of March 31, 2019, of which the Compensation Committee determined that 36,938 of such options should vest based on performance in respect of this goal. Options to purchase an additional 147,750 shares of Common Stock granted to Mr. Pate in 2018 vested on June 30, 2019. All of these vested options have an exercise price of $71.67 and will remain exercisable until April 8, 2021.
In connection with his departure from the Company,appointment as Interim Chief Financial Officer, on April 9, 2018, Mr. Lindstrom was granted fully vested nonqualified premium-priced stock optionsSeverance received an option to purchase 125,00013,710 shares of Company stock at a price of $71.67 per share, the closing price of the Company’s Common Stock on the grant date. This option became fully exercisable on May 10, 2019. Mr. Orton, Interim Chief Accounting Officer, received an option to purchase 23,313 shares of Company stock at an exercisea price of $61.33 (8% above the 90-day VWAP ending$56.42 per share on the Determination Date under the HoldCo LTIP); theDecember 14, 2017 and an option to purchase 1,207 shares of Company stock at a price of $56.89 per share on December 16, 2017. These options arebecame fully exercisable until their expiration date ofon December 31, 2018 (see “Change in Control, Severance Arrangements and Severance Payments in 2017— Lindstrom Separation Agreement” for additional detail and rationale).
On April 9, 2018,February 18, 2019, in connection with the Consolidation Plan and the extension of his term of employmenther appointment as our Interim CEO, weChief Accounting Officer, Ms. Smith was granted to Mr. Pate unvested nonqualified stock options to purchase 394,0004,600 shares of Common Stock at $73.09 per share, the closing price of the Company’s Common Stock at an exercise price of $71.67 per share (see “Employment Agreementsstock on the grant date. These options will vest if Ms. Smith remains continuously employed with the Named Executive Officers—R. Carter Pate”). Also in connection withCompany through October 31, 2020 and will expire on December 31, 2020.
The following table outlines the Consolidation Plan and his appointment as Interim CFO, we grantedequity grants made to Mr. Severance unvested nonqualified stock options to purchase 13,710 shares of the Company’s Common Stock at an exercise price of $71.67 per share (see “Employment Agreements with the Named Executive Officers—William Severance”).NEOs during 2019.
Named Executive Officer | Grant Date | Exercise Price | Stock Options (# of underlying shares) |
Restricted Share Award or RSUs | ||||||||||
Daniel E. Greenleaf (1) | 12/11/2019 | $ | 59.25 | 67,090 | 20,104 | |||||||||
Daniel E. Greenleaf (1) | 12/11/2019 | $ | 68.14 | 40,432 | - | |||||||||
Kevin M. Dotts (2) | 9/20/2019 | $ | 58.84 | 25,175 | 2,629 | |||||||||
Kathryn Stalmack (3) | 9/20/2019 | $ | 58.84 | 15,257 | 5,842 | |||||||||
Suzanne G. Smith (4) | 2/18/2019 | $ | 73.09 | 4,600 | - | |||||||||
Suzanne G. Smith (2) | 9/20/2019 | $ | 58.84 | 5,798 | 1,816 | |||||||||
R. Carter Pate(5) | 2/1/2019 | $ | - | - | 23,317 | |||||||||
(1) | In connection with his employment, Mr. Greenleaf was granted 67,090 options at the closing market price on the grant date, 40,432 Premium Priced Options and 20,104 RSUs. The stock options and RSUs vest in 25% increments on the first, second, third and fourth anniversaries of the grant date, subject to Mr. Greenleaf’s continued employment through such dates and the terms of Mr. Greenleaf’s employment agreement. |
(2) | Granted in connection with the 2019 Long Term Incentive Plan. The stock options and restricted share award shares vest in 1/3rd increments on March 15, 2021, March 15, 2022 and March 15, 2023, subject to such NEO’s continued employment through such dates. |
(3) | Granted in connection with Ms. Stalmack’s appointment as General Counsel and entry into her employment agreement. The stock options and restricted share award shares vest in 1/3rd increments on March 15, 2021, March 15, 2022 and March 15, 2023, subject to continued employment through such dates. |
(4) | Granted in connection with Ms. Smith’s appointment as Chief Accounting Officer. These options will vest only if Ms. Smith remains continuously employed with the Company through October 31, 2020 and will expire on December 31, 2020. |
(5) | Granted to reward Mr. Pate for his performance in various projects undertaken by the Company in 2018, which fully vested upon Mr. Pate’s separation of service from the Company in December 2019. |
Benefits and Perquisites
401(k) Plans
All NEOs are eligible to participate in our 401(k) Plan and to receive a company match, subject to plan requirements and contribution limits established by the Internal Revenue Service. NEOs receive matching contributions under our 401(k) Plan equal to 10% of participant elective contributions up to a maximum amount of $400. At the end of each plan year, we also may make a contribution on a discretionary basis on behalf of participants who have made elective contributions for the plan year. In 2017 no such elective contributions were made.
Other Benefits and Perquisites
During 2017,fiscal year 2019, our NEOs received, to varying degrees, a limited amount of other benefits, including certain group life, health, medical and other non-cash benefits generally available to all salaried employees. More detail on these benefits and perquisites may be found in the “Summary Compensation Table.”
Other Compensation Policies
Stock Ownership Guidelines for NEOs
We believe that promoting stock ownership aligns the interests of our NEOs with those of our stockholders and provides strong motivation to build stockholder value. Under the guidelines, NEOs are expected to own shares of our Common Stock with a value equal to the following multiple of their respective salaries:
Executive | |
Stock Ownership Guideline as a Multiple of Salary | |
CEO | 3x annual base salary |
Other NEOs | 2x annual base salary |
The following will count towards meeting the required holding level:
shares held directly or indirectly;
any vested restricted stockshare or stock unitsRSUs held under our annual equity-based compensation program;
any unvested time-based restricted stockshare or stock unitsRSUs held under our annual equity-based compensation program (calculated on an assumed net after-tax basis);
any in-the-money value of vested stock options; and
shares owned jointly with or in trust for, immediate family members residing in the same household.
NEOs are not permittedrequired to sellhold all compensatory shares of our Common Stock until they have reached the required holding level except if such sale is effected to satisfy tax obligations or to pay the exercise price of options.described above. This holding requirement does not apply to shares purchased by an NEO in the market or from the Company for cash unless acquired by exercise of a compensatory option. In the event an NEO does not achieve his or her holding level set forth above and sells shares of our Common Stock in violation of the Company’s stock ownership guidelines, the Board will consider all relevant facts and take such actions as it deems appropriate under the circumstances.
Clawback
It is the Board’s policy that the Compensation Committee will, to the extent permitted by governing law, have the sole and absolute authority to make retroactive adjustments to any excess cash or equity-based incentive compensation paid to executive officers and certain other officers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement. Any such incentive compensation received within the three
Anti-hedging / anti-pledging
We have a policy that prohibits employees, executive officers and the Board from engaging in any hedging or monetization transactions, or other financial arrangements that establish a short position in our Common Stock or otherwise are designed to hedge or offset a decrease in market value. In addition, we have a policy that prohibits our employees, executive officers and the Board from pledging our Common Stock as collateral for a loan or for a margin account.
Change in Control, Severance Arrangements and Severance Payments
During 2017,fiscal year 2019, we had employment agreements or letters with each of our NEOs. The employment agreements with Mr. Lindstrom, David ShackeltonGreenleaf, Mr. Dotts, Ms. Stalmack and Ms. TawilSmith provided for a severance payment upon the termination of employment under certain circumstances and for a payment upon a change in control as described below under “—Employment Agreements and Offer Letters with the Named Executive Officers” and “—Potential Payments Upon Termination or Change in Control”. The employment letters with Messrs. Umscheid and Severance did not entitle either of them to severance upon termination of employment or payment upon a change in control. On April 11, 2018, in connection with the Consolidation Plan, we entered into an option agreement with Mr. Pate which provides for accelerated vesting upon a change in control or in certain circumstances upon the termination of his employment (see “—Employment Agreements with the Named Executive Officers”).
Employee Retention Plan
On April 9, 2018, in connection with the Organizational Consolidation, Plan, we adopted an employee retention plan (the “Retention Plan”) covering the employees at the Company’s corporate holding company level, including David Shackelton, Mr. Severance, Mr. Orton and Ms. Tawil (the “Specified NEOs”).certain other executive officers of the Company. The Retention Plan providesprovided for certain payments and benefits to be provided to the Specified NEOseach such executive officer if they remain employed with the Company through a specified retention date, established for each Specified NEOwhich was May 10, 2019, in the case of Mr. Severance and Mr. Orton (the “Retention Date”).
Under the terms of the Retention Plan, certain employees with termination dates in 2019 were eligible for ordinary course, merit-based salary increases in 2019 and would receive guaranteed 2019 short-term incentive bonuses on a pro-rata basis. Thus, if a Specified NEO remainsMr. Severance remained employed with the Company through the applicable Retention Date, or iswas terminated by the Company without “cause” (as defined in the Retention Plan),“cause,” or by the Specified NEOMr. Severance as a result of a material reduction in base salary or target bonus, prior to the Retention Date, the Specified NEO willMr. Severance would be entitled to (i) a retention bonus equal to 100% of the Specified NEO’shis base salary, payable in two installments following the Retention Date, (ii) a pro rata bonus or prior year annual bonus, depending on the date of termination, (iii) accelerated vesting of all of the Specified NEO’sMr. Severance’s restricted stockshare awards and option awards, (iv) an extension of option exercisability through December 31, 2020, and (v) reimbursement for the Company portion of health insurance premiums following termination for a period up to December 31, 2019.
Under the terms of the Retention Plan, if Mr. Orton remained employed with the Company through the Retention Date, or was terminated by the Company without “cause,” or by Mr. Orton as a result of a material reduction in base salary or target bonus, prior to the Retention Date, Mr. Orton would be entitled to (i) a retention bonus equal to 100% of his base salary, payable in two installments following the Retention Date, (ii) a pro rata annual bonus, (iii) accelerated vesting of all of Mr. Orton’s restricted share awards and option awards, (iv) an extension of option exercisability through December 31, 2020, and (v) reimbursement for the Company portion of health insurance premiums following termination for a period up to December 31, 2019.
As a result of their participation in the Retention Plan, none of the Specified NEOs will beMr. Severance and Mr. Orton were not entitled in 2019 to any other severance pay or benefits if their employment ishad been terminated during the retention period, including under the terms of any
Upon the conclusion of his employment with the Company on May 10, 2019, following the completion of his tenure under the Retention Plan, Mr. Severance received a $875,000 retention bonus and $122,344 as his pro rata AIP. Upon the conclusion of his employment on May 10, 2019, following the completion of his tenure under the Retention Plan, Mr. Orton received a $300,000 retention bonus and $54,375 as his pro rata AIP.
Impact of Tax Treatment on Compensation
While the Compensation Committee endeavors to structure compensation so that we may take a tax deduction, it does not have a policy requiring that all compensation must be deductible and it may, from time to time, authorize compensation that is not tax deductible, including where it deems appropriate or necessary in order to ensure competitive levels of total compensation for our NEOs and where doing so would be in the best interests of the Company. Recently enacted tax legislation repealedFor taxable years beginning after December 31, 2017 (including the Company’s 2018 fiscal year), Internal Revenue Code (“IRC”) Section 162(m) exemptiongenerally disallows tax deductions for qualified performance-basedannual compensation for taxable years beginning after December 31, 2017. Thus, compensationin excess of $1 million paid to our NEOs after 2017 that exceeds $1 million will not be deductiblecertain executive officers unless it qualifies for limited transition relief applicable to certain agreementsarrangements in place as of November 2, 2017. In light of these changes, it is expected that compensation to our NEOs beginning in 2018 that exceed $1 million will not be tax deductible.
Other provisions of the IRC can also affect compensation decisions. Section 409A of the IRC, which governs the form and timing of payment of deferred compensation, imposes sanctions, including a 20% additional tax and an interest penalty, on a recipient of deferred compensation that does not comply with Section 409A. The Compensation Committee takes into account the potential implications of Section 409A in determining the form and timing of compensation awarded to our executives and strives to structure its compensation plans to meet these requirements.
Section 280G of the IRC disallows a company’s tax deduction for payments received by certain individuals in connection with a change in control to the extent that the payments exceed an amount approximately three times their average annual compensation (an “excess parachute payment”) and Section 4999 of the IRC imposes a 20% excise tax on those payments. The Compensation Committee also takes the provisions of Sections 280G and 4999 into account in structuring compensation, endeavoring to enable the Company to take a tax deduction and executives to avoid the excise tax. For example, employment agreements with certain of our NEOs contain provisions reducing parachute payments to an amount that will not constitute an excess parachute payment in certain circumstances.
Compensation Committee Report
The Compensation Committee operates under a written charter and is comprised entirely of directors meeting the independence requirements of NASDAQ listing requirements. The Board established this committee to discharge the Board’s responsibilities relating to compensation of our Interim CEO and each of our other executive officers. The Compensation Committee has overall responsibility for decisions relating to all compensation plans, policies, and benefit programs as they affect the Interim CEO and other executive officers.
The Compensation Committee has reviewed and discussed with Providence’s management the preceding section entitled “Compensation Discussion and Analysis.” Based on this review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the 20172019 Annual Report through filing of this Proxy Statement.
Compensation Committee | |||||
Richard A. Kerley (Chairperson) | Todd J. Carter | David A. Coulter | |||
Summary Compensation Table
The following table sets forth certain information with respect to compensation paid by us for services rendered in all capacities to us and our subsidiaries during the fiscal years ended December 31, 2017, 20162019, 2018 and 20152017 to our NEOs, which group is comprised of (1) each person who served as our CEO during 2017,fiscal year 2019, (2) each person who served as our CFO during 2017,fiscal year 2019, and (3) each of our threetwo other most highly compensated executive officers employed on December 31, 2017:
| Name | Year | Salary (2) ($) | Bonus (3) ($) | Stock Awards (4) ($) | Option Awards (5) ($) | Non-Equity Incentive Plan Compensation (3) ($) | All Other Compensation (6) (7) ($) | Total ($) | |||||||||||||||
| R. Carter Pate | 2017 | 88,846 | — | — | — | — | 137 | 88,983 | |||||||||||||||
| Interim Chief Executive Officer | |||||||||||||||||||||||
| James M. Lindstrom | 2017 | 570,000 | — | — | 803,563 | — | 2,018,473 | 3,392,036 | |||||||||||||||
| Former Chief Executive Officer | 2016 | 650,000 | 1,170,000 | — | — | — | 14,529 | 1,834,529 | |||||||||||||||
| 2015 | 559,744 | 400,000 | 5,536,022 | 198,190 | — | 25,661 | 6,719,617 | ||||||||||||||||
| David C. Shackelton | 2017 | 450,000 | — | — | 1,212,296 | 675,000 | 5,287 | 2,342,583 | |||||||||||||||
| Former Chief Financial Officer; current Chief Transformation Officer | 2016 | 450,000 | — | — | — | 675,000 | 5,046 | 1,130,046 | |||||||||||||||
| 2015 | 268,385 | 240,000 | 2,518,000 | 198,190 | — | 24,762 | 3,249,337 | ||||||||||||||||
| Sophia D. Tawil | 2017 | 350,000 | — | — | 451,253 | 525,000 | 13,536 | 1,339,789 | |||||||||||||||
| Senior Vice President, General Counsel & Secretary | 2016 | 242,560 | 525,000 | 965,250 | — | — | 10,922 | 1,743,732 | |||||||||||||||
| Matthew Umscheid (1) | 2017 | 350,000 | — | — | 45,837 | 525,000 | 15,030 | 935,867 | |||||||||||||||
| Senior Vice President, Strategic Services | 2016 | 350,000 | 525,000 | — | — | — | 13,850 | 888,850 | |||||||||||||||
| William Severance | 2017 | 309,000 | 231,750 | 149,583 | 408,206 | — | 15,048 | 1,113,587 | |||||||||||||||
Former Chief Accounting Officer; current Interim CFO | 2016 | 277,568 | 262,500 | 209,998 | — | — | 17,795 | 767,861 | |||||||||||||||
| Name | Year | Salary (1) ($) | Bonus (2) ($) | Stock Awards (3) ($) | Option Awards (4) ($) | Non- Equity Incentive Plan Compensation (5) ($) | All Other Compensation (6) ($) | Total ($) | |||||||||
Daniel E. Greenleaf President and Chief Executive Officer | 2019 | 32,692 | — | 1,191,162 | 1,955,559 | — | — | 3,179,413 | |||||||||
Kevin M. Dotts Chief Financial Officer | 2019 2018 | 456,346 118,462 |
| — 50,000 | 154,690 — | 364,204 372,445 |
| — 50,000 | 24,281 5,566 | 999,521 596,473 | |||||||
Kathryn Stalmack Senior Vice President, General Counsel & Corporate Secretary | 2019 | 132,692 |
| — | 343,743 | 220,721 |
| — | 8,399 | 705,556 | |||||||
|
| ||||||||||||||||
Suzanne G. Smith Chief Accounting Officer | 2019 | 243,346 |
| 15,000 | 106,853 | 140,602 |
| — | 12,420 | 518,221 | |||||||
R. Carter Pate Former Interim Chief Executive Officer | 2019 2018 2017 | 764,423 553,077 88,846 |
| — 450,000 — | 1,499,983 — — | — 5,091,724 — |
(7) |
| 562,500 — — | 4,126 3,645 137 | 2,831,031 6,098,446 88,983 | ||||||
William Severance Former Senior Vice President, Finance | 2019 2018 2017 | 173,077 414,028 309,000 | 875,000 240,900 231,750 |
— 149,583 | - 161,313 408,206 | 122,343 154,754 — | 8,145 13,637 15,048 | 1,178,565 984,632 1,113,587 | |||||||||
Laurence Orton Former Interim Chief Accounting Officer and Senior Vice President Finance | 2019 2018 | 115,385 297,269 | 300,000 31,800 | ——
| ——
| 54,375 112,500 | 7,979 13,360 | 477,739 454,929 | |||||||||
(1) | |
2019 included 27 pay periods, so amount in this column is slightly more than the |
(2) | Includes discretionary bonus, sign on bonus or retention bonus. |
(3) | The compensation included in this column represents the aggregate grant date fair value of the equity awards granted during the year indicated. For |
(4) | |
This column shows the aggregate grant date fair value of the |
(5) | Includes annual non-discretionary bonus amounts which were expensed during the year indicated, but paid in |
(6) | |
We provide the NEOs with certain group life, health, medical and other non-cash benefits generally available to all salaried employees, which are included in this column. For |
| Name | Health, Dental, Life and Disability Insurance Premiums | Matching Contributions under Retirement Savings Plans | ||||||
| R. Carter Pate | $ | 137 | $ | — | ||||
| James M. Lindstrom | $ | 13,906 | $ | 400 | ||||
| David C. Shackelton | $ | 5,287 | $ | — | ||||
| Sophia D. Tawil | $ | 13,136 | $ | 400 | ||||
| Matthew Umscheid | $ | 14,630 | $ | 400 | ||||
| William Severance | $ | 14,648 | $ | 400 | ||||
Name |
| Health, Dental, Life and Disability Insurance Premiums |
| Matching Contributions under Retirement Savings Plans | ||||
Daniel E. Greenleaf | $ | — | $ | — | ||||
Kevin M. Dotts |
| $ | 23,881 |
|
| $ | 400 |
|
Kathryn Stalmack |
| $ | 8,226 |
|
| $ | 173 |
|
Suzanne G. Smith |
| $ | 12,020 |
|
| $ | 400 |
|
R. Carter Pate |
| $ | 4,126 |
|
| $ | — |
|
William Severance | $ | 7,745 |
|
| $ | 400 | ||
Laurence Orton | $ | 7,579 |
|
| $ | 400 | ||
(7) | Represents options granted on April 9, 2018, with an exercise price of $71.67 (the closing price of the Company’s common stock as of the grant date). In 2018, Mr. Pate volunteered to forego 98,500 of the options in order to fund other incentive awards to key employees in amounts and values determined by the Compensation Committee. |
Grants of Plan Based Awards Table
The following Grants of Plan Based Awards TableTable* provides additional information about stock and option awards and non-equity incentive plan awards granted to the NEOs during the fiscal year ended December 31, 2017.2019. The compensation plans under which the grants in the following table were made are described under “2017“2019 Executive Compensation Program Decisions—20172019 Cash Bonus Awards” and “2017“2019 Executive Compensation Program Decisions—Long-Term Incentives” in the “Compensation Discussion and Analysis” section.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | ||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | All Other Option Awards; Number of Securities Underlying Options (#) (4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||
| R. Carter Pate | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
| James M. Lindstrom | (1 | ) | 292,500 | 585,000 | 1,170,000 | — | — | — | — | — | — | — | |||||||||||||||||||||
| 11/15/2017 | — | — | — | — | — | — | — | 125,000 | 61.33 | 594,967 | |||||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 9,798 | 9,798 | 46.44 | 663,615 | |||||||||||||||||||||||
| David C. Shackelton | (1 | ) | 168,750 | 337,500 | 675,000 | — | — | — | — | — | — | — | |||||||||||||||||||||
| 12/16/2017 | — | — | — | — | — | — | — | 5,053 | 56.89 | 52,471 | |||||||||||||||||||||||
| 12/14/2017 | — | — | — | — | — | — | — | 97,615 | 56.42 | 1,005,112 | |||||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 7,267 | 7,267 | 46.44 | 492,191 | |||||||||||||||||||||||
| Sophia D. Tawil | (1 | ) | 131,250 | 262,500 | 525,000 | — | — | — | — | — | — | — | |||||||||||||||||||||
| 12/16/2017 | — | — | — | — | — | — | — | 1,937 | 56.89 | 20,114 | |||||||||||||||||||||||
| 12/14/2017 | — | — | — | — | — | — | — | 37,420 | 56.42 | 385,303 | |||||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 2,153 | 2,153 | 46.44 | 145,822 | |||||||||||||||||||||||
| Matthew Umscheid | (1 | ) | 131,250 | 262,500 | 525,000 | — | — | — | — | — | — | — | |||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 2,153 | 2,153 | 46.44 | 145,822 | |||||||||||||||||||||||
| William Severance | (1) (2) | 77,250 | 154,500 | 231,750 | — | — | — | — | — | — | — | ||||||||||||||||||||||
| 12/16/2017 | — | — | — | — | — | — | — | 1,786 | 56.89 | 18,546 | |||||||||||||||||||||||
| 12/14/2017 | — | — | — | — | — | — | — | 34,504 | 56.42 | 355,277 | |||||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 3,221 | — | — | 149,583 | |||||||||||||||||||||||
| 3/15/2017 | — | — | — | — | — | — | 1,615 | 1,615 | 46.44 | 109,383 | |||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | |||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards; Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | |||||||
Daniel E. Greenleaf | 12/11/2019 | — | — | — | 20,104 | 67,090 40,432 | 59.25 68.14 | 2,477,935 668,785 | |||||||
Kevin M. Dotts | N/A | — | 337,500 | 675,000 | — | — | — | — | |||||||
Kevin M. Dotts | 9/20/2019 | — | — | — | 2,629 | 25,175 | 58.84 | 518,894 | |||||||
Kathryn Stalmack | 9/20/2019 | — | — | — | 5,842 | 15,257 | 58.84 | 564,465 | |||||||
Suzanne G. Smith | N/A | — | 142,500 | 285,000 | — | — | — | — | |||||||
Suzanne G. Smith | 2/18/2019 | — | — | — | — | 4,600 | 73.09 | 56,723 | |||||||
Suzanne G. Smith | 9/20/2019 | — | — | — | 1,816 | 5,798 | 58.84 | 190,732 | |||||||
R. Carter Pate | N/A | — | 750,000 | 937,500 | — | — | — | — | |||||||
R. Carter Pate | 2/1/2019 | — | 23,317 | — | — | 1,499,983 | |||||||||
William Severance | N/A | — | 122,343 | 122,343 | — | — | — | — | |||||||
Laurence Orton | N/A | — | 54,375 | 54,375 | — | — | — | — | |||||||
* Columns that do not apply have been deleted.
(1) | |
Amounts represent the threshold, target and to the extent applicable, maximum, under the short-term incentive plan or the AIP for |
(2) | |
The |
Employment Agreements and Offer Letters with the Named Executive Officers
The following discussion and the discussion below under “—Potential Payments Upon Termination or a Change in Control” describe certain terms of the employment agreements and offer letters with the NEOs. As a result of their participation in the Retention Plan, neither Mr. Severance nor Mr. Orton were entitled in fiscal year 2019 to any other severance pay or benefits if their employment was terminated during the retention period, including under the terms of any employment agreement (see “Change in Control, Severance Arrangements and Severance Payments”).
Daniel E. Greenleaf
Effective December 11, 2019, Daniel Greenleaf was appointed to serve as President and CEO of the Company. The Company, LogistiCare and Mr. Greenleaf entered into an employment agreement (the “Greenleaf Employment Agreement”), dated November 29, 2019, in connection with Mr. Greenleaf’s appointment. The Greenleaf Employment Agreement provides for a term commencing as of December 11, 2019 and continuing until his employment is terminated in accordance with the terms of the Greenleaf Employment Agreement (the “Term”).
Under the terms of the Greenleaf Employment Agreement, Mr. Greenleaf’s annual base salary is $850,000. Mr. Greenleaf is eligible for an annual bonus beginning in fiscal year 2020 equal to 125% of his base salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. Mr. Greenleaf’s annual bonus is subject to a maximum performance of up to 250% of his base salary. In addition, on December 11, 2019, Mr. Greenleaf was granted RSUs covering 20,104 shares of the Company’s common stock and an option to purchase 67,090 shares of Company common stock with an exercise price of $59.25 and 40,432 Premium Priced Options to purchase shares of Company common stock with an exercise price of $68.14. The RSUs and the options vest ratably in equal installments on each of the first, second, third and fourth anniversaries of the grant date, in each case subject to his continued employment through the applicable anniversary date and expire on December 11, 2026.
While employed, Mr. Greenleaf is entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Mr. Greenleaf is also eligible to receive severance benefits in the event his employment is terminated by the Company without cause or by him for good reason. Details with respect to the severance and change in control provisions under the Greenleaf Employment Agreement are set forth below under “Potential Payments Upon Termination or Change in Control.”
The Greenleaf Employment Agreement includes restrictive covenants providing for Mr. Greenleaf’s non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of the non-competition, non-solicitation and non-piracy covenants is the period that includes the term of Mr. Greenleaf’s employment and two years thereafter.
Kevin M. Dotts
Effective August 27, 2018, Kevin Dotts, was appointed to serve as Chief Financial Officer of the Company and LogistiCare. The Company, LogistiCare and Mr. Dotts entered into an employment agreement (the “Dotts Employment Agreement”), dated August 18, 2018, in connection with Mr. Dotts’s appointment. The Dotts Employment Agreement provides for a term commencing as of August 27, 2018 and ending on December 31, 2020 (the “Term”).
Under the terms of the Dotts Employment Agreement, Mr. Dotts’s annual base salary was $400,000, which was increased to $450,000 effective March 1, 2019. Mr. Dotts is eligible for an annual bonus equal to 75% of his base salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. In addition, Mr. Dotts is eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee.
In addition, Mr. Dotts was granted an option to purchase 24,685 shares of Company common stock, with the exercise price of each option equal to the closing price of a share of the Company’s common stock on August 27, 2018. These options will vest only if Mr. Dotts remains continuously employed with the Company through October 31, 2020, and will expire on December 31, 2021.
While employed, Mr. Dotts is entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Mr. Dotts is also eligible to receive severance benefits in the event his employment is terminated by the Company without cause or by him for good reason. Details with respect to the severance and change in control provisions under the Dotts Employment Agreement are set forth below under “Potential Payments Upon Termination or Change in Control.”
The Dotts Employment Agreement includes restrictive covenants providing for Mr. Dotts’s non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of the non-solicitation and non-piracy covenants is the period that includes the term of Mr. Dotts’s employment and two years thereafter. The term of the non-competition covenant is the period that includes the term of Mr. Dotts’s employment and one year following the termination of his employment.
Kathryn Stalmack
Effective August 19, 2019, Kathryn Stalmack, was appointed to serve as Senior Vice President. General Counsel & Corporate Secretary of the Company. The Company, LogistiCare and Ms. Stalmack entered into an employment agreement (the “Stalmack Employment Agreement”), dated August 8, 2019, in connection with Ms. Stalmack’s appointment. The Stalmack Employment Agreement provides for a term commencing as of August 19, 2019 and ending on December 31, 2021 (the “Term”).
Under the terms of the Stalmack Employment Agreement, Ms. Stalmack’s annual base salary was $375,000. Beginning in 2020, Ms. Stalmack is eligible for an annual bonus equal to 75% of her base salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. Ms. Stalmack’s annual bonus is subject to a maximum performance of up to 150% of her base salary. Ms. Stalmack is eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee.
In addition, the Company granted Ms. Stalmack restricted share awards valued at $250,000. The restricted share awards vest ratably in equal installments on each of March 15, 2021, March 15, 2022 and March 15, 2023, in each case subject to her continued employment through the applicable anniversary date.
While employed, Ms. Stalmack is entitled to participate in all employee fringe benefits generally available to the Company’s senior executives. Ms. Stalmack is also eligible to receive severance benefits in the event her employment is terminated by the Company without cause or by her for good reason. Details with respect to the severance and change in control provisions under the Stalmack Employment Agreement are set forth below under “Potential Payments Upon Termination or Change in Control.”
The Stalmack Employment Agreement includes restrictive covenants providing for Ms. Stalmack’s non-competition, non-solicitation, non-piracy, non-disclosure and non-disparagement. The term of the non-solicitation and non-piracy covenants is the period that includes the term of Ms. Stalmack’s employment and two years thereafter. The term of the non-competition covenant is the period that includes the term of Ms. Stalmack’s employment and one year following the termination of her employment.
Suzanne G. Smith
Effective February 18, 2019, Suzanne G. Smith was named Chief Accounting Officer of the Company. Under the terms of Ms. Smith’s employment letter dated January 14, 2019, (the “Smith Employment Letter”) her initial base salary was set at $285,000. Ms. Smith is eligible to participate in the Company’s short-term incentive bonus plan with her 2019 bonus equal to up to 50% of her base salary, based upon achievement of 100% of the performance targets established by the Compensation Committee. In addition, Ms. Smith is eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee. The Smith Employment Letter provides that Ms. Smith will be granted an option to purchase at least 4,600 shares of common stock on terms as determined by Compensation Committee. In addition, Ms. Smith was paid a one-time signing bonus of $15,000.
Ms. Smith is also eligible to receive severance benefits in the event her employment is terminated by the Company without cause or by her for good reason. Details with respect to the severance and change in control provisions under the Smith Employment Letter are set forth below under “Potential Payments Upon Termination or Change in Control.”
R. Carter Pate
Effective November 15, 2017, Mr. Pate became Interim CEO and the Company and Mr. Pate entered into an employment agreement (the “Pate Employment Agreement”). The Pate Employment Agreement provides for a term ending upon the date a permanent successor CEO is hired and commences employment with the Company.
Under the terms of the Pate Employment Agreement, Mr. Pate with temporary housing in accordance with applicable Company policies and guidelines.
On March 31, 2019, 25% of the options granted under the Pate Option Agreement vested as a result of Mr. Pate meeting certain personal goals, including those relating to financial reporting, the Organizational Consolidation, and the mentorship of senior executives. 25% of the options were subject to vesting based on a budget goal as of March 31, 2019, of which 50% vested based on performance in respect of this goal. The remaining options vested on June 30, 2019. The options will remain exercisable until April 8, 2021.
The Pate Option Agreement also includes restrictive covenants in favor of the Company, including a one year noncompetitionone-year non-competition and nonsolicitationnon-solicitation restriction during and for one year following Mr. Pate’s employment with the Company.
The 2018 option grant represented a substantial portion of our employees’ essential contributions to the success of the Company, and to encourage employees to continue to contribute to the Company’s long-term interests through ownership of equity, Mr. Pate has voluntarily determined to set aside 98,500 of the options granted to him under the Option Agreement, representing 25% of his award, the value of whichPate’s overall compensation for 2018. For 2019, the Compensation Committee currently expects to grant to employees in the form of awards of restricted stock at a later date, based on performance.
William Severance
The Company entered into an offer letter with Mr. Severance on November 23, 2015 (the “Severance“Prior Severance Offer Letter”) pursuant to which Mr. Severance was appointed as Chief Accounting Officer of the Company reporting directly to the CFO of the Company, effective February 1, 2016. TheEffective January 10, 2018, the Company and Mr. Severance entered into a new offer letter (the “Amended Severance Offer Letter does not provide a term of employment.
Under the terms of the Prior Severance Offer Letter, Mr. Severance’s annual base salary was $300,000. InThe Amended Severance Offer Letter provided for an increase of annual base salary to $318,270. Under the Amended Severance Offer Letter, in addition to his annual base salary, Mr. Severance was entitled to payment of a short-term incentive bonus in an amount targeted to equal 50% of his annual base salary upon the achievement of certain financial goals as well as certain personal performance targets, in each case consistent with other senior executives of the Company and to be determined by the Board. The Compensation Committee has delegated to the Interim CEO authority to determine the ultimate payout of Mr. Severance’s short-term incentive bonus, which may be paid above the target amount. Mr. Severance received an award on his hire date of the number of restricted shares of the Company equal to 70% of his annual base salary divided by the closing price of the Company’s Common Stock on the date of the grant. As long as Mr. Severance remained employed by the Company, he would also be entitled to an award on each anniversary of his hire date of the number of restricted shares of the Company equal to 35% of his annual base salary divided by the closing price of the Company’s Common Stock on the date of the grant.
Effective April 11, 2018, in connection with the Organizational Consolidation, Plan, the Company appointed Mr. Severance as Interim CFO. In connection with this appointment, Mr. Severance’s base salary was increased from $318,270 to $450,000 and his annual target bonus was increased from 50% to 75% of his base salary. Also in connection with this appointment, on April 9, 2018, Mr. Severance received an optionoptions to purchase 13,710 shares of our Common Stock at a price of $71.67 per share, the closing price of the Company’s Common Stock on the grant date. The optionoptions will become fully exercisable on May 10, 2019, subject to Mr. Severance’s continued employment with the Company, and if not exercised will expire on December 31, 2020.
Neither the Prior Severance Offer Letter nor the Amended Severance Offer Letter provided for a term of employment. Details with respect to the severance provisions under the Amended Severance Offer Letter are set forth below under “Potential Payments Upon Termination or Change in Control.”
In addition, Mr. Severance was covered by the Retention Plan, which became effective on April 9, 2018 (see “Change in Control, Severance Arrangements and Severance Payments - Employee Retention Plan”), pursuant to which he was paid.
Laurence Orton
The Company entered into an offer letter with Mr. Orton on December 28, 2017 (the “Orton Offer Letter”) pursuant to which Mr. Orton continued to be employed as Vice President and Corporate Controller of the Company reporting to the Chief Accounting Officer of the Company. The Orton Offer Letter does not provide a term of employment.
Under the terms of the Orton Offer Letter, Mr. Orton’s annual base salary was $290,000. In addition to his annual base salary, Mr. Orton was entitled to payment of a short-term incentive bonus in an amount targeted to equal 50% of his annual base salary upon the achievement of certain goals determined by the Board or Compensation Committee. Mr. Orton was also eligible to participate in the Company’s 2006 Plan, under the terms approved by the Compensation Committee, and the Company’s fringe benefit programs as may be in effect from time to time.
In addition, Mr. Orton is covered by the Retention Plan, which became effective on April 9, 2018 (see “Change in Control, Severance Arrangements and Severance Payments in 2017—- Employee Retention Plan”).
Outstanding Equity Awards at December 31, 2017
The following table reflects the equity awards granted by us to the NEOs outstanding at December 31, 2017:
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name and Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (2) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($) | ||||||||||||||||
| James M. Lindstrom (5) | ||||||||||||||||||||||||
| 11/15/2017 | 125,000 | — | 61.33 | 12/31/2018 | — | — | — | — | ||||||||||||||||
| David C. Shackelton | ||||||||||||||||||||||||
| 12/16/2017 | — | 5,053 | 56.89 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 12/14/2017 | — | 97,615 | 56.42 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 3/15/2017 | — | 7,267 | 46.44 | 3/15/2027 | — | — | — | — | ||||||||||||||||
| 8/6/2015 | — | 11,319 | 44.17 | 8/6/2020 | — | — | — | — | ||||||||||||||||
| 9/11/2014 | 50,000 | — | 43.81 | 9/11/2024 | — | — | — | — | ||||||||||||||||
| Sophia D. Tawil | ||||||||||||||||||||||||
| 12/16/2017 | — | 1,937 | 56.89 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 12/14/2017 | — | 37,420 | 56.42 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 3/15/2017 | — | 2,153 | 46.44 | 3/15/2027 | — | — | — | — | ||||||||||||||||
| Matthew Umscheid | ||||||||||||||||||||||||
| 3/15/2017 | — | 2,153 | 46.44 | 3/5/2027 | — | — | — | — | ||||||||||||||||
| William Severance | ||||||||||||||||||||||||
| 12/16/2017 | — | 1,786 | 56.89 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 12/14/2017 | — | 34,504 | 56.42 | 12/31/2020 | — | — | — | — | ||||||||||||||||
| 3/15/2017 | — | 1,615 | 46.44 | 3/15/2027 | — | — | — | — | ||||||||||||||||
| 3/15/2017 | — | — | — | — | 3,221 | 191,134 | — | — | ||||||||||||||||
| 2/1/2016 | — | — | — | — | 3,166 | 187,870 | — | — | ||||||||||||||||
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| Option Awards |
| Stock Awards | ||||||||||||||||||||
Name and Grant Date |
| Number of Securities Underlying Unexercised Options (#) Exercisable (1) |
| Number of Securities Underlying Unexercised Options (#) Unexercisable (2) |
| Option Exercise Price ($) |
| Option Expiration Date |
| Number of Shares or Units of Stock That Have Not Vested (#) (3) |
| Market Value of Shares or Units of Stock That Have Not Vested ($) (4) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) |
| Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($) | ||||||||
Daniel E. Greenleaf | ||||||||||||||||||||||||
12/11/2019 |
| — | — | — | — | 20,104 | 1,189,755 | — |
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| — | |||||||||||||
12/11/2019 | — | 67,090 | 59.25 | 12/11/2026 | — |
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12/11/2019 | — | 40,432 | 68.14 | 12/11/2026 | — |
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| — |
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| — |
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| — | ||||||||||
Kevin M. Dotts |
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8/27/2018 |
| — |
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| 24,865 |
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| 67.00 |
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| 12/31/2021 |
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| — |
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| — |
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| — |
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| — |
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9/20/2019 | — | — | — | — | 2,629 |
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| 155,584 | ||||||||||||||||
9/20/2019 | — | 25,175 | 58.84 | 9/20/2024 | — | — |
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| — |
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| — | ||||||||||||
Kathryn Stalmack | ||||||||||||||||||||||||
9/20/2019 | — | — | — | — | 5,842 |
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| 345,730 | — | — | ||||||||||||||
9/20/2019 | — | 15,257 | 58.84 | 9/20/2024 | — | — |
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| — |
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| — | ||||||||||||
Suzanne G. Smith | ||||||||||||||||||||||||
2/18/2019 | — | 4,600 | 73.09 | 12/31/2020 | — | — | — | — | ||||||||||||||||
9/20/2019 | — | — | — | — | 1,816 |
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| 107,471 | — | — | ||||||||||||||
9/20/2019 | — | 5,798 | 58.84 | 9/20/2024 | — | — |
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| — | ||||||||||||
R. Carter Pate |
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4/9/2018 |
| 258,563 |
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| — |
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| 71.67 |
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| 4/8/2021 |
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| — |
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| — |
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| — |
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| — |
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William Severance | ||||||||||||||||||||||||
12/14/2017 | 34,004 | — | 56.42 | 12/31/2020 | — | — | — | — | ||||||||||||||||
12/16/2017 | 1,786 | — | 56.89 | 12/31/2020 | — | — | — | — | ||||||||||||||||
4/9/2018 | 13,710 | — | 71.67 | 12/31/2020 | — | — | — | — | ||||||||||||||||
Laurence Orton | — | — | — | — | — | — | — | — | ||||||||||||||||
(1) | |
The options have an exercise price equal to the closing market price of our Common Stock on the grant |
(2) | The options granted to Mr. |
(3) | Represents restricted share awards or RSUs. The |
(4) | |
The market value of the unvested restricted |
Option Exercises and Stock Vested Table
The following table provides additional information about the value realized by the NEOs on option award exercises and stock award vesting during the year ended December 31, 2017.
| Option Awards | Stock Awards | |||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||
| James M. Lindstrom | 21,117 | 290,758 | — | — | ||||||||
| William Severance | — | — | 1,584 | 61,222 | ||||||||
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| Option Awards |
| Stock Awards | ||||||||
Name |
| Number of Shares Acquired on Exercise (#) |
| Value Realized on Exercise ($) |
| Number of Shares Acquired on Vesting (#) |
| Value Realized on Vesting ($) | ||||
Daniel E. Greenleaf |
| — | — | — | — |
| ||||||
Kevin M. Dotts | — | — | — | — | ||||||||
Kathryn Stalmack | — | — | — | — | ||||||||
Suzanne G. Smith | — | — | — | — | ||||||||
R. Carter Pate |
| — | — | 23,317 | 1,375,237 |
| ||||||
William Severance | 2,115 | 37,139 | 3,730 | 238,069 | ||||||||
Laurence Orton | 24,520 | 324,677 | 1,422 | 90,432 | ||||||||
Non-qualified Deferred Compensation
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in last FY($) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FY ($)(3) | ||||||||||
| James M. Lindstrom (1) | — | — | 215,753 | — | 601,352 | ||||||||||
None of our NEOs participated in or had account balances in non-qualified defined contribution plans or other non-qualified deferred compensation plans maintained by us during fiscal year 2019.
Potential Payments Upon Termination or Change in Control
General
The employment agreements of David ShackeltonMr. Greenleaf, Mr. Dotts, and Ms. TawilStalmack provide for severance payments in the event of termination of employment under certain circumstances, and each such employment agreement provides for a payment in the event of a change in control (none of which include excise tax gross-ups).
The receipt of the payments and benefits to these NEOs under the employment agreements are generally conditioned upon their complying with non-competition, non-solicitation/non-piracy and non-disclosure provisions. By the terms of such agreements, the executives acknowledge that a breach of some or all of the restrictive covenants described therein will entitle us to injunctive relief restraining the commission or continuance of any such breach, in addition to any other available remedies.
In entering into these agreements, the Compensation Committee considered certain legal and tax provisions, fairness to stockholders, tenure of each executive officer and general corporate practice to select the events that will trigger payments under the employment agreements noted below.
Severance Payments in 2017— Lindstrom Separation Agreement”).
For 2017,fiscal year 2019, under their respective employment agreements David Shackeltonor offer letters, as applicable, Mr. Greenleaf, Mr. Dotts, Ms. Stalmack and Ms. TawilSmith would have been eligible to receive a severance benefit, upon executing a general release in favor of us in the event of a termination of the executive officer by us without Cause (as defined below) or with respect to Mr. Greenleaf, Mr. Dotts and Ms. Stalmack, the termination by the executive for Good Reason (as defined below). For 2017, neitherIf termination had occurred as of December 31, 2019, the severance payment to which Mr. Umscheid nor Mr. SeveranceGreenleaf would have been entitled to equaled (i) twenty-four months’ base salary and two times’ the target bonus for the full fiscal year (which was $0 for 2019), (ii) continued healthcare coverage for eighteen months following the date of termination and (iii) accelerated vesting of any severance payment under their offer letters.equity awards that would have otherwise vested based on continued employment for two years following the date of termination. The severance payment to which David Shackelton and Ms. TawilMr. Dotts would have each been entitled to equaled (i) twelve months’ base salary plus (ii) any bonus earned for the prior completed fiscal year, but not yet paid (which was $0 for 2019), and (iii) a pro-rata portion of any bonus earned for the then fiscal year through the date of termination. The severance payment to which Ms. Stalmack would have been entitled to equaled twelve months’ base salary and the severance payment to which Ms. Smith would have been entitled to equaled six months’ base salary.
Under the employment agreements and offer letters, as applicable, with David ShackeltonMr. Greenleaf, Mr. Dotts, Ms. Stalmack, and Ms. Tawil,Smith, “Cause” is defined as:
fraud or theft committed by the employee against us or any of our subsidiaries, affiliates, joint ventures and related organizations, including any entity managed by us (collectively referred to as “Affiliates”), or commission of a felony or any crime involving fraud or moral turpitude;
gross negligence of the employee or willful misconduct by the employee that results, in either case, in material economic or reputational harm to us or our Affiliates;
breach of any provision by the employee of the employment agreement or breach of any fiduciary duty or duty of loyalty owed to us or our Affiliates;
conduct of the employee tending to bring us or our Affiliates into public disgrace or embarrassment, or which is reasonably likely to cause one or more of its customers or clients to cease doing business with, or reduce the amount of business with, the Company or its Affiliates;
neglect or refusal by the employee to perform duties or responsibilities as directed by us, the Board or any executive committee established by the Board, or violation by the employee of any express direction of any lawful rule or regulation established by us or the Board or any committee established by the Board which is consistent with the scope of the employee’s duties under the employment agreement, if such failure, refusal, or violation continues uncured for a period 10 days after written notice from us to the employee specifying the failure, refusal, or violation and our intention to terminate the employment agreement for Cause;
commission of any acts or omissions by the employee resulting in or intended to result in direct material personal gain to the employee at our or our Affiliates’ expense; or
employee materially compromises our or our Affiliates’ trade secrets or other confidential and proprietary information.
Action or inaction by the employee is not considered “willful” unless done or omitted by him or her intentionally and without his or her reasonable belief that his or her action or inaction was in our or our Affiliates’ best interests, and does not include failure to act by reason of total or partial incapacity due to physical or mental illness.
Under the employment agreements with Mr. Greenleaf and Ms. Stalmack, “Good Reason” is defined as: the occurrence of any of the following that is not cured within thirty days of executive’s written notice that the occurrence constitutes Good Reason: (i) a material reduction of executive’s position, duties, or responsibilities with the Company or LogistiCare, including a requirement that the executive report directly to any person other than as provided in the agreement. (ii) a reduction of executive’s base salary other than a reduction which is generally applicable to all executives of the Company and LogistiCare, (iii) a material breach by the Company or LogistiCare of the employment agreement; provided that any resignation for Good Reason must be made within 60 days of the occurrence set forth in (i) –(iii) above. Mr. Dotts’ employment agreement defines Good Reason the same way, with an additional occurrence of requiring Mr. Dotts to move or relocate his primary place of employment more than 75 miles from LogistiCare’s current office at 1275 Peachtree Street, Atlanta, GA 30309.
The amount of estimated payments and benefits that would be provided by us (or our successor) to each of the NEOs employed by us as of December 31, 2017,2019, under the employment agreements, and the HoldCo LTIP (for those NEOs who participate in the HoldCo LTIP), assuming that such agreement had been in effect and the termination circumstance occurred on December 31, 20172019 and did not involve a Change in Control (as defined below) is as follows:
Under their employment agreements, in the event of a termination of employment by the Company without cause David Shackelton(or termination by the executive for good reason with respect to Mr. Greenleaf, Mr. Dotts and Ms. TawilStalmack), Mr. Greenleaf would receivehave received cash severance payments under theirtotaling $1,736,000 and an acceleration of stock-based compensation valued at $594,877, Mr. Dotts would have received $450,000, Ms. Stalmack would have received $375,000, and Ms. Smith would have received $142,500. With the exception of the terms of Mr. Greenleaf’s employment, agreements totaling $450,000 and $350,000, respectively. Thethe Company does not provide NEOs with continuation of benefits or accelerated vesting of equity awards upon a termination of
Change in Control Payments
Employment Agreements
Certain payment provisions of the employment agreements are also triggered by a “Change in Control.” Under the employment agreements with David ShackeltonMr. Greenleaf, Mr. Dotts, and Ms. TawilStalmack, a “Change in Control” is defined as an event or events, in which:
any “person” as defined in Sections 13(d) and 14(d) of the Exchange Act (other than (i) us or our subsidiaries, (ii) any fiduciary holding securities under our employee benefit plan or our subsidiaries, or (iii) any company owned by our stockholders), is or becomes the “beneficial owner” of 50% or more of our voting outstanding securities; or
we consummate (i) mergers or consolidations as more specifically described in the employment agreements, (ii) a liquidation or (iii) the sale or disposition of all or substantially all of our assets.
For 2017, David Shackelton’sfiscal year 2019, had a Change in Control occurred during the term of Mr. Greenleaf’s employment agreement and Ms. Tawil’she was terminated following such Change in Control, Mr. Greenleaf’s employment agreementsagreement would have entitled eachhim to receive from the Company (i) thirty months’ base salary and 2.5 times the target bonus for the full fiscal year 2019, (ii) continued healthcare coverage for eighteen months following the date of themtermination and (iii) accelerated vesting of all unvested equity awards. Had a Change in Control occurred during the term of Mr. Dotts’ employment agreement and he was terminated without cause or he resigns for good reason following such Change in Control Mr. Dotts’ employment agreement would have entitled him to receive from the Company continued payment of base salary for twelve months and a pro rata portion of any bonus earned for the then fiscal year through the date of termination hadof. Had a Change in Control occurred during the term of Ms. Stalmack’s employment agreement term and aftershe was terminated following such Change in Control but priorMs. Stalmack’s employment agreement would have entitled her to the endreceive twelve months’ base salary, and accelerated vesting of the term, such person had been terminated without Cause.
Equity Awards
Upon a Change in Control, each of David Shackelton, Mr. Severance, Mr. Umscheid and Ms. Tawilthe NEOs are entitled to accelerated vesting and payment of stock options and accelerated vesting and payment of restricted stockshare awards granted to that executive officer, as applicable. However, effective January 9, 2018 under their amended employment agreements, for David Shackelton and Ms. Tawil, if the sum of any lump payments, the value of any accelerated vesting of stock options and restricted stock awards, and the value of any other benefits payable to the executive officer, would constitute an “excess parachute payment” (as defined in Section 280G of the IRC), then such lump sum payment or other benefit will be reduced to the largest amount that will not result in receipt by the executive officer of a parachute payment.
The following table quantifies the estimated maximum amount of payments and benefits under the employment agreements, offer letters, and agreements relating to awards granted under our 2006 Plan to which the NEOs employed by us as of December 31, 20172019 would have been entitled upon a Change in Control of our Company that occurred on December 31, 20172019 and termination of employment, but without giving effect to any reduction for excess parachute payments.
| Name | Change in Control Payment ($) | Value of Accelerated Vesting of Equity Awards ($)(1) | Total Termination Benefits ($)(2) | ||||||
| David C. Shackelton | 450,000 | 562,869 | 1,012,869 | ||||||
| Sophia D. Tawil | 350,000 | 141,786 | 491,786 | ||||||
| Matthew Umscheid | — | 27,774 | 27,774 | ||||||
| William Severance | — | 504,965 | 504,965 | ||||||
Name |
| Change in Control Payment ($) (1) |
| Value of Accelerated Vesting of Equity Awards ($)(2) |
| Total Termination Benefits ($)(3) | |||
Daniel E. Greenleaf | 2,161,000 | 1,189,755 | 3,350,755 | ||||||
Kevin M. Dotts |
| 500,000 |
|
| 164,144 |
|
| 664,144 |
|
Kathryn Stalmack | 375,000 | 350,917 | 725,917 | ||||||
Suzanne G. Smith | — |
|
| 109,442 |
|
| 109,442 | ||
(1) | For Mr. Greenleaf and Ms. Stalmack, no bonus was included as they were not eligible for a bonus in 2019 pursuant to their employment agreements. |
(2) | Calculated based on the |
(3) | |
No value has been assigned to any provisions of the employment agreements that remain in force following a Change in Control. |
CEO Pay Ratio Disclosure
Pay Ratio Methodology
To determine the estimated ratio of CEO pay to median employee pay (the “Pay Ratio”) in accordance with Item 402(u) of Regulation S-K of the Securities Act, we considered our entire global employee population of 6,925approximately 3,800 employees who were on the payroll as of December 31, 2017.2019. We then used base salary paid during 2017fiscal year 2019 as the form of compensation to determine our median employee, and annualized pay for those employees who commenced work during 2017. Under the 5% de minimis rule, we excluded 300 employees located in South Korea (representing all of our employees in that jurisdiction). From the remaining 6,625 employees, wefiscal year 2019. We then identified our median employee, whose Summary Compensation Table (“SCT”) total compensation, as calculated in accordance with Item 402(u)(2) of Regulation S-K of the Securities Act, was $29,974$24,940 in 2017.fiscal year 2019.
The CEO pay used for purposes of calculating the Pay Ratio is $3.5M,$2,831,031, the combined SCT total compensation paid to our former CEO, James Lindstrom, between January 1, 2017 and November 14, 2017, and our Interim CEO, R. Carter Pate, from November 15, 2017January 1, 2019 through December 31, 2017 (reflecting the compensation provided to each during the time he served as our CEO during 2017). In addition to his regular compensation, James Lindstrom’s SCT total compensation includes his severance payment and a one-time option grant. (See “Change in Control, Severance Arrangements and Severance Payments in 2017— Lindstrom Separation Agreement”.)
As a result, the reasonable estimated ratio of CEO pay to median employee pay, calculated in a manner consistent with Item 402(u) of Regulation S-K of the Securities Act is 116:114:1. The SEC’s pay ratio disclosure rules permit the use of estimates, assumptions, and adjustments. We believe that the foregoing pay ratio is a reasonable estimate calculated in a manner consistent with the SEC’s pay ratio disclosure rules.
PROPOSAL 2 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), enables our stockholders to vote, on a non-binding advisory basis, on the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules.
The Compensation Committee has considered that the holders of overapproximately 82% and 79%80% of the votes cast at our 20162019 and 20172018 annual meeting of stockholders, respectively, approved, on an advisory basis the compensation of our NEOs as disclosed in the Proxy Statement for those annual meetings.
As described in detail under the heading “Executive Compensation—Compensation Discussion and Analysis,” above, our executive compensation programs are designed to attract, motivate, and retain our NEOs, who are critical to our success. Under these programs, our NEOs are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value. Please read the “Compensation Discussion and Analysis” beginning on page 2119 for additional details about our executive compensation programs, including information about the fiscal year 20172019 compensation of our NEOs.
We believe that the compensation programs offered to our NEOs should support the creation of stockholder value and
achievement of our financial goals. Accordingly, our guiding compensation principles focus on:
attracting, retaining, and retaining high-performancemotivating high-performing leaders;
aligning the interests of our executives with those of our stockholders;
linking a meaningful portion of executive compensation to performance;achievement of key financial, operational, and
maintaining a significant portion of compensation based on equity-based awards.at-risk opportunities including equity awards tied to stock price.
Our Compensation Committee has a long history of performance-based pay practices and considers numerous factors
actual and adjusted EBITDA, earnings per share, return on equity performance, and stockholder value created;
goals and objectives set for each executive officer at the beginning of the year; and
recommendations of an independent third-party executive compensation consultant.
Other considerations include individual performance, internal pay comparisons within the executive group at the
Performance based portions of our executive compensation for any given year are awarded primarily based on the respective prior year financial performance. Our annual incentive cash compensation and equity-based compensation programs are designed to be performance-based incentives requiringand to incentivize achievement of performance goals set by the Board in order to earn payouts.Company’s short- and long-term financial, operation and strategic goals. Our long-term incentive program has historically used equity grants to incentivize performance, reward our executives for substantial stockholder value creation and drive extraordinary stockholder value. We believe this structure encourages an ownership mentality that incentivizes our management to create stockholder value over a multi-year period.
Our Compensation Committee continually reviews the compensation programs for our NEOs to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices.
We are asking our stockholders to indicate their support for our NEO compensation as described in this Proxy Statement. This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company stockholders approve, on a non-binding advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 20182020 Annual Meeting of Stockholders
The Say-on-Pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. The Company values the opinions of our stockholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board unanimously recommends that you vote “FOR” the compensation of our Named Executive Officers, as disclosed in this Proxy Statement.
PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company’s independent registered public accounting firm for the fiscal year ended December 31, 20172019 was KPMG. The Audit Committee of the Board has selected KPMG as its independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2018.
Although we are not required to do so, we believe that it is appropriate for us to request stockholder ratification of the appointment of KPMG as our independent registered public accounting firm. If stockholders do not ratify the appointment, though it may nevertheless retain KPMG, the Audit Committee will investigate the reasons for the stockholders’ rejection and reconsider the appointment. In addition, even if the stockholders ratify the selection of KPMG, the Audit Committee may in its discretion appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that a change is in the best interest of the Company.
The Company has been advised that representatives of KPMG will be present at the Annual Meeting with the opportunity to make a statement if the representatives desire to do so. It is expected that the representatives will be available to respond to appropriate questions.
The Board unanimously recommends that you vote “FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2020.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board consists of Mr. Kerley, Ms. MeintsNorwalk and Mr. Wright. Ms. MeintsMr. Kerley is the Chairperson of the Audit Committee.
The Audit Committee operates under a written charter adopted by the Board, a copy of which is available on the Company’s website at www.prscholdings.com/corporategovernance.
The Audit Committee has reviewed and discussed with management its assessment and report on the effectiveness of Providence’s internal control over financial reporting as of December 31, 2017,2019, which it made using the criteria established in
The Audit Committee has reviewed and discussed with management and KPMG the audited consolidated financial statements of Providence for the fiscal year ended December 31, 2017.2019. Management represented to the Audit Committee that Providence’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States. The Audit Committee also discussed with representatives of KPMG the matters required to be discussed by Statement on Auditing Standards No. 16 as adopted bythe applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.
The Audit Committee received the written disclosures and the confirming letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with KPMG its independence from Providence.
Based on these reviews and discussions and in reliance thereon, the Audit Committee recommended to the Board that the audited financial statements be included in the 20172019 Annual Report.
The Audit Committee | |||
Richard A. Kerley (Chairperson) | Leslie V. Norwalk | Frank J. Wright | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Fees of Independent Registered Public Accounting Firm
Fees for professional services provided by KPMG, the Company’s independent registered public accounting firm, for the fiscal years ended December 31, 20172019 and 2016,2018, in each of the following categories were:
| Fiscal Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Audit fees | $ | 2,131,916 | $ | 2,809,950 | ||||
| Audit related fees | 40,581 | 37,136 | ||||||
| Tax fees | 1,251,303 | 1,059,825 | ||||||
| All other fees | 290,660 | 75,000 | ||||||
| Total | $ | 3,714,460 | $ | 3,981,911 | ||||
Fiscal Year Ended December 31, | ||||||||
2019 | 2018 | |||||||
Audit fees | $ | 1,532,083 | $ | 2,289,800 | ||||
Audit related fees | - | 15,000 | ||||||
Tax fees | 453,805 | 1,971,768 | ||||||
All other fees | - | 472,862 | ||||||
Total | $ | 1,985,888 | $ | 4,749,430 | ||||
Audit Fees
. Audit fees consisted of amounts incurred for services performed in association with the annual financial statement audit (including required quarterly reviews), the audit of the Company’s internal control over financial reporting, and for services provided in connection with statutory and regulatory filings or engagements.Audit Related Fees
. Audit related fees consisted of amounts incurred for internal control assurance services inTax Fees
. Tax fees consisted of amounts incurred for professional services rendered by KPMG for tax compliance, transfer pricing and tax consulting.All Other Fees
. Other feesThe Audit Committee has considered and determined that the services provided by KPMG were compatible with KPMG maintaining their independence.
The Audit Committee has adopted a policy that requires advance approval of all audit, audit related, tax services and other services performed by the independent auditor. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. The Audit Committee pre-approved all of the foregoing services provided to the Company by KPMG in fiscal years 2017ended December 31, 2019 and 2016.
STOCKHOLDER PROPOSALS FOR 20192021 ANNUAL MEETING
Pursuant to the proxyapplicable rules promulgated under the Exchange Act, Company stockholders are notified that the deadline for providing the Company with timely notice of any stockholder proposal to be submitted within the Rule 14a-8 process for consideration at the Company’s annual meeting to be held in 20192021 (the “2019“2021 Annual Meeting”) will be December 28, 2018.
Pursuant to the amended and restated bylaws,Company’s Bylaws, in order for a stockholder to bring a proposal (other than proposals sought to be included in the Company’s Proxy Statement pursuant to Rule 14a-8 of the Exchange Act) before, or make a nomination at, the 20192021 Annual Meeting, such stockholder must deliver a written notice of such proposal and/or nomination to, or it must be mailed and received by, the Company’s Corporate Secretary at the principal executive offices of the Company, located at 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902,Atlanta, GA 30309, no earlier than the close of business on February 12, 2019,16, 2021, and not later than the close of business on April 13, 2019.17, 2021. Stockholders are also advised to review the Company’s amended and restated bylaws,Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
As to all such matters which the Company does not have notice on or prior to April 13, 2019,17, 2021, discretionary authority shall be granted to the persons designated in the Company’s proxy related to the 20192021 Annual Meeting to vote on such proposal.
OTHER MATTERS
On the date we filed this Proxy Statement with the SEC, the Board did not know of any other matter to be raised at the Annual Meeting. If any other matters properly come before our stockholders at this Annual Meeting, the persons named on the enclosed proxy card intend to vote the shares they represent in accordance with their best judgment.
ADDITIONAL INFORMATION
The Company files reports and other information with the SEC. Copies of these documents may be obtained at the SEC’s public reference room in Washington, D.C. The Company’s SEC filings are also available on the SEC’s web site at www.sec.gov. Stockholders may also request additional copies of the Company’s 20172019 Annual Report, except for exhibits to the 20172019 Annual Report, without charge, by submitting a written request to the Company’s Corporate Secretary at 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902.
HOUSEHOLDING
In order to reduce printing costs and postage fees, the Company has adopted the process called “householding”. Under this procedure, the Company may deliver a single copy of the Notice, and if applicable, this Proxy Statement and 20172019 Annual Report to multiple stockholders who share the same last name and address, unless the Company receives contrary instructions from stockholders at that address. Stockholders who participate in householding will continue to receive separate proxy cards, if applicable.
If you prefer to receive multiple copies of the Company’s Notice or Proxy Statement and the 20172019 Annual Report, at the same address, you may obtain additional copies by writing to the Company’s Corporate Secretary at 700 Canal1275 Peachtree Street, ThirdSixth Floor, Stamford, CT 06902Atlanta, GA 30309 or by calling (203) 307-2800.(404) 888-5800. Eligible stockholders of record receiving multiple copies of this Proxy Statement and 20172019 Annual Report can request householding by contacting the Company in the same manner.
On behalf of the Board of Directors Daniel E. Greenleaf President and Chief Executive Officer |
April 29, 2020
Atlanta, Georgia
