Tivity Health, Inc.
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DEF 14A 1 tvty-def14a_20210520.htm TIVITY HEALTH, INC. DEF 14A tvty-def14a_20210520.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No.    )

 

Filed by the Registrant 

Filed by a Party other than the Registrant 

 

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

TIVITY HEALTH, INC.

(Name of registrant as specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

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(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

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Total fee paid:

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

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(4)

Date Filed:

 

 

 

 


 

 

701 Cool Springs Blvd

Franklin, Tennessee 37067

 

Notice of Annual Meeting of Stockholders

Thursday, May 20, 2021

8:30 a.m. Central Time

Virtual Meeting Site: www.virtualshareholdermeeting.com/TVTY2021

Stockholders of Tivity Health, Inc.:

The 2021 Annual Meeting of Stockholders of Tivity Health, Inc., a Delaware corporation (the “Company”), will be held on Thursday May 20, 2021 at 8:30 a.m., Central time, in a virtual-only format, which will be conducted online via live webcast (the “2021 Annual Meeting of Stockholders”).  You will be able to virtually attend the 2021 Annual Meeting of Stockholders and vote and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/TVTY2021.  The 2021 Annual Meeting of Stockholders is being held for the following purposes:

 

(1)

To elect seven directors to hold office for a term of one year or until their successors have been elected and qualified;

 

(2)

To consider and act upon a non-binding, advisory vote to approve compensation of the Company’s named executive officers as disclosed in the Proxy Statement;

 

(3)

To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

 

(4)

To transact such other business as may properly come before the meeting, or any adjournment or postponement thereof.

In accordance with Securities and Exchange Commission rules, we are mailing to many of our stockholders a Notice of Internet Availability instead of a paper copy of each of the Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2020. The Notice of Internet Availability contains instructions on how stockholders can access the proxy materials over the Internet as well as how stockholders can receive a paper copy of our proxy materials, including the Proxy Statement, the Annual Report on Form 10-K for the year ended December 31, 2020 and a form of proxy card. The Proxy Statement and form of proxy card accompanying this notice are being furnished to stockholders on or about April 6, 2021.  Only stockholders of record at the close of business on March 22, 2021 are entitled to notice of and to vote at the meeting or any adjournment or postponement thereof.

Your attention is directed to the Proxy Statement accompanying this notice for additional information regarding the matters to be acted upon at the meeting.

Whether or not you plan to attend the 2021 Annual Meeting of Stockholders, we hope you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of a proxy or voting instruction card by mail, you may submit your proxy or voting

 


 

instruction card for the meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided.

By Order of the Board of Directors,

 

 

 

Anthony M. Sanfilippo

April 6, 2021

Chairman

 


 

Tivity Health, Inc.

Proxy Statement

Table of Contents

 

 

Page

Proxy Statement for Annual Meeting of Stockholders

1

Security Ownership of Certain Beneficial Owners and Management

3

Corporate Governance

7

Proposal No. 1 Election of Directors

14

Director Compensation

18

Compensation Discussion and Analysis

23

Summary Compensation Table

44

Grants of Plan-Based Awards

47

Outstanding Equity Awards

49

Option Exercises and Stock Vested

52

NEO Employment Agreements

53

Potential Payments Upon Termination or Change in Control of the Company

54

CEO to Median Employee Pay Ratio

67

Delinquent Section 16(a) Reports

68

Proposal No. 2 Non-Binding, Advisory Vote to Approve Executive Compensation

69

Proposal No. 3 Ratification of Independent Registered Public Accounting Firm

70

Audit Committee Report

71

Deadline for Submission of Stockholder Proposals to be Presented at the 2022 Annual Meeting of Stockholders

72

Delivery of Form 10-K and Proxy Statement to Stockholders Sharing an Address

72

Attending the Annual Meeting

72

Miscellaneous

73

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 20, 2021: The Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2020 are available at www.proxyvote.com.

 

 


 

TIVITY HEALTH, INC.

701 Cool Springs Boulevard

Franklin, Tennessee 37067

 

Proxy Statement for Annual Meeting of Stockholders

The proxy is solicited by the Board of Directors (the “Board”) of Tivity Health, Inc. (“Tivity Health” or the “Company”) for use at the Annual Meeting of Stockholders to be held on Thursday, May 20, 2021, at 8:30 a.m., Central time, in a virtual-only format, which will be conducted online via live webcast at www.virtualshareholdermeeting.com/TVTY2021 and at all adjournments or postponements thereof (the “2021 Annual Meeting of Stockholders”), for the purposes set forth in the foregoing Notice of Annual Meeting of Stockholders. We have adopted a virtual format for our Annual Meeting of Stockholders again this year to provide a consistent experience to all stockholders regardless of location, and to support the health and well-being of our employees and stockholders due to the ongoing public health impact of the coronavirus outbreak (COVID-19).  In accordance with Securities and Exchange Commission (the “Commission”) rules, we are mailing to many of our stockholders a Notice of Internet Availability instead of a paper copy of each of the Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”). The Notice of Internet Availability contains instructions on how stockholders can access the proxy materials over the Internet as well as how stockholders can receive a paper copy of our proxy materials, including the Proxy Statement, the Form 10-K and a form of proxy card.  Copies of this Proxy Statement, the attached notice and the form of proxy are being furnished to stockholders on or about April 6, 2021.

In the election of directors (Proposal No. 1), you may vote “FOR” or “AGAINST” any or all of the nominees or you may “ABSTAIN” from voting with respect to any or all of the nominees. If you “ABSTAIN” from voting, it will not affect the outcome of this proposal.

For the non-binding, advisory vote to approve compensation of the Company’s named executive officers as disclosed in this Proxy Statement (Proposal No. 2) and the ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) (Proposal No. 3), you may vote “FOR,” “AGAINST” or “ABSTAIN.”  If you “ABSTAIN,” it will have the same effect as a vote “AGAINST” these proposals.

Shares represented by proxies will be voted in accordance with the choices specified thereon.  If you sign your proxy card without giving specific voting instructions, the shares represented by such proxies will be voted FOR the election of the director nominees set forth under Proposal No. 1, FOR the non-binding, advisory vote to approve compensation of the Company’s named executive officers as disclosed in this Proxy Statement set forth under Proposal No. 2, and FOR the ratification of the appointment of PwC as our independent registered public accounting firm for 2021 set forth under Proposal No. 3.  The Board does not know of any other matters that will be presented for action at the meeting, but the persons named in the proxy intend to vote or act with respect to any other proposal that may be properly presented for action according to their best judgment in light of the conditions then prevailing.

The quorum requirement for holding the 2021 Annual Meeting of Stockholders and transacting business is a majority of the outstanding shares entitled to vote.  The shares may be present in person or represented by proxy at the 2021 Annual Meeting of Stockholders. Abstentions and broker non-votes will be counted as present for the purpose of determining the presence of a quorum.

Votes are counted by an independent third party.  In the election of directors, a nominee will be elected as a director if the number of votes cast “FOR” such nominee exceeds the number of votes cast “AGAINST” such nominee (with abstentions and broker non-votes not counted as either votes “FOR” or “AGAINST”).  In the non-binding, advisory vote to approve executive compensation, the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy will constitute the stockholders’ non-binding approval with respect to our executive compensation programs.  The proposal to ratify the appointment of our independent registered public accounting firm requires the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy.

1


 

Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner and (2) the broker lacks discretionary voting power to vote those shares.  A broker is entitled to vote shares held for a beneficial owner on routine matters, such as the ratification of the appointment of PwC as independent registered public accounting firm (Proposal No. 3), without instructions from the beneficial owner of those shares. On the other hand, a broker is not entitled to vote shares held for a beneficial owner on certain non-routine items absent instructions from the beneficial owner of such shares. The election of directors and the non-binding, advisory vote to approve executive compensation are non-routine items on which a broker is not entitled to vote shares absent instructions from the beneficial owner of such shares. Broker non-votes count for purposes of determining whether a quorum exists, but do not count as votes cast (with respect to Proposal No. 1) or as shares entitled to vote (with respect to Proposal No. 2). Accordingly, broker non-votes will have no impact on the outcome of the election of directors (Proposal No. 1) or the non-binding, advisory vote to approve the compensation of the Company’s named executive officers as disclosed in this Proxy Statement (Proposal No. 2).

A proxy may be revoked by a stockholder at any time before its exercise by attending and voting during the meeting; by filing, no later than 5:00 p.m., Central time on Wednesday, May 19, 2021, with the Secretary of the Company a written notice of revocation; by duly executing a proxy bearing a later date; or by casting a new vote by toll-free telephone or the Internet no later than 11:59 p.m., Eastern time on Wednesday, May 19, 2021.

The preliminary voting results will be disclosed in a Current Report on Form 8-K that will be filed by the Company with the Commission within four business days following the 2021 Annual Meeting of Stockholders.  The final voting results, if different from the preliminary voting results, will be published on an amended Current Report on Form 8-K within four business days following the date on which the final results become known to us.

Each share of our common stock, $.001 par value (“Common Stock”), issued and outstanding on the record date, March 22, 2021, will be entitled to one vote on all matters to come before the 2021 Annual Meeting of Stockholders.  Cumulative voting is not permitted.  As of March 22, 2021, there were 49,234,409 shares of Common Stock outstanding.

We will bear all costs of this solicitation, including expenses in connection with preparing, assembling and furnishing this Proxy Statement. In addition to solicitations by mail, solicitations may be made by Internet, telephone, facsimile, email, or personal or press interviews. Some solicitations by any of these methods may be made by our directors and executive officers or by our investor relations employees within the normal conduct of their duties and without additional remuneration. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable and documented expenses in connection therewith.


2


 

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to those persons that we know to be the beneficial owners (as defined by Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than 5% of the outstanding shares of our Common Stock, our only voting security, and with respect to the beneficial ownership of our Common Stock by all directors and nominees, each of the named executive officers (“NEOs”) included in the Summary Compensation Table and all of our executive officers, directors, and director nominees as a group.  The information set forth below is based on ownership information we received as of March 22, 2021 (except as otherwise noted below) and the number of shares of Common Stock outstanding as of March 22, 2021.  Unless specified otherwise, the shares indicated are presently outstanding, and each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned.  Unless otherwise noted, the address of each beneficial owner is c/o Tivity Health, Inc., 701 Cool Springs Blvd., Franklin, TN 37067.

 

Name and Address of Beneficial Owner

 

Amount and

Nature of

Beneficial

Ownership (1)

 

Percent of

Class (1)

BlackRock, Inc.

 

6,244,695

(2)

12.68%

55 East 52nd Street

New York, NY 10055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HG Vora Capital Management, LLC.

 

4,800,000

(3)

9.75%

330 Madison Avenue, 20th Floor

 

 

 

 

New York, NY 10017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hudson Executive Capital LP

 

4,795,310

(4)

9.74%

570 Lexington Avenue, 35th Floor

New York, NY 10022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Vanguard Group

 

4,661,536

(5)

9.47%

100 Vanguard Blvd.

 

 

 

 

Malvern, PA 19355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altaris Capital, L.P.

 

4,409,438

(6)

8.96%

10 East 53rd Street, 31st Floor

New York, NY 10022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goldman Sachs & Co. LLC.

 

3,652,286

(7)

7.42%

200 West Street

New York, NY 10282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miller Value Partners, LLC.

 

3,037,206

(8)

6.17%

One South Street, Suite 2550

 

 

 

 

Baltimore, MD 21202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anthony Sanfilippo (a)

 

583,744

(9)

1.19%

 

 

 

 

 

 

 

 

 

 

Mary S. Flipse (b)

 

127,721

(10)

*

 

 

 

 

 

 

 

 

 

 

Robert J. Greczyn, Jr.(c)

 

113,098

(11)

*

 

 

 

 

 

 

 

 

 

 

Peter A. Hudson, M.D. (a)

 

74,390

(12)

*

 

 

 

 

 

3


 

 

 

 

 

 

Bradley S. Karro (a)

 

62,171

(13)

*

 

 

 

 

 

 

 

 

 

 

Benjamin A. Kirshner (a)

 

44,884

(14)

*

 

 

 

 

 

Adam C. Holland (b)

 

41,737

(15)

*

 

 

 

 

 

 

 

 

 

 

Sara J. Finley (a)

 

27,681

(16)

*

 

 

 

 

 

Beth M. Jacob (a)

 

25,358

(17)

*

 

 

 

 

 

 

 

 

 

 

Erin L. Russell (a)

 

20,231

(18)

*

 

 

 

 

 

Ryan M. Wagers (b)

 

11,214

(19)

*

 

 

 

 

 

 

 

 

 

 

Richard M. Ashworth (c)

 

0

 

*

 

 

 

 

 

Steven Janicak (b)

 

0

 

*

 

 

 

 

 

 

 

 

 

 

Donato J. Tramuto (b)

 

0

 

*

 

 

 

 

 

All directors and executive officers as a group (11 persons)

 

1,004,508

(20)

 

2.03%

 

 

 

 

 

 

*

Indicates ownership of less than one percent of our outstanding shares of Common Stock

(a)

Director of the Company

(b)

Named Executive Officer

(c)

Director and Named Executive Officer

(1)

Pursuant to the rules of the Commission, certain shares of our Common Stock that an individual owner set forth in this table has a right to acquire within 60 days after March 22, 2021 pursuant to the exercise or vesting of options to purchase shares of Common Stock (“stock options”), restricted stock units, or other securities are deemed to be outstanding for the purpose of computing the ownership of that owner, but are not deemed outstanding for the purpose of computing the ownership of any other individual owner shown in the table.  Likewise, the shares subject to stock options, restricted stock units, or other securities held by our other directors and executive officers that are exercisable within 60 days after March 22, 2021 are all deemed outstanding for the purpose of computing the percentage ownership of all executive officers, directors, and director nominees as a group.

(2)

Information with respect to stock ownership is based on a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) with the Commission on January 27, 2021 and includes shares held by certain of its subsidiaries.  Includes 6,187,733 shares to which BlackRock has sole voting power and 6,244,695 shares to which BlackRock has sole investment power.

(3)

Information with respect to stock ownership is based on a Schedule 13G filed by HG Vora Capital Management, LLC (“HG Vora”) with the Commission on January 22, 2021 and includes shares held by certain of its affiliates. Includes 4,800,000 shares to which HG Vora has sole voting power and sole investment power.

(4)

Information with respect to stock ownership is based on a Schedule 13D/A filed by Hudson Executive Capital LP (“Hudson”) with the Commission on May 11, 2020 and includes shares held by certain of its subsidiaries.  Includes 4,795,310 shares to which Hudson has shared voting power and shared investment power.

(5)

Information with respect to stock ownership is based on a Schedule 13G/A filed by The Vanguard Group, Inc. (“Vanguard”) with the Commission on February 10, 2021 and includes shares held by certain of its subsidiaries. Includes 67,288 shares to which Vanguard has shared voting power, 4,566,996 shares to which Vanguard has sole investment power and 94,540 shares to which Vanguard has shared investment power.

4


 

(6)

Information with respect to stock ownership is based on information provided to the Company by Altaris Capital, L.P. (“Altaris Capital”) as of March 22, 2021 and includes shares held by certain of its affiliates. Includes 4,409,438 shares to which Altaris Capital has shared voting power and shared investment power.

(7)

Information with respect to stock ownership is based on a Schedule 13G filed by Goldman Sachs & Co. LLC (“Goldman Sachs”) with the Commission on February 12, 2021 and includes shares held by certain of its affiliates. Includes 3,652,281 shares to which Goldman Sachs has shared voting power and 3,652,286 shares to which Goldman Sachs has shared investment power.

(8)

Information with respect to stock ownership is based on a Schedule 13G/A filed by Miller Value Partners, LLC (“Miller Value”) with the Commission on February 16, 2021 and includes shares held by certain of its affiliates.  Includes 3,037,206 shares to which Miller Value has shared voting power and shared investment power.

(9)

Includes 230,000 shares held by the Sanfilippo Family Trust as to which Mr. Sanfilippo shares or may be deemed to share voting and investment power. Also includes 17,942 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021. Excludes shares constituting $50,000 in value to be issued subsequent to the record date as fully vested common stock on March 31, 2021 based on the closing stock price of the Company’s Common Stock on such date.  Such shares will be issued under the Director Deferred Compensation Program in lieu of a portion of Mr. Sanfilippo’s annual cash retainer.

(10)

Information with respect to stock ownership is based on information provided to the Company by Ms. Flipse as of March 22, 2021. Includes 23,568 shares that, as of March 22, 2021, were issuable upon the exercise of outstanding stock options.

(11)

Includes 9,786 shares issuable upon vesting of restricted stock units on the earlier of (i) June 3, 2021, or (ii) the first annual meeting of the stockholders of Tivity Health that occurs after June 3, 2020. As the 2021 Annual Meeting of Stockholders will be held on May 20, 2021, these shares will be issuable within 60 days after March 22, 2021.

(12)

Includes 14,029 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

(13)

Includes 15,000 shares that, as of March 22, 2021, were issuable upon the exercise of outstanding stock options. Also includes 14,207 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

(14)

Includes 13,851 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021. Excludes shares constituting $21,250 in value to be issued subsequent to the record date as deferred RSUs on March 31, 2021 based on the closing stock price of the Company’s Common Stock on such date.  Such deferred RSUs will be issued under the Director Deferred Compensation Program in lieu of a portion of Mr. Kirshner’s annual cash retainer and will be distributed on a later date as elected by Mr. Kirshner.

(15)

Includes 7,273 shares that, as of March 22, 2021, were issuable upon the exercise of outstanding stock options. Also includes 6,734 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

(16)

Includes 14,207 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021. Excludes shares constituting $23,750 in value to be issued subsequent to the record date as deferred RSUs on March 31, 2021 based on the closing stock price of the Company’s Common Stock on such date.  Such deferred RSUs will be issued under the Director Deferred Compensation Program in lieu of a portion of Ms. Finley’s annual cash retainer and will be distributed on a later date as elected by Ms. Finley.

5


 

(17)

Includes 14,384 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

(18)

Includes 14,429 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021. Excludes shares constituting $19,688 in value to be issued subsequent to the record date as fully vested common stock on March 31, 2021 based on the closing stock price of the Company’s Common Stock on such date. Such shares will be issued under the Director Deferred Compensation Program in lieu of a portion of Ms. Russell’s annual cash retainer.

(19)

Includes 844 shares that, as of March 22, 2021, were issuable upon the exercise of outstanding stock options. Also includes 3,235 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

(20)

Includes 23,117 shares that, as of March 22, 2021, were issuable upon the exercise of outstanding stock options. Also includes 122,804 shares issuable upon vesting of restricted stock units within 60 days after March 22, 2021.

6


 

 

Corporate Governance

Board and Committee Summary

The table below lists the current members of the Board and their current committee assignments.

 

Board Member

Age

Director

Since

Primary Occupation

Audit

Comp

NCG

Ashworth (1)

46

2020

President and Chief Executive Officer of Tivity Health, Inc.

 

 

 

Finley

61

2018

Principal of Threshold Corporate Consulting, LLC

 

 

C

Greczyn (2)

69

2015

Former President and CEO of Blue Cross Blue Shield of North Carolina

 

M

M

Hudson (3)

55

2016

Managing Director of Alta Partners

M, F

 

 

Jacob

59

2018

Former SVP, Strategic Advisor and Leadership Coach of SPS Commerce

M

M

 

Karro

59

2014

Principal of Hillcote Advisors

 

C

 

Kirshner (3)

43

2019

Chairman of Elite Holdings, LLC

 

 

M

Russell (4)

47

2020

Former Principal of Vestar Capital Partners, LP

C, F

 

 

Sanfilippo (4)

63

2020

Co-founder of Sorelle Capital, Sorelle Entertainment, and Sorelle Hospitality

 

 

 

2020 Meetings

 

Board: 30

9

14

6

 

Audit

Audit Committee

 

C

Chair

Comp

Compensation Committee

 

M

Member

NCG

Nominating and Corporate Governance Committee

 

F

Financial Expert

 

 

 

 

 

 

(1)

Mr. Ashworth was appointed as President and Chief Executive Officer of the Company and appointed to the Board effective June 1, 2020.  He is not a member of any committee of the Board.

 

(2)

Effective February 18, 2020, Mr. Tramuto’s employment with the Company terminated, and Mr. Greczyn was appointed by the Board as Interim CEO. Mr. Greczyn served as Interim CEO from February 18, 2020 through May 31, 2020 and remained a member of the Board during his employment.  Prior to his employment as Interim CEO, Mr. Greczyn served as a member of the Compensation Committee and the Chair of the Nominating and Corporate Governance Committee. Following his employment as Interim CEO, Mr. Greczyn served as a member of the Compensation Committee and the Nominating and Corporate Governance Committee.

(3)

Messrs. Hudson and Kirshner will not stand for reelection at the 2021 Annual Meeting of Stockholders.

(4)

Ms. Russell and Mr. Sanfilippo were appointed to the Board effective March 16, 2020 in connection with a cooperation agreement (as discussed under Proposal No. 1), that the Company entered into with HG Vora. On April 2, 2020, Mr. Sanfilippo was appointed Chairman of the Board.

 

 

7


 

Other than Messrs. Ashworth and Tramuto, all of the members of the Board who served during 2020 are (or were, as applicable) “independent directors,” as defined under the Nasdaq Stock Market (“Nasdaq”) listing standards.  Mr. Greczyn was not considered an “independent director,” as defined under the Nasdaq listing standards, during the period that he served as the Interim CEO of the Company.

During 2020, each of our incumbent directors attended at least 75% of the aggregate of the total number of meetings held (i) by the Board during the period for which such director served as a member of the Board and (ii) by the committees of which such director was a member during the period for which such director served as a member of such committees.

Board Structure

Our Second Amended and Restated Bylaws, as amended (our “Bylaws”), provide that the Board shall consist of no fewer than five nor more than 12 directors, with the exact number of directors to be determined from time to time by resolution of the Board. The Board may not take any action to increase the size of the Board to a number greater than 12 directors without the approval of the stockholders of the Company that beneficially own a majority of the capital stock of the Company issued, outstanding and entitled to vote on such matters at the time of any such proposed increase.  

In February 2020, Mr. Tramuto resigned from the Board in connection with the termination of his employment, and the size of the Board was decreased from 11 to 10 directors. Also in February 2020, in connection with a cooperation agreement that the Company entered into with HG Vora (as described under Proposal No. 1), and upon the recommendation of the Nominating and Corporate Governance Committee and subsequent Board approval, Ms. Russell and Mr. Sanfilippo were appointed to the Board. Paul H. Keckley, Ph.D., Lee A. Shapiro, and Kevin G. Wills did not stand for reelection at the 2020 Annual Meeting of Stockholders, and at such time, the size of the Board was decreased from 12 to nine directors. In June 2020, in connection with Mr. Ashworth’s employment as President and Chief Executive Officer of the Company, the size of the Board was increased from nine to 10 directors, and Mr. Ashworth was appointed to fill the vacancy created by such increase. In September 2020, Daniel G. Tully resigned from the Board, and the size of the Board was decreased from 10 to nine directors. Dr. Hudson and Mr. Kirshner will not stand for reelection at the 2021 Annual Meeting of Stockholders, and at such time, the size of the Board will be decreased from nine to seven directors.

While our Board’s Governance Guidelines (our “Corporate Governance Guidelines”) provide flexibility in who may serve as Chairman of the Board, the Board currently separates the roles of Chairman and Chief Executive Officer (“CEO”). The CEO is responsible for setting our strategic direction and the day-to-day leadership of our business, while the Chairman ensures that the Board’s time and attention are focused on effective oversight of the matters most critical to the Company. On April 2, 2020, Mr. Sanfilippo was appointed Chairman of the Board, replacing Mr. Wills, who had served in that role since 2015.

Our Corporate Governance Guidelines set forth in greater detail the responsibilities of our Board.  Our Corporate Governance Guidelines are available under “Corporate Governance” accessible through the “Investors” link on the Company’s website at www.tivityhealth.com.

Risk Oversight

The Company is exposed to a number of risks, including economic, environmental, operational, and regulatory risks, as well as risks resulting from the coronavirus (COVID-19) pandemic, among others. Management is responsible for the day-to-day management of the risks the Company faces, while the Board as a whole is responsible for the oversight of such risks. Each of the Audit, Compensation, and Nominating and Corporate Governance Committees plays a significant role in assisting the Board to fulfill its oversight responsibilities.

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Our Audit Committee, for example, is responsible for overseeing the accounting, financial, legal, cybersecurity, and regulatory risks the Company faces. The Audit Committee receives reports from management and outside auditors regarding material issues concerning the adequacy of the Company’s internal controls over financial reporting. The Audit Committee also has access to management in discharging its duties and provides regular reports to the Board.

Our Compensation Committee assists the Board with risk oversight by annually reviewing the compensation philosophy of the Company and evaluating and providing recommendations on executive compensation as well as producing an annual report on executive compensation to be included in our Proxy Statement.  As further described in the “Compensation Discussion and Analysis” section, the Compensation Committee has determined that our executive compensation program and governance policies do not encourage our management or colleagues to take risks reasonably likely to have a material adverse effect on our business.  The Compensation Committee regularly reports its activities to the full Board.

Our Nominating and Corporate Governance Committee assists with risk oversight by managing Board structure and organization, the criteria for selecting new members to the Board and any Board committees, determining compensation for directors, evaluating Board members, and annually reviewing the corporate governance principles of the Company and recommending changes when appropriate. The Nominating and Corporate Governance Committee regularly provides reports to the Board.

The activities of each of our committees are set forth in greater detail in each of their respective charters, which are available under “Corporate Governance” accessible through the “Investors” link on the Company’s website at www.tivityhealth.com.

The Company believes that the Board leadership structure supports its role in risk oversight. There is open communication between management and directors, and all directors are actively involved in the risk oversight function.

Committees of the Board

Compensation Committee

During 2020, the Compensation Committee was composed of Mr. Karro and Ms. Jacob for the entire year.  Mr. Greczyn was a member of the Compensation Committee for the entire year except for the period during which he served as the Company’s Interim CEO (February 18, 2020 through May 31, 2020).  In addition, Mr. Shapiro was a member of the Compensation Committee from the beginning of the year until the 2020 Annual Meeting of Stockholders (at which time Mr. Shapiro did not stand for re-election to the Board), and Mr. Tully was a member of the Compensation Committee from February 2020 through September 1, 2020 (at which time Mr. Tully resigned from the Board). The Compensation Committee was chaired by Mr. Karro. As discussed in the “Compensation Discussion and Analysis” section, all of the directors who serve on the Compensation Committee are “non-employee directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), “Outside Directors” for purposes of regulations promulgated pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and “independent directors” as defined under the Nasdaq listing standards, in each case as determined by the Board.  The Compensation Committee is responsible for overseeing our overall compensation strategies and policies, evaluating the performance of our executive officers, approving the appropriate compensation of each of our executive officers, and administering our equity-based incentive plans, among other things.  The Compensation Committee’s Charter, which is reviewed annually by the Compensation Committee and is available on our website at www.tivityhealth.com, provides a detailed description of the Compensation Committee’s duties and responsibilities.

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Nominating and Corporate Governance Committee

During 2020, the Nominating and Corporate Governance Committee was composed of Mr. Kirshner and Ms. Finley for the entire year.  Mr. Greczyn was a member of the Nominating and Corporate Governance Committee for the entire year except for the period during which he served as the Company’s Interim CEO (February 18, 2020 through May 31, 2020).  In addition, Dr. Keckley was a member of the Nominating and Corporate Governance Committee from the beginning of the year until the 2020 Annual Meeting of Stockholders (at which time he did not stand for re-election to the Board), and Mr. Tully was a member from February 2020 through September 1, 2020 (at which time Mr. Tully resigned from the Board).  It was chaired by Mr. Greczyn from the beginning of the year until February 18, 2020 and was chaired by Ms. Finley thereafter.  All of the directors who serve on the Nominating and Corporate Governance Committee are “independent directors” as defined under the Nasdaq listing standards.  The Nominating and Corporate Governance Committee’s responsibilities include, among other things, identifying individuals qualified to become members of the Board, recommending such individuals to the Board for election to the Board, and developing and recommending to the Board corporate governance principles applicable to the Company.  The Nominating and Corporate Governance Committee’s Charter, which is reviewed annually by the Nominating and Corporate Governance Committee and is available on our website at www.tivityhealth.com, provides a detailed description of the Nominating and Corporate Governance Committee’s duties and responsibilities and sets forth the director nomination process.

Audit Committee

During 2020, the Audit Committee was composed of Dr. Hudson and Ms. Jacob for the entire year.  In addition, Mr. Shapiro was a member of the Audit Committee from the beginning of the year until the 2020 Annual Meeting of Stockholders (at which time he did not stand for re-election to the Board), and Ms. Russell was a member from April 2020 through the end of the year.  It was chaired by Mr. Shapiro from the beginning of the year through until the 2020 Annual Meeting of Stockholders and was chaired by Ms. Russell thereafter. All of the directors on the Audit Committee are “independent directors” as defined under the Nasdaq listing standards, and satisfy the heightened independence criteria applicable to members of the Audit Committee under the Nasdaq listing standards and Rule 10A-3(b)(1) under the Exchange Act.  We have, and will continue to have, at least one member of the Audit Committee who has past employment experience in finance or accounting and requisite professional certification in accounting or other comparable experience that results in the individual’s financial sophistication.  The Board has determined that each of Dr. Hudson and Ms. Russell qualifies as an “audit committee financial expert”, as defined by the regulations of the Commission.  The Audit Committee meets with our independent registered public accounting firm and management to review our consolidated financial statements, the quality and integrity of our accounting, auditing and financial reporting process, and our systems of internal controls.  The Audit Committee’s Charter, which is reviewed annually by the Audit Committee and is available on our website at www.tivityhealth.com, provides a detailed description of the Audit Committee’s duties and responsibilities.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines to assist the Board in the exercise of its duties and responsibilities and to serve in the best interests of the Company and its stockholders.  Our Corporate Governance Guidelines, which are available on our website at www.tivityhealth.com, provide a framework for the conduct of the business of the Board.

Environmental, Social, and Governance (“ESG”) Policy

We are committed to conducting our business in an environmentally responsible manner, acting in a manner that promotes and protects the wellness of our employees, customers, and members, and helping to improve the local communities where our employees live and work.  The Board has approved an ESG policy, which is available on our website at www.tivityhealth.com and includes strategies related

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to sustainability and social responsibility.  Our ESG Committee, comprised of executives and subject matter experts from across the Company, oversees our ESG policy, strategies, and efforts to integrate such strategies into our business.  

Code of Conduct

Our Code of Business Conduct applies to all employees (including officers) and non-employee directors (collectively, “colleagues”).  The purpose of the Code of Business Conduct is to provide written standards that are reasonably designed to promote: honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in reports and documents we file with the Commission and other public communications we make; compliance with applicable governmental laws, rules and regulations; prompt internal reporting of violations of the Code of Business Conduct; and accountability for adherence to the Code of Business Conduct, and to deter wrongdoing.  A copy of our Code of Business Conduct, as well as any amendments thereto, is available on our website at www.tivityhealth.com. We intend to post any waiver of a provision of the Code of Business Conduct granted to any principal executive, financial, or accounting officers or any material amendment to the Code of Business Conduct on our website. We did not grant any waivers to the Code of Business Conduct in 2020.

Anti-Hedging Policy

Pursuant to the terms of our Anti-Hedging Policy, which applies to all employees (including officers) and directors, we consider the following actions to be inappropriate: “hedging” or monetizing transactions to lock in the value of Company stock holdings; engaging in any derivative transactions of Company securities, including put options, call options, prepaid variable contracts, equity swaps, collars, or exchange funds; and engaging in any short selling of Company securities. Because such transactions allow the holder to own Company securities without the full risks and rewards of ownership, they potentially separate the holder’s interests from those of other Company stockholders.

Stockholder Nominees

The policy of the Nominating and Corporate Governance Committee is to consider properly submitted stockholder nominations for director candidates as described below under “Identifying and Evaluating Nominees for Directors.”  Any stockholder nominations proposed for consideration by the Nominating and Corporate Governance Committee should be addressed to: Secretary, Tivity Health, Inc., 701 Cool Springs Boulevard, Franklin, Tennessee 37067.  To be timely, director nominations for the 2021 Annual Meeting of Stockholders must be submitted within the time limits for stockholder proposals as set forth at the end of this Proxy Statement.

Director Qualifications

Under our Corporate Governance Guidelines and the Nominating and Corporate Governance Committee Charter, the Nominating and Corporate Governance Committee is responsible for determining the criteria for membership on the Board.  Under such criteria, at least a majority of the members of the Board should be independent, and all members should have the highest character and integrity and possess an inquiring mind, vision, and the ability to work well with others. Currently, all of our directors except for Mr. Ashworth, the Company’s President and CEO, are independent. Other criteria that will be considered include prior experience as a director, knowledge of our business, and industry and broad experience at the operational, financial, or policy-making level in business. Diversity, age, and skills in the context of the needs of the Board are also a consideration. While the Company’s Corporate Governance Guidelines do not explicitly define diversity, it is the Nominating and Corporate Governance Committee’s practice to seek director candidates who will contribute to a diversity of perspectives. The Nominating and Corporate Governance Committee considers diversity in the context of the Board as a whole and takes into account a candidate’s personal characteristics and industry experience, with the intent of maintaining a Board that represents a broad range of viewpoints. Board members should also have sufficient time to devote to the affairs of the Company and to provide insight and practical wisdom based on experience.  

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As such, in order to be active participants and perform all director duties responsibly, directors’ service on other boards of public companies is limited to three public company boards (excluding the Company).

Identifying and Evaluating Nominees for Directors

The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director.  The Nominating and Corporate Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or other reasons.  In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current members of the Board, management, professional search firms, stockholders, or other persons. These candidates are evaluated at meetings of the Nominating and Corporate Governance Committee and may be considered at any point during the year. As described above, the Nominating and Corporate Governance Committee considers properly submitted stockholder nominations for candidates for the Board.  In evaluating nominations, the Nominating and Corporate Governance Committee uses the same criteria for all nominees and seeks to achieve a balance of knowledge, experience, and expertise on the Board. Ms. Russell and Mr. Sanfilippo were appointed to the Board effective March 16, 2020 in connection with a cooperation agreement between the Company and HG Vora (as discussed under Proposal No. 1) and were elected to serve as directors at the 2020 Annual Meeting of Stockholders until the 2021 Annual Meeting of Stockholders.  Mr. Sanfilippo and Ms. Russell were recommended by the Nominating and Corporate Governance Committee to the Board to be nominated to stand for re-election at the 2021 Annual Meeting of Stockholders and to serve, if elected, as directors until the 2022 Annual Meeting of Stockholders.

Directors’ Attendance at Annual Meetings of Stockholders

Although directors are invited and are always encouraged to attend the annual stockholder meetings, we do not require their attendance.  All of the directors then serving virtually attended the 2020 Annual Meeting of Stockholders held on May 21, 2020.

Communications with the Board

Stockholders may communicate with the Board by submitting a letter in writing addressed to: Chairman of the Board, Tivity Health, Inc., 701 Cool Springs Boulevard, Franklin, Tennessee 37067.  If the communication relates to the Company’s ethics or conduct, financial statements, accounting practices or internal controls, the communication may be submitted in writing addressed to: Audit Committee Chairman, Tivity Health, Inc., 701 Cool Springs Boulevard, Franklin, Tennessee 37067.  Stockholder communications may be submitted confidentially or anonymously.

Stock Ownership and Retention Guidelines

The Company’s stock ownership and retention guidelines applicable to NEOs require currently employed NEOs to maintain a minimum ownership in the Company’s stock calculated as a multiple of their base salary aligned with their job responsibility (for 2021, at least 3.75 times base salary for the Chief Executive Officer, 2.0 times base salary for the Chief Financial Officer, and 1.2 times base salary for the Chief Accounting Officer). Executive officers must retain at least 75% of the net number of shares acquired (after payment of exercise price, if any, and taxes) upon the exercise of all stock options and upon the vesting of all restricted stock units representing hypothetical shares of our Common Stock (“RSUs”), performance-based stock units (“PSUs”) and market stock units (“MSUs”), until they reach the required multiple of base salary.  Executive officers who do not comply with the guidelines may not be eligible for future equity awards. All of the NEOs who are currently employed by the Company are currently in compliance with the guidelines.

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Additionally, the Board has adopted stock retention guidelines for independent directors.  From January 1, 2021 until the 2021 Annual Meeting of Stockholders, the guidelines require directors to maintain ownership in the Company’s stock equal to three times the minimum annual cash retainer for directors. Effective on the date of the 2021 Annual Meeting of Stockholders, the guidelines require directors to maintain ownership in the Company’s stock equal to four times the minimum annual cash retainer for directors. Directors must retain at least 75% of the net number of shares acquired (after payment of exercise price, if any, and taxes) upon the exercise of all stock options and vesting of all RSUs until they reach the required minimum ownership.  Directors generally have until the five-year anniversary of their appointment to the Board to meet these requirements and may not sell shares of the Company’s stock until the ownership requirement is achieved.  All of the directors are currently in compliance with the guidelines.

Evaluations of Board and Committee Performance

Each year, the Nominating and Corporate Governance Committee of the Board evaluates the performance of the Board and of each committee of the Board, which includes a process to solicit from each director his or her assessment of the Board’s performance.  The manner of the evaluation is determined annually by the Nominating and Corporate Governance Committee in order to ensure the procurement of accurate and relevant information.  Following the evaluation, the Nominating and Corporate Governance Committee recommends to the Board any changes that would improve the Board’s ability to oversee more effectively the business and affairs of the Company. The chair of the Nominating and Corporate Governance Committee is responsible for reporting the results to each committee and the full Board.

Certain Relationships and Related Party Transactions

Since the beginning of the last fiscal year, we are not aware of any related party transactions between us and our directors, executive officers, 5% stockholders or their family members that require disclosure under Item 404 of Regulation S-K under the Exchange Act (“Item 404”).

Pursuant to its written charter, the Audit Committee reviews and either approves or disapproves all transactions between the Company and any related person that are required to be disclosed pursuant to Item 404.

In determining whether to approve any material related party transaction, the Audit Committee considers the relevant information and facts available to it regarding the transaction and takes into account factors such as the related party’s relationship to the Company and interest (direct or indirect) in the transaction, the terms of the transaction, and the benefits to the Company of the transaction. No director participates in the approval of an interested transaction for which he or she is a related party or otherwise has a direct or indirect interest.

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Proposal No. 1.  Election of Directors

The Board currently consists of nine directors.  Of the nine current directors who have previously been elected by the Company’s stockholders, seven directors will stand for re-election at the 2021 Annual Meeting of Stockholders, and two directors (Messrs. Hudson and Kirshner) will not stand for re-election.

HG Vora Cooperation Agreement

On February 25, 2020, we entered into a cooperation agreement (the “HG Vora Agreement”) with HG Vora.  Pursuant to the HG Vora Agreement, HG Vora had the right to appoint two individuals (“New Directors”) to the Board with a term expiring at the 2020 Annual Meeting of Stockholders. HG Vora appointed Mr. Sanfilippo and Ms. Russell, each of whom was re-elected at the 2020 Annual Meeting of Stockholders. During the term of the HG Vora Agreement, at least one New Director was to serve on each of the Audit Committee of the Board, the Strategic Review Committee of the Board (dissolved in April 2020), and the CEO Search Committee (dissolved upon Mr. Ashworth’s appointment as President and CEO). The HG Vora Agreement expired pursuant to its terms in January 2021.

Director Nominees

A nominee for election will be elected as a director if the number of votes cast “FOR” such nominee at the 2021 Annual Meeting of Stockholders exceeds the number of votes cast “AGAINST” such nominee (with abstentions and broker non-votes not counted as either votes “FOR” or “AGAINST”).  Stockholders have no right to vote cumulatively for directors, but rather each stockholder shall have one vote for each director for each share of Common Stock held by such stockholder.

Unless contrary instructions are received, shares of our Common Stock represented by duly executed proxies will be voted in favor of the election of the nominees named below.  If for any reason a nominee is unable to serve as a director, it is intended that the proxies solicited hereby will be voted for such substitute nominee as our Board may propose.  The Board has no reason to expect that the nominees will be unable to serve, and therefore, at this time does not have any substitute nominees under consideration.

Each of the seven persons below is a nominee for election to serve as a director for a term that will expire at the 2022 Annual Meeting of Stockholders and until his/her successor is elected and qualified.  All of the Company nominees for election to the Board are presently directors of the Company and were previously elected by the Company’s stockholders. Except for Messrs. Hudson and Kirshner, all directors elected at the 2020 Annual Meeting of Stockholders are standing for re-election. Certain information relating to the following persons has been furnished to us by the individuals named, and we have also included the specific skills, qualifications, and experience of each of our directors and director nominees.

 

Name

Age

Director Since

Position(s)

Richard M. Ashworth

46

2020

Chief Executive Officer and Director

Sara J. Finley

61

2018

Director

Robert J. Greczyn, Jr.

69

2015

Director

Beth M. Jacob

59

2018

Director

Bradley S. Karro

59

2014

Director

Erin L. Russell

47

2020

Director

Anthony M. Sanfilippo

63

2020

Chairman of the Board

 

 

 

 

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Richard M. Ashworth

President and Chief Executive Officer of the Company

Age 46

Director since 2020

 

Mr. Ashworth has served as President and Chief Executive Officer of the Company and as a member of the Board since June 2020. Mr. Ashworth previously served as the President of Walgreen Co. (“Walgreens”), where he was responsible for developing the strategies and plans for all Walgreens operations including leadership, development, operations, and management of the business. Mr. Ashworth served as President of Operations of Walgreens from November 2017 to February 2020 and as President of Pharmacy and Retail Operations from 2014 to 2017. In 2013, Mr. Ashworth also led the development and delivery of the healthcare strategy for the strategic partnership with U.K.-based Alliance Boots, which Walgreens later acquired.

Qualifications: Mr. Ashworth’s specific skills, experience and qualifications to serve as Chief Executive Officer and a director of the Company include 28 years of experience at Walgreens, a global pharmacy-led health and wellness company, including 20 years of strategic and operational experience.  He has extensive knowledge in strategy, operations, product and business development, healthcare, pharmacy, marketing and consumer insights, and successful leadership of teams comprised of several thousand members.

 

Board Committees:  None

 

 

Sara J. Finley

Principal of Threshold Corporate Consulting, LLC

Age 61

Director since 2018

 

Ms. Finley is the Principal of Threshold Corporate Consulting, LLC, a consulting services firm that she founded in 2015. From 2009 to 2011, Ms. Finley served as Senior Vice President and General Counsel of CVS Health Corporation, formerly known as CVS Caremark Corporation (including its predecessor companies, “CVS Caremark”), a publicly traded pharmacy services company.  From 2007 to 2009, Ms. Finley served as Senior Vice President and General Counsel of the pharmacy benefits management division of CVS Caremark, and from 2011 until her retirement from the company in 2015, Ms. Finley served as a senior legal advisor for CVS Caremark.  From 1998 to 2007, Ms. Finley served as Senior Vice President, Assistant General Counsel and Corporate Secretary of Caremark Rx, Inc., a publicly traded company and a predecessor of CVS Caremark. Previously, she was a partner at the law firm Kutak Rock in Atlanta, Georgia.  Ms. Finley graduated from the University of Alabama and received her law degree from Vanderbilt University.  She currently serves on the board of directors of Preferred Apartment Communities, Inc., a publicly traded real estate investment trust, and she is also chair of its compensation committee and a member of its nominating and governance committee. Ms. Finley also currently serves on the board of directors of Oak Paper Products Company, Inc., a privately-held paper products, packaging and janitorial supply company based in Los Angeles, California and Studio Bank, a community bank based in Nashville, Tennessee.  Ms. Finley currently serves on several Nashville non-profit boards, including The Center for Nonprofit Management, The Community Foundation of Middle Tennessee, Leadership Nashville, and the Vanderbilt Law School Board of Advisors.

Qualifications: Ms. Finley’s specific skills, experience and qualifications to serve as a director of the Company include over 15 years of executive management experience for industry-leading health care companies; board leadership roles for corporate and nonprofit organizations; and extensive experience as a senior legal advisor for mergers and acquisitions, health care regulatory matters, corporate governance, enterprise risk management, compliance, and other matters.  We believe Ms. Finley’s experience and perspective provides our Board with valuable insight, particularly with respect to strategic, legal, compliance, and risk management matters.

Board Committees:  Nominating and Corporate Governance (Chair)

 

 

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Robert J. Greczyn, Jr.

Former President and Chief Executive Officer of Blue Cross Blue Shield of North Carolina

Age 69

 

Director since 2015

 

 

Mr. Greczyn served as the Interim Chief Executive Officer of the Company from February 18, 2020 through May 31, 2020.  He was the Chief Executive Officer of Blue Cross Blue Shield of North Carolina (“BCBSNC”) from 2000 until his retirement in 2010, where he also served on the Board of the Blue Cross Blue Shield Association.  Since 2010, Mr. Greczyn has served as Principal Manager of Capital Food Group, LLC and RJG Restaurant Group LLC, privately held restaurant franchise operations.  From August 1998 until September 1999 he was the Chief Operating Officer of BCBSNC and became its President in September 1999.  From 1990 to 1998, he was the President and CEO of Carolina Physicians Health Plan, a health maintenance organization, which was partially acquired by Healthsource, Inc. in 1991 and fully acquired by Healthsource, Inc. in 1994, at which time it became Healthsource North Carolina.  In 1997, Cigna Corporation acquired Healthsource, Inc.  From 1986 to 1990, Mr. Greczyn was President and CEO of Health Plan of Delaware, Ltd. (which was acquired by Principal Health Care, Inc. in 1988, at which time it became Principal Health Care of Delaware, Inc.).  From March 2011 to November 2014, Mr. Greczyn served on the Board of Directors of Liposcience, Inc., a publicly traded (until its acquisition by Laboratory Corporation of America in November 2014) clinical diagnostic company, where he chaired the compensation committee and was a member of the audit committee.  He also served as the interim President and Chief Executive Officer of Liposcience, Inc. from August 2013 until February 2014, during which time he resigned from his positions on the audit and compensation committees.  From October 2011 until August 2012, Mr. Greczyn served as a director of M*Modal Inc., a publicly traded (until its acquisition August 2012 by One Equity Partners) provider of interactive clinical documentation and speech understanding technology, where he was a member of the compensation and audit committees.  From 2006 to 2008, Mr. Greczyn was Chairman of the Board of the Council for Affordable Quality Care, an alliance of chief executive officers of the nation’s leading health insurers working to simplify healthcare transactions.  Mr. Greczyn also serves as a board member of Vidant Health, of which he is also the chair of the compensation committee, and Vidant Medical Center, a not for profit large hospital, of which he is also a member of the quality committee and the executive committee.  Mr. Greczyn received an M.P.H. degree in health policy from the University of North Carolina at Chapel Hill and a B.A. degree in psychology from East Carolina University.

Qualifications:  Mr. Greczyn’s specific skills, experience and qualifications to serve as a director of the Company include over 20 years of experience as Chief Executive Officer of three health insurance companies as well as service on the compensation and audit committees of publicly traded companies.  We believe his extensive management experience and knowledge of the managed care industry and his prior public company board experience provides critical insight to our Board.

Board Committees:  Compensation; Nominating and Corporate Governance

 

 

Beth M. Jacob

Former Senior Vice President, Strategic Advisor and Leadership Coach of SPS Commerce

Age 59

Director since 2018

 

After serving in senior leadership roles since 2015 with SPS Commerce, Inc. (“SPS Commerce”), a global leader in cloud-based supply chain management solutions, Ms. Jacob retired in April 2019 from her position as Senior Vice President, Strategic Advisor and Leadership Coach of SPS Commerce, which began in March 2018, and supported the work of SPS Commerce as an independent consultant through August 2019.  From 2015 to March 2018, Ms. Jacob was the Senior Vice President, Chief Customer Success Officer, at SPS Commerce, where she created a high energy and innovative customer success organization that delivers new services and value to drive retention and growth.  From 2002 to 2014, Ms. Jacob was an executive with Target Corporation (“Target”), a leading upscale discount retailer that provides high-quality merchandise with a guest-friendly experience across store and digital channels.  At Target, she was Executive Vice President and Chief Information Officer from 2010 to 2014 and Senior Vice President and Chief Information Officer from 2008 to 2010. Ms. Jacob also was responsible for the

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global operations of Target India from 2011 to 2014.  From 2006 to 2008, Ms. Jacob was the Vice President of Target Financial Services, Guest Operations, leading the contact center and collection operations team that provided services to Target’s customers.  From 2003 to 2006, Ms. Jacob was Vice President of Target Financial Services, Guest Contact Centers, and from 2002 to 2003, she was the Director of Target Financial Services, Guest Contact Centers.  Prior to joining Target, Ms. Jacob spent 15 years at Ameriprise Financial, Inc. (formerly known as American Express Financial Advisors), a leading diversified financial services firm dedicated to helping customers achieve their financial goals.   Ms. Jacob graduated with a B.S. degree from the University of Minnesota in 1984 and received her Master of Business Administration degree from the University of Minnesota Carlson School of Management in 1989.  Ms. Jacob has served on several non-profit boards.

Qualifications: Ms. Jacob’s specific skills, experience and qualifications to serve as a director of the Company include more than 30 years of consumer-focused business experience with a broad range of responsibilities, spanning customer strategy and service, global operations, technology and data capabilities, scaling strategies for growth, and successful leadership and engagement of teams comprised of several thousand members. We believe Ms. Jacob’s experience and perspective provide our Board with valuable insight, particularly with respect to the Company’s developing digital platforms, expanded operational footprint, and strategy.

Board Committees:  Audit; Compensation

 

 

Bradley S. Karro

Principal of Hillcote Advisors

Age 59

Director since 2014

 

Mr. Karro is a principal of Hillcote Advisors, a firm focused on investing in and restructuring healthcare companies that Mr. Karro founded in May 2007. Prior to starting Hillcote Advisors, Mr. Karro held a number of senior executive positions in the healthcare industry, including serving as Executive Vice President of Caremark Rx, a prescription benefit management company. Mr. Karro joined Medpartners (which changed its name to Caremark Rx) in 1998 and served at Caremark Rx through 2007.  During his time at Caremark Rx, Mr. Karro was responsible for mergers and acquisitions, integration planning, information technology and Medicare product development. Mr. Karro was also appointed as a charter member of the Governor’s e-Health Advisory Council in Tennessee, an organization established to coordinate Tennessee’s initiatives leading towards the adoption of electronic medical records. He currently serves on the Board of Directors of Sharecare, a digital health company. From October 2013 to March 2017, Mr. Karro served as a member of the Board of Directors of Angiotech Pharmaceuticals, Inc., a global specialty pharmaceutical and medical device company, where he chaired the Audit Committee. Mr. Karro previously served on the Board of Directors of Emageon Inc., an information technology systems provider for hospitals, healthcare networks, and imaging facilities, from 2008 through 2009.

Qualifications:  Mr. Karro’s specific skills, experience and qualifications to serve as a director of the Company are evidenced by his more than 25 years of healthcare industry experience, extensive knowledge of the healthcare industry, executive management experience, and prior public board experience.

Board Committees:  Compensation (Chair)

 

Erin L. Russell

Former Principal of Vestar Capital Partners, LP

Age 47

Director since 2020

 

Since January 2019, Ms. Russell has served as a member of the board of directors of Kadant, Inc., a global supplier of engineered systems, where she is a member of the audit and nominating and corporate governance committees and serves as the chair of the risk oversight and sustainability committee.  From August 2001 until April 2017, she was a principal of Vestar Capital Partners, LP (“Vestar”), a private equity firm specializing in management buyouts, recapitalizations, and growth equity investments. While at Vestar, Ms. Russell served on the boards of directors of a number of companies, including most

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recently as a director of DeVilbiss Healthcare LLC, a company that designs, manufactures and markets respiratory medical products, from 2012 until July 2015 and as a director and a member of the audit committee of 21st Century Oncology Inc., a provider of state-of-the-art radiation therapy and integrated cancer treatments, from 2008 until September 2016, including as the chair of the audit committee until 2014. She also served as a director of DynaVox Inc., a communications device manufacturer, from 2004 until 2014, including serving as the chair of its audit committee until its initial public offering in 2010. Ms. Russell is currently a member of the school advisory board of St. Thomas Aquinas Catholic School, where she has served since June 2018, and has served on the advisory boards of McIntire School of Commerce since June 2016 and the Jefferson Scholars Foundation at the University of Virginia since April 2008. Ms. Russell holds a Bachelor’s degree in commerce with a concentration in accounting from McIntire School of Commerce, University of Virginia and a Masters in Business Administration from Harvard Business School.

 

Qualifications: Ms. Russell’s specific skills, experience and qualifications to serve as a director of the Company are evidenced by her experience with capital and credit markets, as well as her extensive experience serving on the boards of directors of companies in the healthcare sector.  We believe her financial literacy and extensive public and private company board experience provide critical insight to our Board.

 

Board Committees:  Audit (Chair)

 

 

Anthony M. Sanfilippo

Co-founder of Sorelle Capital, Sorelle Entertainment, and Sorelle Hospitality

Age 63

Director since 2020

 

Mr. Sanfilippo has been Chairman of the Board since April 2020.  He is the co-founder of Sorelle Capital, Sorelle Entertainment and Sorelle Hospitality, a series of firms focused on investing in and helping grow companies with entrepreneurs in hospitality sectors and related real estate ventures.  Mr. Sanfilippo served as Chief Executive Officer and member of the board of directors (including chairman of the board from May 2017 until October 2018) of Pinnacle Entertainment Inc. (“Pinnacle”), a publicly traded gaming hospitality company with 16 casino locations in 10 states across the U.S., from March 2010 until October 2018, at which time Pinnacle was acquired by Penn National Gaming. Prior to joining Pinnacle, Mr. Sanfilippo served as President, Chief Executive Officer and board member of Multimedia Games Inc., a publicly traded creator and supplier of comprehensive technology systems, content and electronic gaming devices for various segments of the gaming industry.  Prior to joining Multimedia Games, Inc., he served as Division President at Harrah’s Entertainment Inc., currently known as Caesars Entertainment Inc., including serving as President and Chief Operating Officer for Harrah’s New Orleans and a board member of Jazz Casino Corporation.  Mr. Sanfilippo is a member of the board of directors of Papa John’s International, where he chairs the compensation committee and also serves on its corporate governance and nominating committee.  

 

Qualifications: Mr. Sanfilippo’s specific skills, experience and qualifications to serve as a director of the Company include his extensive operational, strategic, and senior leadership experience in the hospitality industry, including casinos, hotels, restaurants and entertainment businesses.  We believe his leadership and board experience provides our Board with valuable insight.

 

Board Committees:  None

 

The Board recommends a vote FOR each nominee.

 

Director Compensation

 

The Nominating and Corporate Governance Committee (the “NCG Committee”) reviews on an annual basis director compensation in relation to other comparable companies and in light of other factors that

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the NCG Committee deems appropriate and discusses director compensation with the Board. Pursuant to our director compensation policy in effect during 2020, each of our non-employee directors (excluding the Chairman of the Board, who was entitled to receive a $200,000 annual cash retainer as further described below) was entitled to receive a $75,000 annual cash retainer as well as annual committee retainers as follows, each of which was paid on a monthly basis during 2020:

 

 

Annual Retainer

Committee

Member

Chair

Audit

$15,000

$30,000

Compensation

$10,000

$20,000

Nominating and Corporate Governance

$10,000

$20,000

Strategic Review (1)

$10,000

$20,000

 

 

(1)

The Strategic Review Committee was dissolved in April 2020.

 

The Chairman of the Board was entitled to receive an annual cash retainer in the amount of $200,000 and was not entitled to receive any other additional cash compensation for his service on the Board or attendance at any Board or Committee meetings.  Mr. Tully did not receive any compensation for his service on the Board.

 

In April 2020, upon the recommendation of the NCG Committee of the Board, the Board approved a 100% reduction in the annual cash retainer and annual committee retainers payable to non-management members of the Board who were standing for reelection at the 2020 Annual Meeting of Stockholders (the “Board Retainer Reduction”) for a period of four months, beginning May 1, 2020.  In June 2020, upon the recommendation of the NCG Committee, the Board approved the extension of the Board Retainer Reduction for the period from September 1, 2020 through December 31, 2020 (the “Extended Board Retainer Reduction”).

 

In connection with each of the Board Retainer Reduction and the Extended Board Retainer Reduction, the Board, upon the recommendation of the NCG Committee, approved the grants of RSUs to each director whose compensation was reduced, with the value of the RSU grants to be equal as closely as reasonably possible to the amount of such reduction. The RSUs are subject to vesting in full on the first anniversary of the grant date. 

 

In addition, non-employee directors (excluding Mr. Tully) received an annual grant of RSUs with a grant date fair value of approximately $110,000.  Equity awards to non-employee directors during 2020 were made pursuant to the Company’s Second Amended and Restated 2014 Stock Incentive Plan (the “Second Amended and Restated 2014 Plan”).  Directors who are also our employees (e.g., Mr. Ashworth) receive no additional compensation for their Board service.

 

The following table summarizes the compensation to each non-employee director during 2020.

2020 Director Compensation

 

Name

Fees Earned

or Paid in

Cash

($)

Stock Awards

($)

Option

Awards

($)

Total

($)

 

 

(1)

(2)

 

Sara J. Finley

$33,333

$173,345

$206,678

Robert J. Greczyn, Jr. (3)

17,500

165,417

182,917

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Name

Fees Earned

or Paid in

Cash

($)

Stock Awards

($)

Option

Awards

($)

Total

($)

Peter A. Hudson, M.D. (4)

33,333

169,997

203,330

Beth M. Jacob

33,333

176,667

210,000

Bradley S. Karro

35,000

173,345

208,345

Paul H. Keckley, Ph.D. (5)

35,000

35,000

Benjamin A. Kirshner (4)

31,667

166,666

198,333

Erin L. Russell (6)

197,086

197,086

Anthony M. Sanfilippo (6)

261,675

261,675

Lee A. Shapiro (5)

38,333

38,333

Daniel G. Tully (7)

Kevin G. Wills (5)

66,667

66,667

 

 

(1)

Reflects the aggregate grant date fair value of RSUs granted during 2020 calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718.  

 

During 2020, the directors received RSU grants having a value equal as closely as reasonably possible to the amount of the Board Retainer Reduction and the Extended Board Retainer Reduction, if applicable.  The following directors received RSUs on May 11, 2020 having a grant date fair value of $9.37 per share in connection with the Board Retainer Reduction: Ms. Finley (3,380); Mr. Hudson (3,202); Ms. Jacob (3,557); Mr. Karro (3,380); Mr. Kirshner (3,024); Ms. Russell (3,602); and Mr. Sanfilippo (7,115).  Following his employment with the Company as Interim CEO, Mr. Greczyn received 2,113 RSUs on June 3, 2020 having a grant date fair value of $11.24 per share in connection with his Board Retainer Reduction. The following directors received RSUs on August 24, 2020 having a grant date fair value of $16.47 per share in connection with the Extended Board Retainer Reduction: Ms. Finley (1,923); Mr. Greczyn (1,923); Mr. Hudson (1,821); Ms. Jacob (2,024); Mr. Karro (1,923); Mr. Kirshner (1,720); Ms. Russell (2,125); and Mr. Sanfilippo (4,048).

 

In addition, non-employee directors (excluding Mr. Tully) received an annual grant of RSUs with a grant date fair value of approximately $110,000.  Each of the following directors received 10,827 RSUs having a grant date fair value of $10.16 per share on May 21, 2020: Ms. Finley, Mr. Hudson, Ms. Jacob, Mr. Karro, Mr. Kirshner, Ms. Russell, and Mr. Sanfilippo.  Following his employment with the Company as Interim CEO, Mr. Greczyn received 9,786 RSUs on June 3, 2020 having a grant date fair value of $11.24 per share. In addition, on March 16, 2020, each of Ms. Russell and Mr. Sanfilippo received a pro-rated annual grant consisting of 5,802 RSUs having a grant date fair value of $3.16 per share.  

 

The following directors and former directors who served on the Board during 2020 had unvested stock awards outstanding as of December 31, 2020 as follows: Ms. Finley (16,130); Mr. Greczyn (13,822); Dr. Hudson (15,850); Ms. Jacob (16,408); Mr. Karro (16,130); Mr. Kirshner (15,571); Ms. Russell (22,356); and Mr. Sanfilippo (27,792).

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(2)

The following directors and former directors who served on the Board during 2020 had stock option awards outstanding as of December 31, 2020 as follows:  Mr. Karro (15,000); Dr. Keckley (15,000); and Mr. Wills (12,026).

 

(3)

Mr. Greczyn served as the Company’s Interim CEO from February 18, 2020 through May 31, 2020.  His compensation during such period is not reflected in the table above but is reflected in the Summary Compensation Table.

 

(4)

Dr. Hudson and Mr. Kirshner will not stand for re-election at the 2021 Annual Meeting of Stockholders.  Therefore, their terms will end at the 2021 Annual Meeting of Stockholders.

 

(5)

Dr. Keckley and Messrs. Shapiro and Wills did not stand for re-election at the 2020 Annual Meeting of Stockholders.  Therefore, their terms ended at the 2020 Annual Meeting of Stockholders.

 

(6)

Ms. Russell and Mr. Sanfilippo were appointed to the Board effective March 16, 2020.  

 

(7)

Mr. Tully resigned from the Board effective September 1, 2020.  He did not receive any compensation for his service on the Board.

Director Compensation for 2021

The NCG Committee has approved the following revisions to non-employee director compensation, effective beginning on the date of the 2021 Annual Meeting of Stockholders:

 

The annual cash retainer for each non-employee director (excluding the Chairman) will decrease from $75,000 to $60,000;

 

The annual cash retainer for the Chairman will decrease from $200,000 to $135,000;

 

The grant date fair value of the annual grant of RSUs will increase from $110,000 to $125,000; and

 

The annual committee retainers will be as follows:

 

 

Annual Retainer

Committee

Member

Chair

Audit

$15,000

$35,000

Compensation

$10,000

$25,000

Nominating and Corporate Governance

$10,000

$25,000

 

Director Deferred Compensation Plan

 

In addition, in December 2020, the Board approved a deferred compensation program for non-employee directors, which took effect January 1, 2021. Non-employee directors can defer all or a portion of the retainer and fee payments that would otherwise be paid or granted to them in cash or equity, and may elect to convert any cash payments into RSUs or unrestricted shares based on the fair market value of the Common Stock at the time the cash payments would otherwise have been made. For RSUs, dividend equivalents are credited to non-employee directors as if the RSUs are outstanding shares of Common Stock. Such dividend equivalents are deemed invested in additional RSUs.  Alternatively, non-employee directors may elect to defer their cash compensation into a cash account that will earn interest at the long term “applicable federal rate” established by the IRS from time to time.

 

At such distribution date as specified in the election form, the director will receive a distribution of the deferred compensation then credited to him or her under the program. If the director elected to defer

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RSUs (either the RSUs issued in lieu of cash pursuant to the election under the program or RSUs granted as an equity retainer), then shares of Common Stock equal to the number of RSUs (including those issued as dividend equivalents) will be distributed to the director per his or her deferral election. Shares of Common Stock issued for RSUs are issued under the Second Amended and Restated 2014 Plan. Upon a change in control of the Company, the period of deferral for any of such deferred amounts shall end, and payments shall be made to the director in accordance with the director’s election and the program.

Forward-Looking Statements

This Proxy Statement contains forward-looking statements, which are based upon current expectations, involve a number of risks and uncertainties, and are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief, or expectations of the Company, including, without limitation, all statements regarding the Company’s future earnings, revenues, and results of operations.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors. These factors include, but are not limited to, those described in Item 1A, Risk Factors, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Form 10-K, and those that will be described from time to time in the Company’s filings with the Commission, including the Company’s subsequent reports filed with the Commission on Form 10-K, Form 10-Q, and Form 8-K, which are available on the Commission’s website at www.sec.gov and on the Company’s website at www.tivityhealth.com. We undertake no obligation to update or revise any such forward-looking statements.


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Compensation Discussion and Analysis

Executive Summary

In 2020, our Named Executive Officers (“NEOs”) were as follows:

 

Name

Position

Richard Ashworth (1)

President and Chief Executive Officer

Adam Holland

Chief Financial Officer

Ryan Wagers

Chief Accounting Officer

Mary Flipse (2)

Former Chief Legal and Administrative Officer

Robert Greczyn (3)

Former Interim Chief Executive Officer

Steve Janicak (4)

Former Business Unit President, Healthcare

Donato Tramuto (5)

Former Chief Executive Officer

 

 

(1)

Mr. Ashworth was hired as President and Chief Executive Officer effective June 1, 2020.

 

(2)

Ms. Flipse’s role as Chief Legal and Administrative Officer was terminated effective December 1, 2020.  She remained employed by the Company through December 31, 2020 to assist with the transition.

 

(3)

In connection with Mr. Tramuto’s departure, the Board appointed Mr. Greczyn to serve as Interim Chief Executive Officer.  Mr. Greczyn served as Interim CEO from February 18, 2020 through May 31, 2020 and continued to serve as a member of the Board thereafter.

 

(4)

Mr. Janicak departed the Company in August 2020.

 

(5)

Mr. Tramuto departed the Company in February 2020.

Business and Leadership Changes

During 2020, there were significant developments in our business and the composition of our executive leadership.  

 

Effective February 18, 2020, Mr. Tramuto’s employment was terminated without cause, and the Board appointed Mr. Greczyn as Interim CEO of the Company.  

 

Effective June 1, 2020, Mr. Ashworth began employment with the Company as President and Chief Executive Officer.  In conjunction with Mr. Ashworth’s appointment, Mr. Greczyn’s employment as Interim CEO concluded effective May 31, 2020.

 

During the third quarter of 2020, we began a reorganization plan primarily related to optimizing our former Healthcare segment for growth and executing on our new strategy.  As part of this reorganization, Mr. Janicak’s role was eliminated, and his employment was terminated without cause effective August 31, 2020.

 

Effective December 9, 2020, we sold our wholly owned subsidiary Nutrisystem, Inc. (“Nutrisystem”).  Following the sale of Nutrisystem, we have one operating and reportable segment.

 

Effective December 31, 2020, Ms. Flipse’s employment was terminated without cause.

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COVID-19

 

In January 2020, the Secretary of the U.S. Department of Health and Human Services declared a national public health emergency due to a novel strain of coronavirus, which causes the disease known as “COVID-19.”  In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic.  By March 31, 2020, substantially all of the fitness centers in our national network were temporarily closed, which had an adverse impact on our results of operations for the first quarter of 2020 because a significant portion of revenues from our SilverSneakers program is based on member visits to a fitness partner location. A substantial number of our fitness partner locations remained closed through April, with some locations reopening in May and additional locations reopening in June and throughout the third quarter of 2020. Due to a resurgence of COVID-19 cases throughout the country, some fitness partner locations were closed again during the fourth quarter of 2020.  For the month of December 2020, approximately 74% of our fitness partner locations reported at least one visit from our SilverSneakers program. Revenues from continuing operations were adversely impacted by COVID-19 during 2020.

 

We took a number of actions in response to the pandemic, including the following:

 

 

We took a variety of measures to ensure the availability and functioning of our critical infrastructure, to promote the safety and security of our employees and to support the communities in which we operate. These measures included implementing remote working arrangements for employees where practicable. We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing, and the adoption of work-from-home arrangements.

 

 

We focused on preserving our liquidity and managing our cash flow, including, but not limited to, managing our working capital, optimizing tax savings under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and other COVID-19-related legislation, curtailing capital expenditures, reducing discretionary spending, and reducing compensation costs.

 

 

o

In April 2020, we furloughed 13% of our approximately 1,000 employees at that time.  In June 2020, some of these furloughed employees’ positions were eliminated (in addition to other position eliminations, resulting in approximately 8% of our then-employees being terminated), and we extended the furlough for substantially all of the remaining furloughed employees through the end of 2020. Also in June 2020, we placed an additional 2% of our total employees on furlough through the end of 2020.  Of the employees who were placed on furlough in June or whose furlough was extended in June through the end of 2020, one-half of these employees returned from furlough.  The positions of the other one-half were eliminated.

 

 

o

In April 2020, the Compensation Committee of the Board (the “Committee”) approved a 25% reduction in base salary (the “Base Salary Reduction”) for Messrs. Holland, Wagers, and Janicak and Ms. Flipse, as well as certain other employees, for the period from April 20, 2020 through August 23, 2020.  In June 2020, the Committee approved the extension of the Base Salary Reduction for such executive officers for the period from August 24, 2020 through December 31, 2020 (the “Extended Base Salary Reduction”), as well as a Base Salary Reduction for Mr. Ashworth for the period from July 1, 2020 through December 31, 2020.

  

 

o

Effective at the end of July 2020, the Compensation Committee suspended the Company matching contribution to the Company’s 401(k) plan.

 

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o

Base salaries for NEOs were restored effective January 1, 2021.  The Company’s matching contribution to the 401(k) plan was also restored in January 2021.

 

In connection with each of the Base Salary Reduction and the Extended Base Salary Reduction, the Board, upon the recommendation of the Committee, approved the grants of RSUs to each NEO whose compensation was reduced (the “Salary Reduction RSUs”), with the value of the RSU grants to be equal as closely as reasonably possible to the amount of such reduction. The Salary Reduction RSUs are subject to vesting in full on the first anniversary of the grant date. These RSUs were intended to align management’s interests with those of shareholders and to promote executive retention over the vesting period.

2020 Highlights

The COVID-19 pandemic created unique and unprecedented challenges.  We responded to these challenges by demonstrating our commitment to our clients, members, and shareholders through our actions and investments.  Despite the challenges resulting from the COVID-19 pandemic, the discipline of our executive team and employees and their intense focus on our long-term strategic goals was evidenced by the following achievements in 2020:

 

We sold Nutrisystem in December 2020, which strengthened our balance sheet to support future growth.  Following the sale, we repaid $519 million of term loan debt and ended the year with a net leverage ratio (as defined in our credit agreement) of 2.36.  In January 2021, we voluntarily prepaid $45 million of our term loan debt, which prepaid all scheduled quarterly installments due through September 30, 2022.

 

As fitness locations closed as a result of the pandemic, we quickly adapted to the changing needs of our members and clients by launching a new and dynamic suite of virtual offerings, which we plan to continue offering in the future.  Virtual visits grew significantly, from 12,000 in the first quarter of 2020 to 804,000 in the fourth quarter of 2020.  We believe these digital offerings not only allowed our currently homebound members to stay active and connected with the help of SilverSneakers, but they will be a critical contributor to our new digitally-enabled member engagement platform going forward.

 

We developed a new strategy and began expanding our focus beyond fitness and gym access to becoming a leading member-focused platform engagement company with omnichannel capabilities.  Our new strategy includes the following components:

 

o

We will expand beyond fitness by establishing an engagement platform that enables personalized member interaction with all of our offerings, and we will partner with other payors and service providers to aggregate services to members under the SilverSneakers umbrella.  

 

o

We plan to accelerate growth in our core SilverSneakers and Prime Fitness businesses by expanding and strengthening our fitness partner network, continuing to grow and scale our new virtual offerings, and expanding our popular community-based offerings.

 

o

The continued development of our suite of digital offerings will enable a more tailored, interactive, and impactful experience across a variety of areas, including fitness, social connection, community involvement, volunteering, and enrichment.  

 

o

We plan to accelerate growth in our WholeHealth Living offering through market share expansion and improved technology.

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Income from continuing operations margin improved from 7.1% of revenues for 2019 to 13.0% of revenues for 2020.  Cash flows from operating activities improved from $82.3 million for 2019 to $169.4 million for 2020.  

 

We maintained a national fitness network of over 16,000 locations at the end of 2020, a decrease of only 1% from the end of 2019, despite a significant number of fitness centers in the United States closing permanently during 2020 as a result of economic challenges from the pandemic.  In addition, we extended the terms of several key fitness center contracts during 2020.  

Key Compensation Actions for 2020

The Committee believes that the Company’s 2020 executive compensation program was effective in attracting, retaining, and providing appropriate incentives for our NEOs.  After considering the positive say-on-pay vote received from our stockholders at the 2020 Annual Meeting of Stockholders regarding our 2019 executive compensation program, input from our independent compensation consultant Frederic W. Cook & Co., Inc. (“FW Cook”), pay relative to the market and the 2020 Peer Group (if applicable), and competitive and best practices, the Committee made the following key decisions with respect to executive compensation for 2020:

 

Effective February 18, 2020, the Board appointed Mr. Greczyn to serve as Interim CEO.  During his service as Interim CEO, Mr. Greczyn was entitled to receive $110,000 per month as compensation for his services and did not receive any compensation for serving on the Board.  

 

Effective February 2020, the Committee approved base salary merit increases for each of Messrs. Holland, Wagers, and Janicak and Ms. Flipse.

 

Following the departure of Mr. Tramuto and other key executives, in order to ensure executive retention during a time of transition, in March 2020 the Committee approved special equity grants consisting of RSUs for each of Messrs. Holland, Wagers, and Janicak and Ms. Flipse (the “Retention RSUs”).  The RSUs were subject to vesting as follows: two-thirds of the Retention RSUs were scheduled to vest in March 2021, and one-third of the Retention RSUs were scheduled to vest in September 2021.

 

In March 2020, when the World Health Organization characterized the outbreak of COVID-19 as a global pandemic, the Committee had not yet determined the short-term incentive program and related targets for 2020 or granted annual long-term incentive (“LTI”) awards for 2020.  Due to the significant uncertainty surrounding COVID-19 and its ongoing impact on the Company’s business, the Committee determined to delay the approval of both the short-term incentive program and the annual LTI awards (each of which is typically approved in or around March of each year).

 

In May 2020, the Company appointed Mr. Ashworth as President and CEO of the Company and as a member of the Board, effective June 1, 2020.  In connection with Mr. Ashworth’s appointment as President and CEO, we entered into an employment agreement with Mr. Ashworth, as further described in this “Compensation Discussion and Analysis”.  

 

 

In July 2020, the Committee approved the short-term incentive program for 2020, which was based solely on the achievement of adjusted EBITDA.  In light of the multiple challenges associated with the COVID-19 pandemic that the Company was navigating during 2020, the maximum short-term incentive award that each eligible NEO could earn for 2020 was limited to 12.5% of his or her target amount.  Based on actual adjusted EBITDA for 2020, each eligible NEO earned a short-term incentive award equal to 12.5% of target.  

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In October 2020, following the reorganization of the Company’s former Healthcare segment, the Committee approved annual LTI awards to be granted effective November 10, 2020.  (Mr. Ashworth did not receive an annual LTI award in November 2020 due to having received an equity award in June 2020 intended as compensation for fiscal years 2020 through 2022). The Committee designed the LTI program such that 50% of the grant date fair value of each eligible NEO’s LTI grant consisted of “premium priced” stock options having an exercise price equal to 110% of the closing price of the Common Stock on the grant date and becoming exercisable on May 10, 2023. The remaining 50% of the grant date fair value of each NEO’s LTI grant consisted of RSUs that vest as follows: one-third of the RSUs vest on the first anniversary of the grant date, one-third vest on the 18-month anniversary of the grant date, and one-third vest on the 30-month anniversary of the grant date. The Committee determined to set the total vesting period equal to 30 months (rather than three years or more) for each of the stock options and the RSUs due to the delay in timing of the annual LTI grant.

The Committee is committed to designing and maintaining an executive compensation program that is performance-based, competitive, and clear in its design and objectives, and that aligns the interests of management with those of the Company’s stockholders. The Committee will continue to evaluate the executive compensation program each year in light of market competitiveness and new facts and circumstances to ensure that our executive compensation strategies are aligned with our pay-for-performance compensation philosophy and our business objectives.  The Committee considers the results of the previous year’s “say-on-pay” advisory vote on executive compensation and other feedback the Company receives from its stockholders in determining the Company’s executive compensation policies and decisions.  This year’s “say-on-pay” proposal is Proposal No. 2 in this Proxy Statement.

Summary of Compensation Practices

Below are the key features of our executive compensation program that we believe drive sustainable results, encourage executive retention, and align executive and stockholder interests.  We also highlight

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certain practices we do not do because we believe they do not align with our stockholders’ long-term interests.

 

What We Do

What We Don’t Do

 

    Reinforce our pay-for-performance philosophy by designing the majority of total target executive compensation to be variable, through linkage to our financial or market results

    Mitigate undue risk by having caps on incentive awards and a recoupment policy with respect to all performance-based compensation, including performance-based equity

    Maintain meaningful stock ownership and retention requirements

    Engage an independent compensation consultant who reports directly to the Committee and does not provide any other services to the Company

    Require double trigger change in control provisions for acceleration of equity awards in all equity awards for executive officers made after February 2014

    Balance incentives to reward the achievement of short-term operating goals and long-term stockholder value creation

    Periodically, and at least annually, seek stockholder feedback on our executive compensation

 

 

   No excise tax gross-ups upon a change in control for employment agreements

  No tax gross-ups on ongoing benefits (which do not include benefits associated with one-time events such as relocation) for current or future executive officers

  No granting of discounted stock options

  No repricing of stock options without stockholder approval

  No hedging or short sales of Company securities

  No pledging of Company securities   

 

Impact of Say-on-Pay Vote Results

At the 2020 Annual Meeting of Stockholders, 95.7% of the shares that were actually voted on the proposal to approve the compensation of the Company’s NEOs were in support of our executive compensation program as disclosed in the proxy statement relating to that meeting. The Committee has considered the outcome of the vote on executive compensation and believes it affirms our stockholders’ support of our overall approach to executive compensation. Accordingly, we have endeavored, to the extent possible in light of the changes in our business and our senior leadership and evaluation of the Company’s strategy, to maintain that overall approach to executive compensation. The Committee will continue to consider the outcome of the annual vote on executive compensation when making future compensation decisions for our NEOs.

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The Committee’s Processes and Analyses

Role of Compensation Committee

The Committee sets and administers the policies that govern compensation of our executive officers, including:

 

Annually evaluating the performance of the CEO and other executive officers and determining the compensation level, including short- and long-term incentive compensation, for each such person based on this evaluation;

 

Reviewing and approving any changes in executive officer incentive compensation plans and equity-based compensation plans; and

 

Reviewing and approving all equity-based compensation plans of the Company and granting equity-based awards pursuant to such plans.

Only independent directors serve on the Committee. Based on the Committee’s charter, the Committee may delegate any of its responsibilities to a subcommittee as long as such subcommittee is solely composed of one or more members of the Committee.  The Committee may also delegate to one or more executive officers the authority to make grants of equity-based awards to individuals who are not executive officers.

Executive Compensation Philosophy and Objectives

We seek to attract, retain, and motivate talented individuals who are committed to the Company’s mission and core values.  The Committee is committed to designing and maintaining an executive compensation program that is performance-based, competitive, clear in its design and objectives, and aligns the interests of management with those of the Company’s stockholders by rewarding executive officers when the Company achieves financial success.

The Committee believes that performance-based pay is key to achieving our financial and strategic objectives and meeting stockholder expectations.  The direct effect of this performance-based philosophy is that a majority of the total target compensation (excluding benefits and perquisites) that is set at the beginning of the year for an NEO is variable.  We consider compensation to be variable if the ultimate value realized may differ from the intended target compensation.  Variable compensation includes both our annual short-term incentive awards and long-term incentive awards.

The Committee strives to align executive compensation with the unique talent and business needs of the Company, without encouraging excessive or unnecessary risk-taking, through the following objectives:

 

To attract, retain and motivate talented executives by providing overall compensation that is performance-based, fair to the executives and the stockholders, and takes into consideration both individual contribution and corporate performance;

 

To closely align the interests of executives with the long-term interests of the Company and its stockholders through a significant portion of each executive’s total compensation opportunity based on long-term equity incentives tied to financial performance, stock price performance, and/or operational performance; and

 

To provide appropriate incentives for executives to work toward the achievement of our overall business goals with payouts tied directly to the successful achievement of such goals.

 

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The Committee strives to design total compensation opportunities for the Company’s executives that are competitive, but not excessive, as compared to market practice.  Market practice is generally defined as median compensation levels found among companies of comparable size and business relative to the Company.  Individual compensation targets may be above or below market based on the following factors:

 

The individual skills and experience of the executive;

 

The difficulty of attracting or replacing the executive; and

 

Importance of the position to the Company’s success.

In addition, actual compensation earned may be above or below market levels depending on the performance of the executive and the Company as a whole.  

We use the following compensation vehicles to meet the above-described objectives:

 

Base salaries;

 

Short-term incentives, based upon achieving clearly-defined financial and/or operational targets; and

 

Long-term incentives based on the achievement of financial performance, stock price performance, and/or operational performance. To focus our executives on the Company’s sustained performance over the long term, a majority of our target executive compensation is weighted toward long-term incentives.

The compensation vehicles may vary by executive based on role, responsibilities, and the executive’s ability to influence Company performance and the achievement of key short- and long-term objectives.

On an annual basis, or more frequently as needed, the Committee reviews:

 

The Company’s compensation philosophy, ensuring proper alignment with the Company’s principal business objectives;

 

Our executive compensation policies in light of our financial performance, annual budget, long-term objectives, and competitive and best practices; and

 

The compensation of each individual executive in light of such executive’s contribution and performance, market practice for the executive’s role, and the Committee’s executive compensation policies for that year.

The Committee believes that our executive compensation program and governance policies do not encourage our management or colleagues to take risks reasonably likely to have a material adverse effect on our business.  This belief is based on the following factors: our balance of short- and long-term incentives; our use of different types of equity compensation awards that provide a balance of incentives; our cap on incentive awards; our recoupment policy (which permits the Committee, in its discretion, to recover incentive-based compensation from our executive officers in the event of a restatement of our financial results or non-compliance with our Code of Business Conduct to the material detriment of the Company); our anti-hedging and anti-pledging policies; and our stock ownership guidelines.

The Committee also believes that our compensation strategies are aligned with our compensation philosophy, long-term performance, and Company culture, which places significant value on high-performing individuals, and that those strategies promote individual responsibility for collective long-term success of the Company.

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As discussed in further detail throughout this Compensation Discussion and Analysis section, the Committee believes that the 2020 executive compensation program was reasonable and appropriate.

Setting Compensation

In addition to its annual review of executive compensation, the Committee retains an independent compensation consultant to review the Company’s executive compensation practices.  The Committee has engaged FW Cook since 2013 to provide independent executive compensation advisory services.  The independent compensation consultant reports directly to the Committee and provides no other services to the Company.  The Committee also employs several tools to set executive compensation targets that meet the Company’s objectives, including the following:

 

Assessment of individual performance

 

o

At least once per year, the Committee meets with the CEO to review and approve performance objectives for the upcoming year for each NEO.  After the end of the year, the CEO delivers to the Committee individual performance evaluations and compensation recommendations for each NEO, excluding himself (“other NEOs”).  The Committee determines compensation adjustments for each other NEO based on a variety of factors, such as a competitive compensation analysis; the Committee’s assessment of each other NEO’s individual performance, taking into account the CEO’s input; the Company’s performance; and the Committee’s judgment based on such NEO’s interactions with the Board.

 

o

After the end of the year, the CEO also presents to the Committee a self-assessment of his performance for the year based on his established performance objectives.  The Committee conducts a confidential review of the CEO’s performance for the previous year and discusses any compensation adjustment based on the competitive compensation analysis, its assessment of the CEO’s performance in light of the pre-approved performance objectives, the Company’s performance, and the level of CEO compensation relative to the other NEOs.

 

Assessment of Company performance

 

o

In addition to each NEO’s individual performance, the Committee also considers the Company’s overall performance in determining executive compensation.  When evaluating the relationship between the CEO’s pay and Company performance, the Committee considers both reported pay (as reflected in the Summary Compensation Table) and realized pay for the CEO in recent years (as applicable).

 

Compensation market data

 

o

The Committee reviews NEO compensation against external references to help guide compensation decisions.  The Committee does not use particular formulas or target specific market pay positions when determining compensation levels of a particular officer position but instead uses external comparisons to provide a point of reference.  The external references may include peer group analysis (see below) and/or commercially available, broad-based, comparative market compensation survey reports developed by independent professional organizations (collectively, the “Survey Reports”).  The Survey Reports cover a significant number of companies across a broad range of industries.  To support the Committee’s review and evaluation, management, and if applicable, an independent compensation consultant, provides the Committee with information compiled from the Survey Reports.

 

31


 

 

o

The Committee recognizes that the Company competes locally and nationally for talent with companies much larger than those included in our compensation peer group.  These larger companies aggressively recruit for the best qualified talent in particularly critical functions.  As a result, to attract and retain talent, the Committee may from time to time determine that it is in the best interests of the Company and its stockholders to provide compensation packages that deviate from the external market references.

Executive Compensation for 2020

Program Elements

The 2020 executive compensation program consisted of:

 

Base salaries;

 

Short-term cash incentive awards, based on achieving clearly-defined financial, operational, or financial reporting targets; and

 

LTI awards that are based on service and/or Company performance.  To focus our executives on the Company’s sustained performance over the long term, a meaningful portion of our target executive compensation is weighted toward long-term incentives.

2020 Peer Group

In early 2020, FW Cook conducted a review of our peer group.  FW Cook applied certain criteria in developing the 2020 Peer Group (as defined below) such as industry sectors, revenues, market capitalization, and our historical peers.  With regard to revenue and market capitalization, FW Cook evaluated comparable companies with revenues ranging from approximately one-third to three times the Company’s projected annual revenue at the time.  FW Cook also considered in its analysis companies included in the peer groups used by certain proxy advisory firms in their pay-for-performance assessments.  Our 2020 peer group consists of the following companies (the “2020 Peer Group”), whose compensation levels were used as competitive comparisons when reviewing our NEO compensation for 2020.  

 

 

1-800-FLOWERS.COM, Inc.

 

GNC Holdings, Inc.

 

Nu Skin Enterprises, Inc.

 

 

 

 

 

 

 

 

 

Allscripts Healthcare Solutions, Inc.

 

GrubHub, Inc.

 

Premier, Inc.

 

 

 

 

 

 

 

 

 

Amedisys, Inc.

 

HMS Holdings Corp.

 

Providence Service Corp.

 

 

 

 

 

 

 

 

 

Blue Apron Holdings, Inc.

 

LHC Group, Inc.

 

Teladoc, Inc.

 

 

 

 

 

 

 

 

 

The Chefs’ Warehouse, Inc.

 

Medifast, Inc.

 

USANA Health Sciences, Inc.

 

 

 

 

 

 

 

 

 

Evolent Health, Inc.

 

Navigant Consulting, Inc. (1)

 

WW International, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Acquired by another company in October 2019

The median revenue for the latest four quarters and the median market capitalization as of December 31, 2019 for companies in our 2020 Peer Group were $1.3 billion and $1.6 billion, respectively. Of the 18 companies that comprised the peer group in 2019, one company was removed in favor of a company that was more relevant to the Company’s business.

 

Compensation Decisions for 2020

Based on the strong say-on-pay support received from our stockholders at the 2020 Annual Meeting of Stockholders regarding our 2019 executive compensation program, input from our independent

32


 

compensation consultant FW Cook, and competitive and best practices, the Committee maintained a performance-based compensation philosophy when designing the 2020 executive compensation program.  

The Committee believes that the Company’s 2020 executive compensation program was instrumental in attracting, retaining, and providing appropriate incentives for our NEOs.  The Committee remains committed to designing and maintaining an executive compensation program that is performance-based, competitive, and clear in its design and objectives, and that aligns the interests of management with those of the Company’s stockholders.

In general, and based on the methodology described under the heading “Compensation market data”, the Committee believes compensation levels for the NEOs were appropriate.

Base Salary

In establishing base salaries for 2020, the Committee considered each NEO's performance and responsibilities, recommendations of the CEO, internal pay equity, pay relative to the market, and the date of each NEO’s last salary increase.      

Effective February 24, 2020, the NEOs who were employed on such date (Messrs. Holland, Wagers, and Janicak and Ms. Flipse) received a merit increase in their base salary.  Base salaries for the NEOs were as follows:

Annualized Base Salary ($000s)

 

Name

 

2020

Base Salary (1)

2019

Base Salary

(at end of year)

 

Percentage

Increase

Date of

Previous

Increase

Richard Ashworth

$900

Hired in 2020

n/a

n/a

Adam Holland

$412

$400

3.0%

04/2019

Ryan Wagers

$283

$275

3.0%

04/2019

Mary Flipse

$427

$415

3.0%

04/2019

Robert Greczyn (2)

Note (2)

Hired in 2020

n/a

n/a

Steve Janicak

$464

$450

3.0%

04/2019

Donato Tramuto

$950

$950

0.0%

03/2019

 

 

(1)

Amounts do not reflect the Base Salary Reduction and Extended Base Salary Reduction.

 

(2)

Mr. Greczyn served as Interim CEO from February 18, 2020 through May 31, 2020 and was entitled to receive a base salary of $110,000 per month as total compensation for his service as Interim CEO (i.e., he was not eligible for short- or long-term incentive compensation, except for the Salary Reduction RSUs).

In order to preserve cash and manage cash flows in response to the COVID-19 pandemic, in April 2020, the Committee approved a 25% reduction in base salary (the “Base Salary Reduction”) for Messrs. Holland, Wagers, Greczyn, and Janicak and Ms. Flipse, for the period from April 20, 2020 through August 23, 2020.  In June 2020, the Committee approved the extension of the Base Salary Reduction for such NEOs for the period from August 24, 2020 through December 31, 2020 (the “Extended Base Salary Reduction”), as well as a Base Salary Reduction for Mr. Ashworth for the period from July 1, 2020 through December 31, 2020.  In connection with each of the Base Salary Reduction and the Extended Base Salary Reduction, the Board, upon the recommendation of the Committee, approved the grants of the Salary Reduction RSUs, with the value of the RSU grants to be equal as closely as reasonably possible to the amount of such reduction. The Salary Reduction RSUs are subject to vesting in full on the first anniversary of the grant date. These RSUs were intended to align management’s interests with those of shareholders and to promote executive retention over the vesting period.

33


 

Short-Term Cash Incentive Awards

We offer short-term cash incentive awards to NEOs to align their annual compensation with the Company’s financial and operational objectives for the current year.  For fiscal year 2020, Mr. Ashworth was eligible to receive an annual cash bonus of up to 100% of base salary, subject to such performance objectives as were mutually agreed to by the parties.  For the remaining NEOs (except for Mr. Greczyn, who was not eligible to participate in the short-term cash incentive program) the performance factor for the short-term cash incentive award in 2020 was Adjusted EBITDA (weighted 100%). Actual payouts were calculated using the following formula: (Base Salary * Bonus Target Percentage * Performance Factor Achievement). The maximum amount that each NEO could earn for the full year was 12.5% of target.  The Committee believed this was an appropriate maximum level for 2020 given the uncertainty and challenges the Company was facing related to COVID-19.  Short-term cash incentive awards earned are described in further detail below and were paid in mid-March 2021.

Short-Term Cash Incentive Target Percentages

Short-term cash incentive targets (expressed as a percentage of base salary) were set based on target percentages that correspond with each NEO’s internal job grade and/or market comparisons.  The Committee believes that the short-term cash incentive targets are market competitive and that they establish the appropriate level of at-risk annual cash incentive and drive the achievement of annual performance goals.

 

Short-Term Cash Incentive Targets (as a percentage of base salary)

 

 

As of December 31,

Name

2020

2019

Richard Ashworth

100% (1)

Hired in 2020

Adam Holland

50%

50%

Ryan Wagers

40%

40%

Mary Flipse

50%

50%

Robert Greczyn (2)

Not eligible

n/a

Steve Janicak

75%

75%

Donato Tramuto

100%

100%

 

 

(1)

For fiscal year 2020, Mr. Ashworth was eligible to receive an annual cash bonus of up to 100% of base salary, subject to such performance objectives as are mutually agreed to by the parties.

 

(2)

Mr. Greczyn served as Interim CEO from February 18, 2020 through May 31, 2020 and was not eligible for a short-term incentive award.

Adjusted EBITDA (100% of Total Bonus Target)

Generally consistent with 2014 through 2019, the predominant performance metric for short-term cash incentive awards for 2020 was Adjusted EBITDA, which was used as a metric for both earning and funding short-term cash incentive awards (the “Adjusted EBITDA Bonus”).  “Adjusted EBITDA” was defined as earnings before interest, taxes, depreciation, and amortization excluding certain pre-defined costs, losses, and expenses, including but not limited to impairment, restructuring, and severance charges, CEO transition costs, and transaction and integration costs.  The Committee believes that Adjusted EBITDA provides a specific measure of operating and financial performance and aligns our executives with our short-term business goals for EBITDA growth.  The Adjusted EBITDA Bonus comprised 100% of each NEO’s total bonus target for 2020.

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Except for Mr. Ashworth and Mr. Greczyn, each NEO’s Adjusted EBITDA Bonus was based on the achievement of Adjusted EBITDA by the Healthcare segment, which is currently the Company’s only segment following the sale of Nutrisystem.  However, the NEOs could not earn any short-term incentive awards until the bonus pools for each of the Company’s former segments (Healthcare and Nutrition, prior to the sale of Nutrisystem) achieved a certain level of funding.  

The short-term cash incentive pool for the eligible NEOs (“NEO Bonus Pool”) began funding when (i) the bonus pools for each of the Healthcare and Nutrition segments reached 25% funding, and (ii) Adjusted EBITDA for the Healthcare segment exceeded $132.3 million (the “Adjusted EBITDA Threshold”).  The following table outlines the threshold and target Adjusted EBITDA goals, along with the Adjusted EBITDA achieved and the corresponding payout as a percent of target for Messrs. Holland, Wagers, Janicak and Tramuto and Ms. Flipse.

 

 

Threshold (1)

Target

Actual

Payout (% of Target)

Adjusted EBITDA ($mil.)

$132.3

$142.9

$147.4

12.5% (2)

 

 

(1)

Threshold funding for NEO Bonus Pool also required funding of 25% of target for each of the Healthcare and Nutrition bonus pools.

 

(2)

Maximum payouts were capped at 12.5% of target for NEOs in 2020 given the uncertainty and challenges the Company was facing related to COVID-19.

Based on actual Adjusted EBITDA (before accruing the Adjusted EBITDA Bonus described herein) of $147.4 million for 2020, each eligible NEO (Messrs. Holland, Wagers, Janicak and Tramuto and Ms. Flipse) earned an Adjusted EBITDA Bonus of 12.5% of the target applicable to such NEO.  Bonuses for Messrs. Janicak and Tramuto were prorated based the portion of 2020 they were employed by the Company.  In connection with his hiring in 2020, Mr. Ashworth was eligible to receive an annual cash bonus of up to 100% of base salary, subject to such performance objectives as are mutually agreed to by the parties.  The Committee determined that Mr. Ashworth earned an annual cash bonus equal to the maximum amount of 100% of his annual base salary for 2020.  Mr. Greczyn was not eligible for a short-term incentive award based on the terms of his employment with the Company.

Short-Term Cash Incentive Payouts for 2020 ($000s)

 

 

2020 at Target (1)

 

2020 Actual Payout

Name

Adjusted

EBITDA

Bonus

Individual

Performance

Bonus

Total

 

Adjusted

EBITDA

Bonus

Individual

Performance

Bonus

Total

Richard Ashworth

n/a

$900

$900

 

n/a

$900

$900

Adam Holland

$169

n/a

$169

 

$21

n/a

$21

Ryan Wagers

$93

n/a

$93

 

$12

n/a

$12

Mary Flipse

$175

n/a

$175

 

$22

n/a

$22

Steve Janicak (2)

$198

n/a

$198

 

$25

n/a

$25

Donato Tramuto (3)

$127

n/a

$127

 

$16

n/a

$16

 

 

(1)

The target amounts shown for the Adjusted EBITDA Bonus reflect 100% of the NEO’s short-term cash incentive target, although the maximum payout was capped at 12.5% of such target for 2020.

 

(2)

The 2020 target award for Mr. Janicak is calculated based on his earnings from January 1, 2020 through August 31, 2020, the date of his termination.

 

(3)

The 2020 target award for Mr. Tramuto is calculated based on his earnings from January 1, 2020 through February 18, 2020, the date of his termination.

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Long-Term Incentive Awards

The Committee believes that our LTI compensation is a key component of our retention strategy and is integral to our ability to achieve our performance goals.  LTI awards are generally granted annually to eligible employees, including our NEOs.  LTI awards are typically made during the first quarter or shortly thereafter once the Committee has had the opportunity to review the previous year’s full year results, expected performance for the current year, and the Company’s long-range business plan (to the extent a sufficient number of shares is available under the Company’s equity incentive plan).  As COVID-19 was declared a pandemic in March 2020, the Committee had not yet granted annual LTI awards for 2020.  Due to the significant uncertainty surrounding COVID-19 and its impact on the Company’s business, the Committee determined to delay the grant of annual LTI awards.  In October 2020, following the reorganization of the Company’s former Healthcare segment, the Committee approved annual LTI awards to be granted effective November 10, 2020.  The Committee may also approve additional equity-based awards in certain special circumstances, such as upon an officer’s initial employment with the Company, the promotion of an officer to a new position or in recognition of special contributions made by an officer.

The table below summarizes the types of long-term incentives granted to the NEOs in recent years intended to incentivize performance and the objective for using each of the incentives in supporting the interests of the stockholders.

 

Incentive

Objective

RSUs

Encourage executive retention and align management and stockholder interests

MSUs

Align management and stockholder interests and reward achievement of certain total shareholder return goals

PSUs

Align management and stockholder interests and reward achievement of the Company’s financial goals

Stock options

Reward share price appreciation

 

Annual Equity Awards

As described above, one of our key compensation objectives is to provide long-term incentive compensation to strengthen and align the interests of our NEOs with those of our stockholders.  Each NEO’s target LTI value was set based on the NEO’s internal job grade and/or market comparisons.  To meet this objective, the Committee designed the LTI program for 2020 such that 50% of the grant date fair value of each NEO’s LTI grant consisted of “premium priced” stock options having an exercise price equal to 110% of the closing price of the Common Stock on the grant date. The remaining 50% of the grant date fair value of each NEO’s LTI grant consisted of RSUs. Messrs. Holland and Wagers were the only NEOs who received an annual equity award in 2020.  Mr. Ashworth received an equity award effective June 2020 granted as compensation for fiscal years 2020 through 2022 and was not eligible for an additional LTI grant in 2020.  Ms. Flipse did not receive the annual LTI award due to the fact that her employment with the Company was terminating on December 31, 2020.  The remaining NEOs’ employment had terminated prior to the annual LTI award.

 

 

 

 

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Name

RSUs (1)

Grant Date

Fair Value

of RSUs

 

Premium

Priced

Stock

Options (2)

Grant Date

Fair Value

of Premium

Priced Stock

Options

Adam Holland

21,311

$324,993

39,634

$324,999

Ryan Wagers

5,738

$87,505

10,671

$87,502

 

 

(1)

One-third of the RSUs vest on the first anniversary of the grant date, one-third vest on the 18-month anniversary of the grant date, and one-third vest on the 30-month anniversary of the grant date.  The awards have a 30-month vesting schedule rather than the Company’s customary three-year vesting schedule due to the delay in timing of the annual LTI grant (which is typically approved in or around March of each year).

 

(2)

Premium priced stock options become exercisable on May 10, 2023.

 

Special Retention Awards

 

Following the departure of Mr. Tramuto and other key executives, in order to ensure executive retention during a time of transition, in March 2020 the Committee approved Retention RSUs to be awarded to each of Messrs. Holland (30,769), Wagers (12,692), and Janicak (53,846) and Ms. Flipse (31,923).  The size of the awards was generally based on a multiple of the NEO’s annual salary (approximately 156% of annual salary for Mr. Janicak, 100% of annual salary for each of Mr. Holland and Ms. Flipse, and 60% of annual salary for Mr. Wagers). The RSUs had a grant date fair value of $8.89 per share.  The number of RSUs awarded to each NEO was calculated as the dollar value of the award (e.g., 100% of salary) divided by $13.00 (rather than $8.89) in order to limit the number of shares granted from the Company’s stock incentive plan.  The Retention RSUs are subject to vesting as follows: two-thirds of the Retention RSUs were scheduled to vest in March 2021, and one-third of the Retention RSUs are scheduled to vest in September 2021.  The vesting schedule was established to encourage executive retention for the initial one-year transition period (considered most critical) and for an additional six months beyond such time.  The Retention RSUs for each of Mr. Janicak and Ms. Flipse accelerated and vested in full upon their termination from the Company, in accordance with the terms of the underlying award agreement.  

 

Salary Reduction Awards

 

As previously noted, in connection with each of the Base Salary Reduction and the Extended Base Salary Reduction, the Board, upon the recommendation of the Committee, approved the grants of the Salary Reduction RSUs, with the value of the RSU grants to be equal as closely as reasonably possible to the amount of such reduction. On May 11, 2020, each of the eligible NEOs received Salary Reduction RSUs with a grant date fair value of $9.37 per share as follows: Mr. Holland (3,664), Mr. Wagers (2,519), Ms. Flipse (3,802), Mr. Greczyn (11,740), and Mr. Janicak (4,122). On August 24, 2020, each of the eligible NEOs received Salary Reduction RSUs with a grant date fair value of $16.47 per share as follows: Mr. Ashworth (6,887), Mr. Holland (2,227), Mr. Wagers (1,531), Ms. Flipse (2,311), and Mr. Janicak (2,506). The Salary Reduction RSUs vest in full on the first anniversary of the grant date. Messrs. Greczyn and Janicak forfeited a portion of their Salary Reduction RSUs upon their termination of employment from the Company.  See “Employment Agreements and Termination Events for Formerly Employed NEOs”.

 

Performance Achievement of PSUs and Integration Performance Awards Granted in 2019

 

The annual equity awards granted in 2019 to Messrs. Holland, Wagers, Janicak, and Tramuto and Ms. Flipse included PSUs that were subject to risk of forfeiture if pre-defined, multi-year adjusted EBITDA objectives for fiscal 2019 and fiscal 2020 were not achieved.  Two-thirds of the PSUs awarded to each

37


 

NEO were subject to a fiscal 2019 Adjusted EBITDA target, and one-third of the PSUs awarded to each NEO were subject to a fiscal 2020 Adjusted EBITDA target.  “Adjusted EBITDA” was defined as earnings before interest, taxes, depreciation, and amortization excluding realized synergies and excluding certain pre-defined costs, losses, and expenses, including but not limited to impairment and restructuring charges, LTI expense, and transaction and integration costs. With respect to the fiscal 2019 performance targets, the performance goals were based on the achievement of Adjusted EBITDA (as defined) by such NEO’s legacy segment (i.e., the Healthcare segment for each of the NEOs noted above).  For 2019, the threshold performance level (which equated to 50% achievement) and target performance level for the Healthcare segment were Adjusted EBITDA of $141 million and $146 million, respectively. Based on actual Adjusted EBITDA (as defined) for the Healthcare segment for 2019 of $145.0 million, the NEOs earned approximately 89.8% of the PSUs that were subject to fiscal 2019 performance.  With respect to fiscal 2020 performance targets, the performance goals were based on the achievement of total Company Adjusted EBITDA.  The Adjusted EBITDA target was not met for fiscal 2020; therefore, the NEOs did not earn any of the PSUs that were subject to fiscal 2020 performance targets.  After applying weighting to each of fiscal 2019 (two-thirds) and fiscal 2020 (one-third) performance, the aggregate PSUs earned equaled approximately 59.9% of target.  A pro-rated portion of the PSUs granted to Messrs. Janicak and Tramuto and Ms. Flipse vested on their separation date and remained subject to the Company’s actual performance against target through the performance period, and the remainder were forfeited.  The PSUs earned by Messrs. Holland and Wagers will vest on December 31, 2021, subject to the executive’s continued service.  

 

In addition, in order to motivate the achievement of the Company’s expected synergies following the acquisition and integration of Nutrisystem (completed in March 2019), in April 2019, the Committee granted awards consisting of a combination of PSUs and performance cash awards to Messrs. Holland, Wagers, and Janicak and Ms. Flipse (the “Integration Performance Awards”), with approximately 71% of the value of each award consisting of PSUs and 29% of the value consisting of performance cash awards.  The Integration Performance Awards were to be earned only upon the achievement of certain cumulative synergies realized over the period January 1, 2019 through December 31, 2020.  Based on actual cumulative synergies realized of $38.5 million, the NEOs earned Integration Performance Awards equal to 85.3% of the target.  In addition, each of Messrs. Holland, Wagers, and Janicak and Ms. Flipse earned performance cash of $42,650 related to the Integration Performance Award. For each of Mr. Janicak and Ms. Flipse, the Integration Performance Awards vested in full on their separation date and remained subject to the Company’s actual performance against target through the performance period.  For each of Messrs. Holland and Wagers, (i) the PSU portion of the Integration Performance Awards will vest on December 31, 2021, subject to the executive’s continued service, and (ii) the performance cash portion is included in the Non-Equity Incentive Plan column of the Summary Compensation Table and will be paid on April 9, 2021.

President and CEO’s Appointment

Effective June 1, 2020, the Company appointed Mr. Ashworth as President and CEO and as a member of the Board.  In connection with his appointment as President and CEO, we entered into an employment agreement with Mr. Ashworth that provided for the following executive compensation and benefits:

Base Salary: Mr. Ashworth’s annual salary is $900,000.

Short-Term Cash Incentives:  For fiscal year 2020, Mr. Ashworth was eligible to receive an annual cash bonus of up to 100% of base salary, subject to such performance objectives as are mutually agreed to by

38


 

the parties. Beginning in fiscal year 2021, Mr. Ashworth will participate in the same annual short-term cash incentive program as other executives, with a target value equal to 100% of base salary.

CEO Inducement Award:  To replace compensation forfeited from his former employer and to induce Mr. Ashworth to join the Company, he was awarded 500,000 RSUs vesting 50%, 25%, and 25% on each of the first, second, and third, anniversaries of the grant date, respectively (“CEO Inducement Award”).

Long-Term Incentive Compensation:  In connection with his hiring, on June 1, 2020, Mr. Ashworth was awarded long-term incentives intended as compensation for fiscal years 2020 through 2022, consisting of an equal number of MSUs and RSUs. The compensation consisted of the following:

 

CEO MSU Award: The target number of MSUs is 150,000; the actual number of MSUs that may be earned can be zero or can range from 50% to 300% of the target number of MSUs based on the Company’s three-year cumulative total shareholder return (“TSR”) using a beginning price equal to $9.63 (“CEO MSU Award”), as follows:

 

Cumulative

TSR (1)

Payout as %

of Target (2)

Ending VWAP Based on

$9.63 VWAP at Grant (3)

<75%

0%

<$16.85

75%

50%

$16.85

100%

100%

$19.26

125%

150%

$21.67

225%

225%

$31.30

325%

300%

$40.93

>325%

300%

>$40.93

 

 

(1)

Based on the 20-trading day volume weighted average price (“VWAP”) prior to the start and end of the performance period.

 

(2)

Payout between performance levels will be interpolated linearly.

 

(3)

VWAP is defined as the trading volume weighted average price of the Company’s Common Stock over the period of 20 consecutive trading days ending on the end date of the performance period.

 

CEO RSU Award: 150,000 RSUs vesting in three equal annual installments beginning on the first anniversary of the grant date (“CEO RSU Award”).

Relocation: Under Mr. Ashworth’s employment agreement with the Company, the Company was obligated to provide relocation expenses consistent with the Company’s relocation policy for executives and agreed to purchase Mr. Ashworth’s current primary residence at fair market value determined by independent appraisal (in February 2021, the Board determined that Mr. Ashworth is not required to be located in the Nashville, Tennessee metropolitan area, and as a result Mr. Ashworth decided not to relocate or sell his current primary residence).

 

Tax Services: Mr. Ashworth is entitled to receive reimbursement of up to $20,000 annually for costs incurred in connection with tax services.

 

Other Benefits: Mr. Ashworth is eligible to participate in benefit plans that are maintained by the Company for senior executive officers generally and is entitled to fringe benefits and perquisites at the same level as those benefits are provided by the Company to senior executive officers generally.

Stock Ownership and Retention Guidelines

Our stock ownership and retention guidelines require currently employed NEOs to maintain a minimum ownership in the Company’s stock calculated as a multiple of their base salary aligned with their job responsibility (for 2020, at least 3.75 times base salary for Messrs. Ashworth and Tramuto, 2.0 times

39


 

base salary for Messrs. Holland and Janicak and Ms. Flipse, and 1.2 times base salary for Mr. Wagers). NEOs (excluding Mr. Greczyn who is subject to the stock ownership and retention guidelines for directors) must retain 75% of the net number of shares acquired (after payment of exercise price, if any, and taxes) upon the exercise of all stock options and upon the vesting of all RSUs, PSUs, and MSUs granted until they achieve the required multiple of base salary.  NEOs who do not comply with the guidelines may not be eligible for future equity awards.  All of the currently employed NEOs are currently in compliance with the guidelines.

401(k) Plan

The Committee believes that an important aspect of attracting and retaining qualified individuals to serve as NEOs involves providing a means to save for retirement.  As part of the Company’s Retirement Savings Plan (the “401(k) Plan”), which is based on a calendar year, for part of 2020 the Company matched 60 cents of each dollar of a participant’s voluntary salary contributions (up to a maximum of 6% of base salary).  Effective at the end of July 2020 and continuing through the end of 2020, the Committee suspended the Company matching contribution to the 401(k) Plan to preserve liquidity and manage cash flow in response to the COVID-19 pandemic.  The annual maximum participant voluntary salary contribution, which is established by the Internal Revenue Service, was $19,500 for 2020, plus a “catch-up” contribution limit for those over 50 years old of $6,500.  With respect to the 2020 plan year, all of the Company’s matching contributions were in cash.  Employees are credited with 33 1/3% vesting in Company contributions each year during their first three years of service such that after three years of service, employees are fully vested in all prior and future Company matching contributions to the 401(k) Plan.  Except for Mr. Greczyn, all of the NEOs were eligible to participate in the 401(k) Plan during 2020.

Severance and Change in Control Benefits

The Committee believes that reasonable severance and change in control benefits are necessary in order to recruit and retain effective executives and compete for executive talent within our industry.  In addition, the Committee also believes that a change in control arrangement provides an appropriate level of security to an executive that will likely reduce the reluctance of that executive to pursue a change in control transaction that could be in the best interests of our stockholders.  Although the Committee independently reviews the potential severance and change in control payments in light of their reasonableness as part of negotiating employment agreements or offer letters with our executive officers, the Committee typically does not consider the value of potential severance and change in control payments when assessing annual compensation because severance payments as a result of a change in control are contingent in nature and have primary purposes unrelated to ordinary compensation.  For a detailed discussion of potential severance and change in control benefits as well as an estimate of the amounts that would have been payable had they been triggered as of the end of 2020, see “Potential Payments Upon Termination or Change in Control of the Company”.

Perquisites and Other Benefits

NEOs are eligible for benefits generally available to and on the same terms as the Company’s employees who are categorized as exempt for purposes of the Fair Labor Standards Act.  Those benefits include health, disability, dental and life insurance. Additionally, in 2020, the Company paid relocation and legal expenses on behalf of Mr. Ashworth. These payments are discussed in the footnotes to the Summary Compensation Table.

Tax Deductibility of Compensation

Prior to the Tax Cuts and Jobs Act enacted in December 2017 (the “Tax Act”), Section 162(m) of the Internal Revenue Code limited the Company’s ability to deduct on its tax return compensation over $1 million to the NEOs, other than the CFO, serving at the end of the year unless, in general, the compensation was paid pursuant to a plan that was performance-related, non-discretionary, and approved by the Company’s stockholders (“performance-based compensation”).

40


 

The Tax Act substantially modified Section 162(m) and, among other things, eliminated the performance-based compensation exception to the $1 million deduction limit with respect to taxable years beginning after December 31, 2017.  Accordingly, effective beginning in fiscal 2018, compensation paid to our NEOs (including our CFO) will be subject to the limitations on deductibility under Section 162(m) for any year in which compensation is paid to them (even years following their separation from service), and we will no longer be able to deduct performance-based compensation to such officers who receive annual compensation in excess of $1 million. However, the Tax Act provides that awards that were made and subject to binding written contracts in effect on November 2, 2017 are “grandfathered” under prior law and can still qualify as deductible “performance-based compensation,” even if paid in future years. The Committee will continue to monitor these awards and Internal Revenue Service guidance to determine whether they are deductible if and when paid.  The Committee has determined, however, that the Company will not necessarily seek to limit executive compensation to amounts deductible under Section 162(m) if the Committee believes such limitation is not in the best interest of the Company’s stockholders. While considering the tax implications of its compensation decisions, the Committee believes its primary focus should be to attract, retain, and motivate executives, and align the executives’ interest with those of the Company’s stockholders.

Compensation Decisions for 2021

For 2021 and beyond, the Committee remains committed to designing and maintaining an executive compensation program that is performance-based, competitive, and clear in its design and objectives, and that aligns the interests of management with those of the Company’s stockholders. The Committee will continue to evaluate the executive compensation program each year in light of market competitiveness and new facts and circumstances to ensure that our executive compensation strategies are aligned with our pay-for-performance compensation philosophy and our business objectives.

2021 Peer Group

In late 2020, FW Cook conducted a review of our peer group in light of our business and size following the anticipated sale of Nutrisystem.  FW Cook applied certain criteria in developing the 2021 Peer Group (as defined below) such as industry sectors, revenues, enterprise value, and our historical peers.  With regard to revenue and enterprise value, FW Cook evaluated comparable companies with revenues ranging from approximately one-fourth to four times our pro-forma annual revenues and favored companies with 12-month average enterprise values ranging from approximately one-fourth to four times our enterprise value.  Our 2021 peer group consists of the following companies (the “2021 Peer Group”), whose compensation levels were used as competitive comparisons when reviewing our NEO compensation for 2021.  The median revenue for the latest four quarters and the median 12-month average enterprise value as of September 30, 2020 for companies in our 2021 Peer Group were $0.6 million and $1.4 billion, respectively.

 

 

Addus HomeCare, Inc.

 

CorVel Corporation

 

Planet Fitness, Inc.

 

 

 

 

 

 

 

 

 

Allscripts Healthcare Solutions, Inc.

 

Evolent Health, Inc.

 

Premier, Inc.

 

 

 

 

 

 

 

 

 

Apollo Medical Holdings, Inc.

 

HMS Holdings Corp.

 

Providence Service Corp.

 

 

 

 

 

 

 

 

 

BioTelemetry, Inc.

 

NextGen Healthcare, Inc.

 

Tabula Rasa HealthCare, Inc.

 

 

 

 

 

 

 

 

 

Computer Programs and Systems, Inc.

 

Omnicell, Inc.

 

U.S. Physical Therapy, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Following is a summary of compensation decisions with respect to the NEOs for 2021:

Base Salaries

 

The Base Salary Reduction and Extended Base Salary Reduction concluded on December 31, 2020. In establishing base salaries for 2021, the Committee considered each NEO’s performance and

41


 

responsibilities, CEO recommendations, internal pay equity, pay relative to the market and the 2021 Peer Group, and date of the last salary increase.  The Committee determined that the NEOs’ base salaries would be equal to the amounts set forth below effective February 22, 2021:

Annualized Base Salary ($000s)

 

 

Name

 

2021

Base Salary

2020

Base Salary

(at end of year) (1)

 

Percentage

Increase

Date of

Previous

Increase

Richard Ashworth

$900

$900

0.0%

n/a

Adam Holland

$424

$412

3.0%

02/2020

Ryan Wagers

$300

$283

5.9%

02/2020

 

(1)

Amounts exclude the Base Salary Reduction and Extended Base Salary Reduction.

 

Short-Term Incentive Awards

For 2021, 100% of each NEO’s short-term incentive target is based on Company achievement of financial goals, specifically Adjusted EBITDA. There were no changes to any of the NEOs’ individual short-term incentive targets from the levels established at the end of 2020. The NEOs’ potential award payouts are capped at 200% of the target award amount.

Short-Term Incentive Targets for 2021 (as a percentage of base salary)

 

 

Name

Short-term

Incentive

Richard Ashworth

100%

Adam Holland

50%

Ryan Wagers

40%

Long-Term Incentive Awards

The Committee granted annual equity awards in March 2021.  Similar to 2020, the Committee designed the LTI program for 2021 such that 50% of the grant date fair value of each NEO’s LTI grant consisted of “premium priced” stock options having an exercise price equal to 110% of the closing price of the Common Stock on the grant date.  The stock options become exercisable on the third anniversary of the grant date.  The remaining 50% of the grant date fair value of each NEO’s LTI grant consisted of RSUs that are subject to vesting in three equal installments over three years.  Mr. Ashworth received an equity award in June 2020 granted as compensation for fiscal years 2020 through 2022 and was not eligible for an annual LTI grant in 2021.

Executive Officers – March 2021

Effective March 31, 2021, the Board appointed each of Tommy Lewis, the Company’s Chief Operating Officer, and Raymond Bilbao, the Company’s Chief Legal Officer, as executive officers of the Company.  As a result, as of March 31, 2021, the executive officers of the Company were Messrs. Ashworth, Holland, Wagers, Lewis, and Bilbao.

Compensation Committee Report

The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed for any purpose, including for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, or incorporated by reference into any other Company

42


 

filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent the Company specifically incorporates this Report by reference therein.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section with management and, based on such review and discussions, recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement and the Form 10-K.

 

Respectfully submitted,

Bradley S. Karro, Chair

Robert J. Greczyn, Jr.

Beth M. Jacob

Compensation Committee Interlocks and Insider Participation

During 2020, the Compensation Committee was composed of Mr. Karro and Ms. Jacob for the entire year.  Mr. Greczyn was a member of the Committee for the entire year except for the period during which he served as the Company’s Interim CEO (February 18, 2020 through May 31, 2020).  In addition, Mr. Shapiro was a member of the Committee from the beginning of the year until the 2020 Annual Meeting of Stockholders (at which time Mr. Shapiro did not stand for re-election to the Board), and Mr. Tully was a member from February 2020 through September 1, 2020 (at which time Mr. Tully resigned from the Board).  Except for Mr. Greczyn, none of these persons has at any time been an officer or employee of the Company or any of the Company’s subsidiaries.  In addition, there are no relationships among the Company’s executive officers, members of the Committee or entities whose executives serve on the Board or the Committee that require disclosure under applicable Commission regulations.

43


 

Summary Compensation Table

The following table provides information regarding compensation to our NEOs.

 

Name and

Principal

Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

All Other

Compensation ($)

Total

($)

 

 

(1)

 

(2)

(2)

(3)

(4)

 

Richard Ashworth

2020

$421,247

$—

$10,154,429

$—

$900,000

$77,288 (5)

$11,552,964

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adam Holland

2020

$338,186

$—

$669,540

$324,999

$63,787

$9,937

$1,406,449

Chief Financial Officer

2019

$389,231

$—

$874,996

$—

$127,566

$10,364

$1,402,157

 

2018

$342,277

$—

$200,015

$200,003

$52,868

$10,015

$805,178

 

 

 

 

 

 

 

 

 

Ryan Wagers

2020

$232,503

$—

$249,155

$87,502

$54,275

$7,385

$630,820

Chief Accounting Officer

2019

$272,365

$10,000

$275,002

$—

$69,314

$10,918

$637,599

 

2018

$50,000

$10,000

$22,485

$22,494

$—

$131

$105,110

 

 

 

 

 

 

 

 

 

Mary Flipse

2020

$350,868

$—

$357,482

$—

$—

$950,985 (6)

$1,659,335

Former Chief Legal and Administrative Officer

2019

$406,984

$—

$674,979

$—

$133,385

$51,442

$1,266,790

 

2018

$374,265

$—

$—

$—

$57,386

$37,897

$469,548

 

 

 

 

 

 

 

 

 

Robert Greczyn (7)

2020

$355,115

$—

$275,420

$—

$—

$3,413

$633,948

Former Interim Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steve Janicak

2020

$264,584

$—

$558,588

$—

$—

$542,952 (8)

$1,366,124

Former Business Unit President, Healthcare

2019

$429,281

$—

$874,996

$—

$196,566

$6,285

$1,507,128

 

2018

$356,677

$—

$99,996

$—

$54,722

$4,102

$515,497

 

 

 

 

 

 

 

 

 

Donato Tramuto

2020

$127,186

$—

$—

$—

$—

$1,943,890 (9)

$2,071,076

Former Chief Executive Officer

2019

$932,885

$—

$3,200,002

$—

$611,486

$32,361

$4,776,734

 

2018

$850,000

$—

$—

$—

$260,183

$36,439

$1,146,622

 

 

 

 

 

 

 

 

 

 

(1)

The amounts reported in this column for fiscal year 2020 for NEOs other than Mr. Tramuto reflect the Base Salary Reduction and the Extended Base Salary Reduction. The grant date fair values of the RSU awards granted to the NEOs in replacement of the reduced salary are included in the Stock Awards column.

 

(2)

Reflects the aggregate grant date fair value of stock and option awards granted during the respective period calculated in accordance with FASB ASC Topic 718, consistent with our estimate of the aggregate compensation cost to be recognized for performance-based and market-based stock awards assuming 100% of target shares are earned. For additional detail regarding the assumptions used in the calculation of these fair value amounts, see Note 7 to our audited financial statements for the fiscal year ended December 31, 2020, included in the Form 10-K filed with the Commission on March 2, 2021. During 2020, each of the NEOs except Mr. Tramuto received certain RSU awards in connection with the Base Salary Reduction and/or the Extended Base Salary Reduction, as further described in “Compensation Discussion and Analysis”.  The aggregate grant date fair values of such awards included in the table above are as follows: Mr. Ashworth ($113,429), Mr. Holland ($71,010), Mr. Wagers ($48,819), Ms. Flipse ($73,687), Mr. Greczyn ($110,004) and Mr. Janicak ($79,897).

 

44


 

In addition to the RSUs discussed in the preceding paragraph, in 2020, stock awards for Mr. Ashworth included the CEO Inducement Award, which had a grant date fair value of $5,550,000, as well as LTI awards (the CEO RSU Award and the CEO MSU Award) granted as compensation for fiscal years 2020 through 2022, which had an aggregate grant date fair value of $4,491,000.  With respect to the CEO MSU Award, the table above includes the aggregate compensation cost ($2,826,000) to be recognized for the MSU award based on the Monte Carlo valuation of the award.  Assuming the highest level of performance conditions will be achieved, the value of the award at the grant date (i.e., the maximum potential shares multiplied by the fair value per share of $11.10 on the grant date) is $4,995,000. 

 

In 2019, stock awards for Mr. Holland include $687,501 aggregate compensation costs to be recognized for PSU awards assuming 100% would be earned at the end of the two-year performance period. Based on actual performance as measured following the end of the performance period, the aggregate compensation cost to be recognized for PSU awards granted to Mr. Holland in 2019 is $443,493.  

 

In 2019, stock awards for Mr. Wagers include $231,249 aggregate compensation costs to be recognized for PSU awards assuming 100% would be earned at the end of the two-year performance period. Based on actual performance as measured following the end of the performance period, the aggregate compensation cost to be recognized for PSU awards granted to Mr. Wagers in 2019 is $163,915.

 

In 2019, stock awards for Ms. Flipse include $537,488 aggregate compensation costs to be recognized for PSU awards assuming 100% would be earned at the end of the two-year performance period. Based on actual performance as measured following the end of the performance period and taking into account the number of PSU awards that were forfeited upon Ms. Flipse’s termination of employment, the aggregate compensation cost recognized for PSU awards granted to Ms. Flipse in 2019 was $271,308.

 

In 2019, stock awards for Mr. Janicak include $687,501 aggregate compensation costs to be recognized for PSU awards assuming 100% would be earned at the end of the two-year performance period. Based on actual performance as measured following the end of the performance period and taking into account the number of PSU awards that were forfeited upon Mr. Janicak’s termination of employment, the aggregate compensation cost recognized for PSU awards granted to Mr. Janicak in 2019 was $293,785.

 

In 2019, stock awards for Mr. Tramuto include $2,399,996 aggregate compensation costs to be recognized for a PSU award assuming 100% would be earned at the end of the two-year performance period. Based on actual performance as measured following the end of the performance period and taking into account the number of PSU awards that were forfeited upon Mr. Tramuto’s termination of employment, the aggregate compensation cost recognized for PSU awards granted to Mr. Tramuto in 2019 was $519,037.

 

(3)

Non-equity incentive plan compensation includes short-term cash incentive awards and the performance cash component of the Integration Performance Awards.  

For 2020, Messrs. Ashworth, Holland, and Wagers earned short-term cash incentive awards of $900,000, $21,137, and $11,625, respectively.  See the section titled “Short-term Cash Incentive Awards” in the “Compensation Discussion and Analysis” section for details on the short-term cash incentive awards.

Also for 2020, each of Messrs. Holland and Wagers earned $42,650 of performance cash related to the Integration Performance Awards. See the section titled “Long-Term Incentive Awards” in the “Compensation Discussion and Analysis” section for details on the Integration Performance Awards.

45


 

(4)

The amounts in this column reflect Company contributions to the 401(k) Plan and the NEO’s health savings account, insurance premiums the Company paid with respect to life insurance for the benefit of each NEO, relocation benefits for Mr. Ashworth, legal fees paid on behalf of Mr. Ashworth, and severance and related benefits earned by Messrs. Janicak and Tramuto and Ms. Flipse.

The table does not include medical benefits coverage and disability insurance that are offered through programs available to substantially all of our salaried employees.

(5)

Includes relocation expenses of $58,634 (primarily related to temporary living expenses) and legal fees of $16,051 paid by the Company on behalf of Mr. Ashworth.  In February 2021, the Board determined that Mr. Ashworth is not required to be located in the Nashville, Tennessee metropolitan area, and as a result Mr. Ashworth decided not to relocate or sell his current primary residence.

(6)

Includes severance and related benefits, including the short-term cash incentive award and the performance cash component of the Integration Performance Award, of $939,749.

(7)

Includes compensation received by Mr. Greczyn for his service as director as follows: (i) the Salary column includes $17,500 representing fees earned or paid in cash, and (ii) the Stock Awards column includes $165,417 representing the aggregate grant date fair value of RSUs granted during 2020.

(8)

Includes severance and related benefits, including the short-term cash incentive award and the performance cash component of the Integration Performance Award, of $540,680.

(9)

Includes severance and related benefits, including the short-term cash incentive award, of $1,936,171.

 


46


 

Grants of Plan-Based Awards in 2020

The following table sets forth the plan-based awards granted to the Company’s NEOs during 2020.

 

 

 

 

 

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards

(2)

Estimated Future Payouts

Under Equity Incentive Plan

Awards

(3)

All Other

Stock

Awards:

Number of

Shares of

All Other

Option

Awards:

Number of

Securities of

Exercise

or Base

Price of

Grant Date

Fair Value

of Stock

and

Name

Grant

Type

(1)

Grant

Date

Grant

Approval

Date

Threshold

($)

Target

($)

Max-

imum

($)

Threshold

(#)

Target

(#)

Max-

imum

(#)

Stock or

Units

(#)

Underlying

Options

(#)

Option

Awards

($/Sh)

Option

Awards

($)

 

 

 

 

 

 

 

 

 

 

(4)

(5)

 

(6)

Richard Ashworth (7)

STC

 

 

$—

$900,000

$900,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard Ashworth

MSU

06/01/20

05/20/20

 

 

 

75,000

150,000

450,000

 

 

 

$2,826,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard Ashworth

RSU

06/01/20

05/20/20

 

 

 

 

 

 

150,000

 

 

$1,665,000

 

 

 

 

 

 

 

 

 

 

 

&n