nxgn-def14a_20190815.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

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Filed by a Party other than the Registrant

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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

NEXTGEN HEALTHCARE, INC.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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NEXTGEN HEALTHCARE, INC.

18111 Von Karman Avenue, Suite 800

Irvine, California 92612

________________

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 15, 2019

To the Shareholders of NextGen Healthcare, Inc.:

The annual meeting of shareholders of NextGen Healthcare, Inc. (formerly named Quality Systems, Inc.) will be held at the Marriott Hotel located at 18000 Von Karman Avenue, Irvine, California 92612 on August 15, 2019, at 9:00 a.m. Pacific Time, for the following purposes:

 

 

1.

Proposal 1:  To elect nine persons to serve as directors of our company until the 2020 annual meeting of shareholders. Our nominees for election to our Board of Directors (“ Board ”) are named in the attached proxy statement, which is a part of this notice;

 

2.

Proposal 2:  To conduct an advisory vote to approve the compensation for our named executive officers (i.e., “Say-on-Pay”);

 

3.

Proposal 3:  To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2020;

 

4.

Proposal 4:  To approve an amendment of our Amended 2015 Equity Incentive Plan; and

 

5.

To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof.

All shareholders are cordially invited to attend the annual meeting in person. Only shareholders of record at the close of business on June 17, 2019, are entitled to notice of and to vote at the annual meeting and at any adjournments or postponements of the annual meeting.

Whether or not you plan to attend the annual meeting, please complete and sign the enclosed proxy card and return it in the enclosed addressed envelope. Your promptness in returning the proxy card will assist in the expeditious and orderly processing of the proxy and will assure that you are represented at the annual meeting even if you cannot attend the meeting in person. You may also vote by telephone or internet by following the instructions on the proxy card. If you return your proxy card or vote by telephone or internet, you may nevertheless attend the annual meeting and vote your shares in person. Shareholders whose shares are held in the name of a broker or other nominee and who desire to vote in person at the meeting should bring with them a legal proxy.

OUR BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF OUR DIRECTOR NOMINEES NAMED ON THE ENCLOSED PROXY CARD, “FOR” PROPOSAL 2, “FOR” PROPOSAL 3, AND “FOR” PROPOSAL 4.

 

By Order of the Board of Directors,

NEXTGEN HEALTHCARE, INC.

 

 

 

Jeffrey D. Linton

Executive Vice President, General Counsel and Secretary

Irvine, California

July 3, 2019

 

 


 

TABLE OF CONTENTS

 

 

 

 

Page

SOLICITATION OF PROXIES

 

1

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

 

1

OUTSTANDING SHARES AND VOTING RIGHTS

 

2

CAUTION CONCERNING FORWARD LOOKING STATEMENTS

 

4

PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

4

NON-DIRECTOR EXECUTIVE OFFICERS

 

8

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

9

EQUITY COMPENSATION PLAN INFORMATION

 

10

EXECUTIVE AND DIRECTOR COMPENSATION AND RELATED INFORMATION

 

11

 

Compensation Discussion and Analysis

 

11

 

Summary Compensation Table for Fiscal Year Ended March 31, 2019

 

23

 

Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2019

 

24

 

Outstanding Equity Awards at Fiscal Year Ended March 31, 2019

 

26

 

Option Exercises and Stock Vested During Fiscal Year Ended March 31, 2019

 

27

 

Pension Benefits

 

28

 

Nonqualified Deferred Compensation for Fiscal Year Ended March 31, 2019

 

28

 

Potential Payments Upon Termination of Employment or Change-in-Control

 

28

 

Director Compensation for Fiscal Year Ended March 31, 2019

 

33

 

Compensation Committee Interlocks and Insider Participation

 

35

 

Compensation Committee Report

 

35

 

CEO Pay Ratio

 

35

INFORMATION ABOUT OUR BOARD OF DIRECTORS, BOARD COMMITTEES AND RELATED MATTERS

 

36

 

Board of Directors

 

36

 

Board Committees and Charters

 

37

 

Related Matters

 

39

CORPORATE SOCIAL RESPONSIBILITY

 

40

DELINQUENT SECTION 16(A) REPORTS

 

41

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

42

 

Review, Approval or Ratification of Transactions with Related Persons

 

42

 

Related Person Transactions

 

42

PROPOSAL NO. 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (“SAY ON PAY”)

 

43

PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

46

 

Audit and Non-Audit Fees

 

46

 

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services

 

46

PROPOSAL NO. 4: AMENDMENT OF AMENDED 2015 EQUITY INCENTIVE PLAN

 

47

ANNUAL REPORT AND AVAILABLE INFORMATION

 

61

PROPOSALS OF SHAREHOLDERS

 

61

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

 

61

OTHER MATTERS

 

62

ANNEX A – FULL TEXT OF AMENDMENT TO 2015 EQUITY INCENTIVE PLAN

 

63

 

18111 Von Karman Avenue, Suite 800

Irvine, California 92612

______________

 

 

 

 


 

NEXTGEN HEALTHCARE, INC.

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 15, 2019

 

PROXY STATEMENT

 

SOLICITATION OF PROXIES

The accompanying proxy is solicited by the Board of Directors (“Board”) of NextGen Healthcare, Inc. (formerly named Quality Systems, Inc.) (“NextGen Healthcare,” the “Company,” “us,” “we” or “our”) for use at our annual meeting of shareholders to be held at the Marriott Hotel located at 18000 Von Karman Avenue, Irvine, California 92612, on August 15, 2019, at 9:00 a.m. Pacific Time, and at any and all adjournments and postponements thereof. All shares represented by each properly submitted and unrevoked proxy received in advance of the annual meeting will be voted in the manner specified therein.

Any shareholder has the power to revoke the shareholder’s proxy at any time before it is voted. A proxy may be revoked by delivering a written notice of revocation to our Secretary prior to or at the annual meeting, by voting again on the internet or by telephone (only your latest internet or telephone proxy submitted prior to 11:59 P.M. Eastern Time on August 14, 2019 will be counted), by submitting to our Secretary, prior to or at the annual meeting, a later dated proxy card executed by the person executing the prior proxy, or by attendance at the annual meeting and voting in person by the person submitting the prior proxy.

Any shareholder who holds shares in street name and desires to vote in person at the annual meeting should inform the shareholder’s broker of that desire and request a legal proxy from the broker. The shareholder will need to bring the legal proxy to the annual meeting along with valid picture identification such as a driver’s license or passport, in addition to documentation indicating share ownership. If the shareholder does not receive the legal proxy in time, then the shareholder should bring to the annual meeting the shareholder’s most recent brokerage account statement showing that the shareholder owned NextGen Healthcare, Inc. common stock as of the record date. Upon submission of proper identification and ownership documentation, we should be able to verify ownership of common stock and admit the shareholder to the annual meeting; however, the shareholder will not be able to vote at the annual meeting without a legal proxy. Shareholders are advised that if they own shares in street name and request a legal proxy, any previously executed proxy will be revoked, and the shareholder’s vote will not be counted unless the shareholder appears at the annual meeting and votes in person or legally appoints another proxy to vote on its behalf.

We will bear all expenses in connection with the solicitation of proxies. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of common stock. Our directors, officers and employees may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities.

This proxy statement, the accompanying proxy card and our 2019 annual report are being made available to our shareholders on or about July 3, 2019.

 

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on August 15, 2019.

This proxy statement, the notice of our 2019 annual meeting of shareholders and the Company’s 2019 annual report to shareholders are available on our website at http://investor.nextgen.com/financial-information.

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OUTSTANDING SHARES AND VOTING RIGHTS

Only holders of record of the 65,360,547 shares of our common stock outstanding at the close of business on the record date, June 17, 2019, are entitled to notice of and to vote at the annual meeting or any adjournments or postponements thereof. A majority of the outstanding shares, represented in person or by proxy, will constitute a quorum for the transaction of business. All properly submitted and unrevoked proxies will be counted in determining the presence of a quorum, including those providing for abstention or withholding of authority and those submitted by brokers voting without beneficial owner instruction and exercising a non-vote on certain matters.

Each shareholder will be entitled to one vote, in person or by proxy, for each share of common stock held on the record date. However, under our Bylaws and California law, if any shareholder gives notice at the annual meeting, prior to the voting, of an intention to cumulate the shareholder’s votes in the election of directors, then all shareholders entitled to vote at the annual meeting may cumulate their votes in the election of directors. Cumulative voting means that a shareholder has the right to give any one candidate who has been properly placed in nomination a number of votes equal to the number of directors to be elected multiplied by the number of shares the shareholder is entitled to vote, or to distribute such votes on the same principle among as many properly nominated candidates (up to the number of persons to be elected) as the shareholder may wish. If cumulative voting applies at the annual meeting, the cumulative number of votes a shareholder may cast in director elections will be equal to the number of shares held by such shareholder on the record date multiplied by nine (the number of directors to be elected at the annual meeting).

Whether the election of directors is by plurality vote or cumulative voting with respect to Proposal No. 1, the nine director nominees who receive the highest number of affirmative votes will be elected; abstentions and broker non-votes will have no effect on this proposal. See “Additional Information on the Mechanics of Cumulative Voting” below for more information on the operation of cumulative voting. In circumstances where there is a contested election and/or one or more of our shareholders demand that cumulative voting apply to the election of directors, our Board will provide instruction to the proxy holders to vote the proxies solicited hereby in such manner as to provide for the election of the maximum number of our director nominees (for whom authority is not otherwise specifically withheld) including, but not limited to, the prioritization of such nominees to whom such votes may be allocated. We have not received notice that any of our shareholders currently intends to invoke cumulative voting. In addition, because the Board has not nominated more than nine director nominees for election at the annual meeting, and because the deadline for the submission of director nominees for the 2019 annual meeting has passed, we believe it is less likely that cumulative voting will be invoked at the 2019 annual meeting.

Approval of Proposal No. 2, an advisory vote to approve the compensation of our named executive officers (i.e., “Say-on-Pay”), will occur if the vote constitutes both: (i) the affirmative vote of a majority of common stock present in person or represented by proxy and voting on the proposal and (ii) the affirmative vote of a majority of the quorum. For purposes of this proposal, abstentions and broker non-votes will not affect the outcome under clause (i), which recognizes only actual votes for or against the proposal. Abstentions and broker non-votes may affect the outcome under clause (ii) because abstentions and broker non-votes are counted for purposes of determining the quorum and have the effect of a vote against the proposal.

Approval of Proposal No. 3, the ratification of the appointment of our independent registered public accounting firm, is not required. However, this proposal will be considered approved if the vote constitutes both: (i) the affirmative vote of a majority of common stock present in person or represented by proxy and voting on the proposal and (ii) the affirmative vote of a majority of the quorum. For purposes of this proposal, abstentions and broker non-votes will not affect the outcome under clause (i), which recognizes only actual votes for or against the proposal. Abstentions and broker non-votes may affect the outcome under clause (ii) because abstentions and broker non-votes are counted for purposes of determining the quorum and have the effect of a vote against the proposal.

Approval of Proposal No. 4, the amendment of our Amended 2015 Equity Incentive Plan, will occur if the vote constitutes both: (i) the affirmative vote of a majority of common stock present in person or represented by proxy and voting on the proposal and (ii) the affirmative vote of a majority of the quorum.  For purposes of this proposal, abstentions and broker non-votes will not affect the outcome under clause (i), which recognizes only actual votes for or against the proposal. Abstentions and broker non-votes may affect the outcome under clause (ii) because abstentions and broker non-votes are counted for purposes of determining the quorum and have the effect of a vote against the proposal.

Additional Information on the Mechanics of Cumulative Voting

In the event cumulative voting applies, all shareholders will have the right to cumulate their votes in the election of directors. Cumulative voting means that each shareholder may cumulate such shareholder’s voting power for the election by distributing a number of votes, determined by multiplying the number of shares held by the shareholder as of the record date by nine (the number of directors to be elected at the annual meeting). Such shareholder may distribute all of the votes to one individual director nominee, or distribute such votes among any two or more director nominees, as the shareholder chooses.

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If you do not specifically instruct otherwise, the proxy being solicited by our Board will confer upon the proxy holders the authority, in the event that cumulative voting applies, to cumulate votes at the instruction and discretion of our Board or any committee thereof so as to provide for the election of the maximum number of our director nominees (for whom authority is not otherwise specifically withheld) including, but not limited to, the prioritization of such nominees to whom such votes may be allocated. Using its authority, the Board may vote your shares for fewer than nine nominees.

If you elect to grant us your proxy and do not specifically instruct otherwise, you are authorizing the proxy holders to vote your shares in accordance with the discretion and at the instruction of the Board, including to cumulate your votes in favor of certain nominees (rather than allocating votes equally among the nominees) and to determine the specific allocation of votes to individual nominees. You may withhold your authority to vote for one or more nominees, in which case the Board will retain discretion to allocate your votes among our other nominees unless you specifically instruct otherwise. Under no circumstances may the proxy holders cast your votes for any nominee from whom you have withheld authority to vote.

For example, a proxy marked “FOR ALL EXCEPT” may only be voted for those of our director nominees for whom you have not otherwise specifically withheld authority to vote, a proxy marked “WITHHOLD ALL” may not be voted for any of our director nominees, and a proxy marked “FOR ALL” may be voted for all of our director nominees. In exercising its discretion with respect to cumulating votes, our Board may instruct, in its sole judgment, the proxy holders to cumulate and cast the votes represented by your proxy for any of our director nominees for whom you have not otherwise withheld authority. For example, if you grant a proxy with respect to shares representing 900 cumulative votes, and mark “FOR ALL EXCEPT” one of our director nominees, the Board may instruct the proxy holders to cast the 900 votes for any or all of our eight other director nominees; of those eight other director nominees, moreover, the Board may allocate the 900 votes among them as it determines, such that each of those other director nominees may receive unequal portions of the 900 votes or none at all.

In the event cumulative voting applies, unless you specifically instruct otherwise, the Board will instruct the proxy holders to cast the votes as to which voting authority has been granted so as to provide for the election of the maximum number of our director nominees, and will provide instructions as to the order of priority of the Board candidates in the event that fewer than all of our Board candidates are elected. The Board has not yet made any determination as to the order of priority of candidates to which it would allocate votes in the event cumulative voting applies, and expects to make this determination, if necessary, at the annual meeting. Accordingly, if you grant a proxy to us and have not specifically instructed otherwise, your shares will be voted for our director nominees at the discretion of the Board with respect to all of your shares (except that the Board will not be able to vote your shares for a candidate from whom you have withheld authority to vote). If you wish to exercise your own discretion as to allocation of votes among nominees, and you are a record holder of shares, you will be able to do so by attending the meeting and voting in person, by appointing another person as your representative to vote on your behalf at the meeting, or by providing us with specific instructions as to how to allocate your votes.

A holder of record who wishes to invoke cumulative voting must submit a proxy card by mail, check the box indicating the exercise of cumulative voting and hand mark the number of votes such holder wishes to allocate to each particular nominee next to the name of such nominee on the enclosed proxy card. A holder of record who wishes to provide vote allocation instructions, in the event that cumulative voting applies, must submit a proxy card by mail and should hand mark the number of votes such holder wishes to allocate to any particular nominee next to the name of such nominee on the enclosed proxy card. If you provide vote allocation instructions for less than all of the votes that you are entitled to cast, the proxy holders will retain discretionary authority to cast your remaining votes pursuant to the instructions of the Board, except for any nominee for whom you have withheld authority by marking the “FOR ALL EXCEPT” box. If you wish to grant the proxy holders discretionary authority to allocate votes among all our nominees you may check the “FOR ALL” box, but you are not required to do so. The proxy holders will retain discretionary authority to allocate votes among all our nominees except where you provide a specific instruction by hand marking the number of votes to be allocated or by marking the “FOR ALL EXCEPT” box.

Any shareholder who holds shares in street name and desires to specifically allocate votes among nominees, in the event cumulative voting applies, may do so by either informing the shareholder’s broker, banker or other custodian of the shareholder’s desire to attend the annual meeting, and requesting a legal proxy to attend the meeting, or by providing the broker, banker or other custodian with instructions as to how to allocate votes among nominees, which can then be delivered to the Company. Because each broker, banker or custodian has its own procedures and requirements, a shareholder holding shares in street name who wishes to allocate votes to specific nominees should contact its broker, banker or other custodian for specific instructions on how to obtain a legal proxy or provide vote allocation instructions.

We have not received notice that any of our shareholders currently intends to invoke cumulative voting. In addition, because the Board has not nominated more than nine director nominees for election at the annual meeting, and because the deadline for the submission of director nominees for the 2019 annual meeting has passed, we believe it is less likely that cumulative voting will be invoked at the 2019 annual meeting; however, in the event cumulative voting is invoked, the foregoing mechanics will apply.

Please note you will not be able to submit vote allocation instructions for director elections if you grant a proxy by telephone or the internet.

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CAUTION CONCERNING FORWARD LOOKING STATEMENTS

Statements made in this proxy statement that are not historical in nature, or that state our or our management’s intentions, hopes, beliefs, expectations or predictions of the future, may constitute “forward-looking statements” within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements can often be identified by the use of forward-looking language, such as “could,” “should,” “will,” “will be,” “will lead,” “will assist,” “intended,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” or “estimate” or variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance. These forward-looking statements may include, without limitation, discussions of our product development plans, business strategies, future operations, financial condition and prospects, developments in and the impacts of government regulation and legislation and market factors influencing our results.

Forward-looking statements involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risk factors discussed under “Risk Factors” in our Annual Report on Form 10-K for fiscal year ended March 31, 2019, as well as factors discussed elsewhere in this and other reports and documents we file with the SEC. Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time unless required by law. Interested persons are urged to review the risks described under “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal year ended March 31, 2019, as well as in our other public disclosures and filings with the SEC.

ELECTION OF DIRECTORS

(Proposal No. 1)

Proposal No. 1 concerns the election of the following director nominees: John R. “Rusty” Frantz, Craig A. Barbarosh, George H. Bristol, Julie D. Klapstein, James C. Malone, Jeffrey H. Margolis, Morris Panner, Sheldon Razin and Lance E. Rosenzweig. The Nominating and Governance Committee has nominated each of these individuals for election as a director. Each of our director nominees has consented to being named in this proxy statement and has agreed to serve as a director if elected. Directors are elected at each annual meeting of shareholders and hold office until the next annual meeting or until their respective successors are duly elected and qualified. Each of our director nominees currently serves on the Board and was elected by the shareholders at the 2018 annual meeting of shareholders.

Certain information with respect to our nine director nominees is set forth below. Although we anticipate that each nominee will be available to serve as a director, if any nominee becomes unavailable to serve, the proxies will be voted for another person as may be or has been designated by our Board.

Unless the authority to vote for one or more of our director nominees has been withheld in a shareholder’s proxy or specific instructions to vote otherwise have been given, the persons named in the proxy as proxy holders intend to vote at the annual meeting “For” the election of each nominee presented below. In the event cumulative voting applies to the election of the directors, our Board will provide instruction to such proxy holders to vote the proxies solicited hereby in such manner as to provide for the election of the maximum number of our director nominees (for whom authority is not otherwise specifically withheld and to the extent no specific instructions otherwise are given) including, but not limited to, the prioritization of such nominees to whom such votes may be allocated.

At the annual meeting, in the event cumulative voting applies, unless you specifically instruct otherwise, the Board will instruct the proxy holders to cast the votes as to which voting authority has been granted so as to provide for the election of the maximum number of our director nominees, and will provide instructions as to the order of priority of the Board candidates in the event that fewer than all of our Board candidates are elected. The Board has not yet made any determination as to the order of priority of candidates to which it would allocate votes in the event cumulative voting applies, and expects to make this determination, if necessary, at the annual meeting.

In the election of directors, assuming a quorum is present, the nine nominees receiving the highest number of votes cast at the meeting will be elected directors.

All properly submitted and unrevoked proxies will be counted for purposes of determining whether a quorum is present, including those providing for abstention or withholding of authority and those submitted by brokers voting without beneficial owner instruction and exercising a non-vote on certain matters.

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Based on definitions of independence established by The Nasdaq Stock Market (“Nasdaq”), SEC rules and regulations, guidelines established in our Bylaws, and the determinations of our Nominating and Governance Committee and our Board, Messrs. Barbarosh, Bristol, Malone, Margolis, Panner, Razin and Rosenzweig and Ms. Klapstein are independent.  Mr. Frantz is a member of our management team and is a non-independent director.

The Nasdaq independence definition includes a series of objective tests, such as that the director or director nominee is not and has not been for the past three years an employee of the Company and has not engaged in various types of business dealings with the Company. In addition, as further required by the Nasdaq rules, our Board has made a subjective determination as to each independent director and director nominee that no relationships exist which, in the opinion of our Board, would interfere with the exercise of independent judgment of such director or director nominee in carrying out his or her responsibilities as a director. In making these determinations, our Board reviewed and discussed information provided by our directors, director nominees and management with regard to each director’s and director nominee’s business and personal activities as they may relate to our management and us. The independent members of our Board meet periodically in executive session without management.

OUR BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” EACH OF THE DIRECTOR NOMINEES NAMED BELOW AND LISTED ON THE PROXY CARD.

John R. “Rusty” Frantz, age 52, was appointed our President and Chief Executive Officer effective July 1, 2015 and has served as a director since August 11, 2015. Previously, he served as Senior Vice President and General Manager, Global Dispensing Division, of CareFusion Corp., a San Diego-based global corporation serving the health care industry, providing products and services that assist hospitals in improving the safety and quality of care, from 2011 until March 2015, when CareFusion was acquired by Becton, Dickinson and Company (BDX). He also served from 2010 to 2011 as Vice President, Research and Development for CareFusion’s Pyxis business unit, from 2008 to 2010 as General Manager of CareFusion’s Pyxis Perioperative Solutions, and from 2007 to 2008 as CareFusion’s Vice President, Marketing, Supply Technologies. Prior to his employment with CareFusion, Mr. Frantz served as Vice President, Marketing, at Cerfidia Solutions, Vice President, Marketing and Product Management, at Amphire Solutions, Co-Founder and Vice President, Engineering, at OutPurchase, and was the fifth employee hired by the founders of Omnicell (OMCL). Mr. Frantz holds a Master of Science degree in engineering from Stanford University and a Bachelor of Science degree in engineering from the Maine Maritime Academy. Our Board has determined that Mr. Frantz should serve on our Board based on his position as our President and Chief Executive Officer, as well as his prior executive experience with other companies, which provides our Board with the perspective of a person with significant executive management and healthcare information technology industry experience who is involved in the Company’s day to day activities.

Craig A. Barbarosh, age 51, is a director and has served as our Vice Chairman of the Board since November 2015. Mr. Barbarosh is a partner at the international law firm of Katten Muchin Rosenman LLP, a position he has held since June 2012. From January 1999 until June 2012, Mr. Barbarosh was a partner of the international law firm of Pillsbury Winthrop Shaw Pittman LLP. Mr. Barbarosh is a nationally recognized restructuring expert. He served in several leadership positions while a partner at Pillsbury including serving on the firm’s Managing Board, as the Chair of the firm’s Board’s Strategy Committee, as a co-leader of the firm’s national Insolvency & Restructuring practice section and as the Managing Partner of the firm’s Orange County office. At Katten, Mr. Barbarosh served as a member of the firm’s Executive and Operating Committee from June 2012 through June 2016 and currently serves on the firm’s Board of Directors. Mr. Barbarosh received a Juris Doctorate from the University of the Pacific, McGeorge School of Law in 1992, with distinction, and a Bachelor of Arts in Business Economics from the University of California at Santa Barbara in 1989. Mr. Barbarosh received certificates from Harvard Business School for completing executive education courses on Private Equity and Venture Capital (2007), Financial Analysis for Business Evaluation (2010) and Effective Corporate Boards (2015) and from the University of Pennsylvania Wharton School program on Corporate Valuation (2019). Mr. Barbarosh is also a frequent speaker and author on restructuring and governance topics. Mr. Barbarosh is also a director of Sabra Health Care REIT, Inc. (Nasdaq: SBRA) where he is the Chair of the Audit Committee and a member of the Compensation Committee, and a director of Aratana Therapeutics, Inc. (Nasdaq: PETX) where he is a member of the Compensation Committee.  Mr. Barbarosh previously served on the boards of BioPharmX, Inc., (NYSE: BPMX) where he was the Chair of the Nominating and Governance Committee and a member of the Audit and Compensation Committees, and Bazaarvoice, Inc., where he was a member of the Compensation Committee. Our Board has concluded that Mr. Barbarosh, a practicing attorney specializing in the area of financial and operational restructuring and related transactions, should serve on our Board because he provides experienced guidance on similar transactions involving our company and governance matters, and because of his extensive background serving in various leadership roles.  Mr. Barbarosh has been a director since 2009.

5


 

George H. Bristol, age 70, is a director. Mr. Bristol is a Managing Director of Janas Associates, a corporate financial advisor, a position he has held since 2010. From August 2006 until March 2010 he served as Managing Director-Corporate Finance of Crowell Weedon & Co. From November 2002 until August 2006, he was a member and Chief Financial Officer of Vantis Capital Management, LLC, a registered investment advisor which managed the Vantis hedge funds totaling over $1.4 billion. Prior to Vantis, he was an investment banker with several firms including Ernst & Young, Paine Webber, Prudential Securities and Dean Witter. He is a graduate of the University of Michigan and Harvard Business School. Our Board has concluded that Mr. Bristol should serve on our Board based on his experience in various corporate finance positions, which provides our Board with insight from someone with direct responsibility for strategic and transactional financial matters. Mr. Bristol has been a director since 2008.

Julie D. Klapstein, age 64, is a director. Ms. Klapstein was the founding Chief Executive Officer of Availity, LLC, one of the nation’s largest health information networks optimizing the automated delivery of critical business and clinical information among healthcare stakeholders. Ms. Klapstein served as Availity’s Chief Executive Officer and board member from 2001 to 2011. She was the interim Chief Executive Officer at Medical Reimbursements of America, Inc., a private company, from February 2017 to June 2017. Ms. Klapstein’s more than thirty years of experience in the healthcare information technology industry include executive roles at Phycom, Inc. (President and Chief Executive Officer from 1996 to 2001), Sunquest Information Systems (Executive Vice President), Shared Medical Systems’ Turnkey Systems Division (now Siemens Medical Systems), and GTE Health Systems. Ms. Klapstein is a director of Amedisys Inc., a public company, since April 2016, where she serves on the Governance and Quality committees, and where she is chair of the Compensation committee. She also currently serves on the board of directors for several private companies and organizations, including eSolutions, Inc., which specializes in revenue cycle management solutions; Dominion Diagnostics, LLC, which specializes in laboratory services; Bottom Line Systems, which specializes in underpayments and denials for hospitals; and the Grand Canyon Conservancy, which is the official nonprofit partner of the Grand Canyon National Park. Ms. Klapstein previously was a director for two public companies, Annie’s Homegrown/Annies, Inc. from January 2012 to September 2014, where she served on the Governance, Compensation, and Audit committees, and Standard Register Inc. from April 2011 to November 2014, where she served on the Governance, Compensation, and Audit committees. She also has been a director for multiple private companies. Ms. Klapstein earned her bachelor’s degree from Portland State University in Portland, Oregon. Our Board has concluded that Ms. Klapstein should serve on our Board based on her extensive knowledge of the healthcare industry, relevant executive and management experience, and public company board experience. Ms. Klapstein has been a director since 2017.

James C. Malone, age 70, is a director. Mr. Malone has more than 35 years of financial leadership experience, having held the Chief Financial Officer position at several global healthcare companies. Currently, Mr. Malone is the Executive Vice President and Chief Financial Officer of XIFIN, Inc. a financial cloud computing company dedicated to optimizing the economics of healthcare, since February 2015. Mr. Malone served as the Chief Financial Officer and Executive Vice President of American Well Inc., a software technology and services company that brings healthcare into the homes and workplaces of patients, from September 2010 to January 2015. He served as Chief Financial Officer of Misys PLC, a multinational software company, from June 2007 to January 2009 and served as its Executive Vice President until January 2009. He joined Misys from The TriZetto Group, Inc., a provider of healthcare IT solutions and services to payers and providers, where he served as Chief Financial Officer from March 2004 to June 2007, Vice President of Finance from January 2004 until his appointment as Chief Financial Officer, Executive Vice President of Finance from January 2006 to June 2007, Senior Vice President of Finance from January 2004 until January 2006 and also served as its Principal Accounting Officer. Prior to this, he served as Chief Financial Officer, Senior Vice President and Chief Administrative Officer of IMS Health Inc., a provider of information, services and technology for the healthcare industry. He served as Senior Vice President and Controller of Cognizant Corporation from 1995 to 1997. Mr. Malone also held management positions at Dun & Bradstreet, Reuben H. Donnelley, and Siemens AG and served as audit manager at Price Waterhouse. He also served as an executive director of Misys PLC from June 2007 to January 2009 and served as director of Allscripts Healthcare Solutions, Inc. (alternate name, Allscripts-Misys Healthcare Solutions, Inc.), which provides practice management and electronic health record technology to healthcare providers, from October 2008 to January 2009. He also served as a director of Cognizant Technology Solutions, Inc. from 1995 to 1998. Mr. Malone received his BS in Accounting from St. Francis College in 1973 and attended Pace University for graduate work in tax. He received his Certified Public Accountant certification from the State of New York in 1975. Our Board has concluded that Mr. Malone should serve on our Board based on his experience as a Chief Financial Officer in the technology industry (including in the health care technology sector) and his experience as an executive officer and director of various companies. Mr. Malone has been a director since 2013.

6


 

Jeffrey H. Margolis, age 56, is a director and has served as our Chairman of the Board since November 2015. Currently, Mr. Margolis is chairman and CEO of Welltok, Inc., a data-driven, enterprise SaaS company that delivers the healthcare industry’s leading consumer activation platform. Mr. Margolis is Chairman Emeritus of TriZetto Corporation, a recognized leader of in the provision of health information technology for payers and providers and the originator of the industry-vertical SaaS model, where he served as the founding CEO beginning in 1997, served as Chairman and CEO until 2010 (publically traded on NASDAQ from October 1999 - August 2008), and continued as Chairman until October 2011. Mr. Margolis also served as Senior Executive Advisor to the Oliver Wyman Health Innovation Center, an organization that identifies and disseminates ideas and best practices that aim to transform healthcare, during 2012 and 2013. From 1989 to 1997, Mr. Margolis served as Senior Vice President and Chief Information Officer of FHP International Corp. and its predecessors, a publicly-traded company that focused on the delivery of managed group and individual health care insurance and hospital and ambulatory-based clinical services along with a broad array of healthcare ancillary services. Earlier in his career, Mr. Margolis served in various positions with Andersen Consulting including his final position as Manager, Healthcare Consulting. Mr. Margolis currently serves on the board of directors of Alignment Healthcare, Inc., a private, for-profit population health management entity, and TriNetX, Inc., a private, for-profit data and software-as-a-service entity that supports clinical trials. He has previously served on a variety of other for-profit boards. He also has served on a number of not-for-profit boards of directors. Mr. Margolis is currently a director of Hoag Hospital in Newport Beach, California. He is a member of the board of governors at Cedars-Sinai in Los Angeles, California and is on the Advisory Boards of the University of California at Irvine’s Center for Healthcare Management & Policy and Center for Digital Transformation. A published author on topics of healthcare information technology and systems, Mr. Margolis earned a bachelor’s degree in business administration/management information systems with high honors from the University of Illinois in 1984, and holds CPA certificates (currently inactive) in Colorado and Illinois. Our Board has concluded that Mr. Margolis should serve on our Board based on his experience as a chief executive officer in the health care information technology sector and his experience as an executive officer and director of various companies.  Mr. Margolis has been a director since 2014.

Morris Panner, age 56, is a director. Mr. Panner is a long tenured executive with expertise in both healthcare software companies, including SaaS capabilities, and the law. Currently, Mr. Panner is the Chief Executive Officer of Ambra Health (formerly DICOM Grid), a cloud-based healthcare software company that manages diagnostic imaging and related healthcare data. Prior to joining Ambra Health in September 2011, Mr. Panner was the Chief Executive Officer of Townflier, Inc. and related affiliates that provide group communications services, from May 2010 to August 2011. Previously, from April 2000 to May 2010, he was Chief Executive Officer of OpenAir, Inc., a SaaS project management company, which he led from start-up to its successful acquisition by NetSuite Inc., a provider of an integrated web-based business software suite, in 2008. Following the acquisition, Panner led the OpenAir division of NetSuite, during which time he oversaw the acquisition and integration of OpenAir’s nearest competitor, QuickArrow, Inc., as well as the expansion of OpenAir internationally. Mr. Panner served as Chairman of the Board of the Software Division of the Software and Information Industry Association and currently serves as a board member. Mr. Panner is a lawyer who served as an Assistant United States Attorney, the Resident Legal Advisor in Bogota, Columbia for the U.S. Department of Justice and as the Principal, Deputy Chief of the Narcotics and Dangerous Drug Section of the U.S. Department of Justice. He currently serves on the board of directors of Drug Strategies, a nonprofit research institution on issues of drug addiction and treatment. Mr. Panner was previously a director of the Washington Office on Latin America, a not-for-profit organization, from 2003 to 2009. Mr. Panner graduated from Yale College with a BA in History in 1984 and from the Harvard Law School with a JD in 1988. Our Board has concluded that Mr. Panner should serve on our Board based on his executive experience at software companies, including at health care software companies, and his legal training. Mr. Panner has been a director since 2013.

Sheldon Razin, age 81, is a director and our Chairman Emeritus. He is the founder of our company and served as our Chairman of the Board from our incorporation in 1974 until his retirement as Chairman and his appointment as Chairman Emeritus in November 2015. Throughout his tenure as our Chairman, Mr. Razin has received several awards recognizing his service and contributions as a director. Mr. Razin’s honors at the national level include: winner in the Software Category of TechAmerica’s 52nd Annual Innovator Awards in 2010 and Chairman of the Year in the 2009 American Business Awards. He was also honored as a Director of the Year in Orange County’s 16th Annual Forum for Corporate Directors Awards in 2011, as the 2009 Ernst & Young Entrepreneur of the Year in the Healthcare Category for the Orange County and Desert Cities region and as a Finalist at the national level, and with the Excellence in Entrepreneurship Award from the Orange County Business Journal in 2009. Mr. Razin served as our Chief Executive Officer from 1974 until April 2000. Since our incorporation until April 2000, he also served as our President, except for the period from August 1990 to August 1991. Additionally, Mr. Razin served as our Treasurer from our incorporation until October 1982. Prior to founding our company, he held various technical and managerial positions with Rockwell International Corporation and was a founder of our predecessor, Quality Systems, a sole proprietorship engaged in the development of software for commercial and space applications and in management consulting work. Mr. Razin holds a B.S. degree in Mathematics from the Massachusetts Institute of Technology. Our Board has concluded that Mr. Razin, as our founder, should serve on our Board based on his valuable knowledge regarding our history, operations, technology and marketplace. As evidenced by his awards, he has been and continues to be a technology and healthcare visionary as well as an outstanding entrepreneur whose insights and guidance are invaluable to the Company. Mr. Razin has been a director since 1974.

7


 

Lance E. Rosenzweig, age 56, is a director. Mr. Rosenzweig is CEO of Startek, a global business processing company with over 45,000 employees, a position he has held since 2018.  Mr. Rosenzweig currently serves as a chairman of the board of Boingo Wireless. From January 2015 through December 2016, Mr. Rosenzweig served as Operating Executive of Marlin Operations Group, which works with Marlin Equity Partners, a global investment firm focused on providing corporate parents, shareholders and other stakeholders with tailored solutions that meet their business and liquidity needs. Previously, Mr. Rosenzweig served as Chief Executive Officer and President, Global Markets for Aegis USA, Inc., a leading business process outsourcing company with over 18,000 employees that services major corporations in the healthcare, financial services and other industries, from 2013 through the company’s sale to Teleperformance for $610 million in 2014. Mr. Rosenzweig served as the founder and Chief Executive Officer of LibertadCard, Inc., a provider of pre-paid debit and remit cards, since the company's inception in 2010 until November 2013. Mr. Rosenzweig has also co-founded and served as Chairman of the Board of PeopleSupport, Inc., a business process outsourcing company with over 8,000 employees and operations in the US, the Philippines and Costa Rica, since its inception in 1998, and as PeopleSupport’s Chief Executive Officer from 2002 through the company’s sale in 2008 for $250 million. Under Mr. Rosenzweig’s leadership as CEO, PeopleSupport went public in an IPO, was ranked by Fortune as the 9th fastest growing small public company in the U.S. and was named employer of the year in the Philippines. From 1993 to 1997, Mr. Rosenzweig was a founder, Chairman of the Board and President of Newcastle Group, a privately held plastics manufacturing company. He was also a founder of Unisite, a privately held wireless cell site management company, acquired by American Tower in 2000 for more than $200 million. Prior to 1993, Mr. Rosenzweig was a divisional vice president at GE Capital; a vice president in the investment banking group of Dean Witter (now Morgan Stanley); a vice president in the investment banking group of Capel Court Pacific, an Australian investment banking firm; and a corporate planning manager of Jefferson Smurfit Group, a multinational packaging company. Mr. Rosenzweig has a BS in Industrial Engineering and an MBA with honors every term, both from Northwestern University. Our Board has concluded that Mr. Rosenzweig should serve on our Board based on his extensive executive, business, and leadership background, which includes significant experience in international operations and successful offshore ventures. Mr. Rosenzweig has been a director since 2012.

NON-DIRECTOR EXECUTIVE OFFICERS

James R. Arnold, Jr., age 62, was appointed our Executive Vice President and Chief Financial Officer in March of 2016. Prior to joining the Company, Mr. Arnold served as Chief Financial Officer and Executive Board member of Kofax Ltd., a publicly traded software company, from June 2010 to May 2015, where Mr. Arnold participated in and facilitated the strategic process that resulted in the sale of Kofax Ltd.’s enterprise software division. From 2004 to 2009, Mr. Arnold was Senior Vice President at Nuance Communications, Inc., a publicly traded software company, where he also served as Chief Financial Officer from 2004 to 2008. Previously, Mr. Arnold held numerous other senior-level finance positions at technology companies, to include roles as Vice President Corporate Controller at Cadence Design Systems, Inc., Chief Financial Officer at Informix Software, Inc., and Corporate Controller at Centura Software Corporation. Additionally, from 2003 to 2010 he served as a director and chair of the audit committee at Selectica, Inc., where he also was co-chairman of the board in 2010. Earlier in his career, Mr. Arnold provided consulting and auditing services to companies in diverse industries while at Price Waterhouse LLP. Mr. Arnold holds a Bachelor of Business Administration degree in Finance from Delta State University in Cleveland, Mississippi, and a Master’s degree in Business Administration from Loyola University in New Orleans, Louisiana.

David A. Metcalfe, age 56, was appointed our Executive Vice President and Chief Technology Officer in February 2016. Prior to joining the Company, Mr. Metcalfe served as Vice President of R&D at Becton, Dickinson & Company, a leading worldwide medical technology company, from March 2015 to January 2016. Previously, Mr. Metcalfe was Vice President of Product Development at CareFusion Corp., a global medical technology company servicing the critical care market, from September 2012 to March 2015, at which time CareFusion was acquired by Becton, Dickinson & Company. From 2008 to 2012, Mr. Metcalfe was Vice President of Development for Allscripts Healthcare Solutions, a provider of healthcare information technology solutions. Earlier in his career, Mr. Metcalfe held numerous other senior-level development positions at technology companies. Mr. Metcalfe holds a Bachelor of Science in Instrumentation and Control Engineering from Teesside University in Middlesbrough, England.

Jeffrey D. Linton, age 56, became our Executive Vice President, General Counsel and Secretary in December of 2017. Prior to joining the Company, Mr. Linton served as General Counsel and Secretary of Applied Proteomics, Inc. from November 2016 to November 2017.  Previously, Mr. Linton was Senior Vice President, General Counsel and Secretary of Sequenom, Inc. from September 2014 to October 2016.  Before joining Sequenom, Mr. Linton was Senior Vice President and General Counsel at Beckman Coulter, Inc. from July 2011 to September 2014 and, prior to that, was Vice President, Deputy General Counsel from September 2008 to July 2011. Before joining Beckman Coulter, Mr. Linton was President of the research products and services division of Serologicals Corporation, a company that developed, manufactured and sold life science research products and technologies, diagnostic kits and drug discovery services. Before that role, he served as Vice President, Law, Corporate Business Development and Public Affairs at Serologicals from October 2000 to April 2003. He has held various other positions in law, government and public affairs and human resources. Mr. Linton earned a B.A., magna cum laude, from Butler University and a J.D., cum laude, from the University of Notre Dame Law School.  He is a member of the Board of Directors of the Notre Dame Law Association.

8


 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Except as otherwise indicated in the related footnotes, the following table sets forth information with respect to the beneficial ownership of our common stock as of the record date, June 17, 2019, by:

 

each of our directors and director nominees;

 

each of our named executive officers (“NEOs”);

 

each person known by us to beneficially own more than 5% of the outstanding shares of our common stock; and

 

all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC, and includes voting or investment power with respect to the securities. To our knowledge, unless indicated by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Shares of common stock underlying options, if any, that currently are exercisable or are scheduled to become exercisable for shares of common stock within 60 days after the date of the table are deemed to be outstanding in calculating the percentage ownership of each listed person or group but are not deemed to be outstanding as to any other person or group. Percentage of beneficial ownership is based on 65,360,547 shares of common stock outstanding as of the record date, June 17, 2019.

Unless otherwise indicated, the address of each of the beneficial owners named in the table is c/o NextGen Healthcare, Inc., 18111 Von Karman Avenue, Suite 800, Irvine, California 92612. Messrs. Barbarosh, Bristol, Frantz, Malone, Margolis, Panner, Razin, Rosenzweig and Ms. Klapstein are current directors and director nominees of our Company. Our NEOs for our fiscal year 2019 were Messrs. Frantz, Arnold, Metcalfe, Bostick and Linton. Our executive officers as of the record date, June 17, 2019, are Messrs. Frantz, Arnold, Metcalfe, and Linton, each of whom is included in the table below.

 

 

 

 

 

 

 

 

 

Name of Beneficial Owner

 

Number of Shares

of Common Stock

Beneficially Owned

 

Percent of

Common Stock

Beneficially Owned

Sheldon Razin

 

10,138,934

 

 

 

15.5%

Craig A. Barbarosh

 

71,053

 

 

 

*

George H. Bristol

 

48,605

 

 

 

*

Julie D. Klapstein

 

15,820

 

 

 

*

James C. Malone

 

47,234

 

 

 

*

Jeffrey H. Margolis

 

71,917

 

 

 

*

Morris Panner

 

45,759

 

 

 

*

Lance E. Rosenzweig

 

49,677

 

 

 

*

Rusty Frantz

 

799,937

 

(1)  

 

1.2%

James R. Arnold, Jr.

 

489,656

 

(2)  

 

*

David A. Metcalfe

 

260,347

 

(3)  

 

*

Jeffrey D. Linton

 

54,629

 

(4)  

 

*

Scott E. Bostick

 

194,313

 

(5)  

 

 

Ahmed Hussein

 

5,687,696

 

(6)  

 

8.7%

BlackRock, Inc.

 

7,243,331

 

(7)  

 

11.1%

Brown Capital Management, LLC

 

9,413,589

 

(8)  

 

14.4%

The Vanguard Group

 

5,313,745

 

(9)  

 

8.1%

The Brown Capital Management Small Company Fund

 

4,323,754

 

(8)  

 

6.6%

All directors, director nominees and executive officers as a group

 

12,287,881

 

(10)  

 

18.5%

 

*

Represents less than 1.0%.

(1)

Includes 520,000 shares underlying options vested as of the record date or within 60 days thereafter.

(2)

Includes 231,250 shares underlying options vested as of the record date or within 60 days thereafter.

(3)

Includes 185,000 shares underlying options vested as of the record date or within 60 days thereafter.

(4)

Includes 33,750 shares underlying options vested as of the record date or within 60 days thereafter.

(5)

Reflects 46,813 shares of common stock and 147,500 shares subject to vested options held by Mr. Bostick as of January 4, 2019, the last day of his employment.

(6)

This information is derived from the most recent available information, a Form 4 filed by Ahmed Hussein on August 27, 2012. According to the Form 4, Mr. Hussein has beneficial ownership of 5,687,696 shares. Mr. Hussein is a former director of the Company who resigned on May 14, 2013.

9


 

(7)

This information is derived from a Schedule 13G filed by BlackRock, Inc. on January 31, 2019. According to the Schedule 13G, BlackRock, Inc. had sole power to vote 7,113,023 shares, sole power to dispose of 7,243,331 shares, and no shared power to vote or dispose of shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

(8)

This information is derived from a Schedule 13G/A filed by Brown Capital Management, LLC as primary filer on February 14, 2019. Brown Capital Management, LLC beneficially owned 9,413,589 shares.  Within those shares are 4,323,754 shares beneficially owned by The Brown Capital Management Small Company Fund, a series portfolio of Brown Capital Management Mutual Funds, a Delaware statutory trust, which is managed by Brown Capital Management, LLC. According to the Schedule 13G/A, Brown Capital Management, LLC had sole power to vote 5,519,703 shares, sole power to dispose of 9,413,589 shares, and no shared power to vote or dispose of shares. The Brown Capital Management Small Company Fund had sole power to vote 4,323,754 shares, sole power to dispose of 4,323,754 shares, and no shared power to vote or dispose of shares. The address for Brown Capital Management, LLC and The Brown Capital Management Small Company Fund is 1201 N. Calvert Street, Baltimore, MD 21202.

(9)

This information is derived from a Schedule 13G/A filed by The Vanguard Group on February 11, 2019. According to the Schedule 13G/A, The Vanguard Group had sole power to vote 87,580 shares, shared power to vote 9,000 shares, sole power to dispose of 5,221,665 shares, and shared power to dispose of 92,080 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

(10)

Includes 1,117,500 shares underlying options vested as of the record date or within 60 days thereafter.

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth information about our common stock that may be issued pursuant to awards under all of our equity compensation plans as of March 31, 2019.

 

Plan Category

 

Number of Securities

to be issued upon

exercise of

outstanding options,

warrants and rights

(a)

 

 

 

Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)

 

 

 

Number of securities

remaining available for

future issuance under

equity compensation

(excluding securities

reflected in column (a))

(c)

 

 

Equity compensation plans approved by security

   holders

 

 

3,414,665

 

(1)

 

$

15.36

 

(2)

 

 

9,646,111

 

(3)

Equity compensation plans not approved by

   security holders

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

3,414,665

 

(1)

 

$

15.36

 

(2)

 

 

9,646,111

 

(3)

 

(1)

Represents 3,166,525 shares of common stock underlying outstanding options and 248,140 shares issuable pursuant to outstanding performance stock units at target under our Amended 2015 Equity Incentive Plan.

(2)

Represents the weighted average exercise price of options and is calculated without taking into account the 248,140 shares of common stock issuable pursuant to outstanding performance stock units at target.

(3)

Represents 6,110,719 shares of common stock available for issuance under options or awards that may be issued under our Amended 2015 Equity Incentive Plan and 3,535,392 shares of common stock available for issuance under our 2014 Employee Share Purchase Plan (the “ESPP”). 32,879 shares were issued under the purchase period in effect as of March 31, 2019 under the ESPP, which purchase period ended on June 14, 2019.

 

 

 

 

 

 

 

 

 

10


 

EXECUTIVE AND DIRECTOR COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis section describes our executive compensation program for our named executive officers, or “NEOs”, for our fiscal year 2019 (which began on April 1, 2018 and ended on March 31, 2019). These NEOs were:

 

John R. “Rusty” Frantz -- President and Chief Executive Officer, appointed July 2015

 

James R. Arnold -- Executive Vice President and Chief Executive Officer, appointed March 2016

 

David A. Metcalfe -- Executive Vice President and Chief Technology Officer, appointed February 2016

 

Scott E. Bostick -- Former Executive Vice President and Chief Operating Officer, appointed April 2017 and resigned from that position on September 14, 2018, continuing employment with the Company in a non-executive officer role until January 4, 2019

 

Jeffrey D. Linton -- Executive Vice President, General Counsel and Secretary, appointed December 2017

Executive Summary

NextGen Healthcare, Inc. provides a range of software, services, and analytics solutions to medical and dental group practices.  Our portfolio delivers foundational capabilities to empower physician success, enrich the patient care experience, and enable the transition to value-based healthcare. We compete for executive talent with a broad range of companies that are leaders in the software and healthcare information technology industries. Our compensation program is intended to:

 

align management’s interests with the interests of our shareholders;

 

reward strong Company financial performance;

 

provide responsible and balanced incentives; and

 

allow us to attract and retain effective executive leadership.

Accomplishments Achieved by Executive Team During Fiscal Year 2019

We are in the process of evolving our Company into a more nimble, client-focused organization and this process is being led by a substantially new management team. Our Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, and General Counsel all joined the Company within the past several years.  

In fiscal year 2019, our executive team continued to implement changes designed to advance the multi-year improvement program that was initiated upon the installation of our current management team. The new strategic direction to date has simplified our usability for customers, broadened our solution set, and increased the visibility of our platform. These results are reflected in our 23% Total Shareholder Return (“TSR”) during fiscal year 2019, which was higher than the Russell 2000 Index’s 2% TSR over the same period, and an improvement over our -1% TSR in fiscal year 2016, the fiscal year in which Mr. Frantz became our CEO in July 2015.  

Hallmarks of our fiscal year 2019 performance were:

 

Earnings per share growth of 850% on a GAAP basis, or 9% on a non-GAAP ASC 605 basis over the prior year

 

Bookings growth of 14% over the prior year

 

Deal-size growth of 24% over the prior year

 

Recognition by KLAS Research, a healthcare information technology data and insights company, as a “Best-in-KLAS” top-ranked practice management solution and as a top performer for overall satisfaction and product functionality

 

Continued growth in client satisfaction, as evidenced by a 42% increase in our net promoter score

For a reconciliation of earnings per share growth on a non-GAAP basis to the more directly comparable GAAP measure, please see the section captioned “Non-GAAP Financial Measure Reconciliation.”

Our executive team made substantial progress in fiscal year 2019 on the Company’s transformation that began with the hiring of our CEO in 2015 and the subsequent hiring of our executive team.  The Company is continuing to enable more efficient, integrated, and client-centered delivery of holistic solutions, ultimately leading to improved growth, profit, and long-term shareholder value.

11


 

Shareholder Support for our Compensation Decisions

At our annual meeting of shareholders in August 2018, approximately 99% of the shares represented and voting on the “say-on-pay” proposal voted in favor of the compensation of our fiscal year 2018 NEOs. We believe the high level of say-on-pay vote support from our shareholders validates our executive compensation program and its underlying pay-for-performance design.

Overview of Executive Compensation Program

Over the past several years, the Compensation Committee revised the design and philosophy of our executive compensation program so that it more closely aligns with the Company’s strategy and market trends.  We believe a significant portion of our NEOs’ compensation should be variable, at risk and tied directly to measurable performance. Consistent with these principles, a significant portion of our NEOs’ compensation is in the form of performance-based incentives that are earned upon the attainment of pre-established financial goals.  For fiscal year 2019, our NEOs’ actual total direct compensation in the aggregate was aligned with the Peer Group’s median actual total direct compensation.  Also, we re-introduced performance-based equity awards for our NEOs in fiscal year 2019.

Base Salary:  For fiscal year 2019, the Compensation Committee increased base salaries for our NEOs by an average of 3% over fiscal year 2018 levels, consistent with the budgeted salary increases for our other employees. This resulted in salaries for our NEOs that were within 3% of the median of our Peer Group companies, on average.

Cash Bonus:  For fiscal year 2019, the Compensation Committee increased each of our NEOs’ target cash bonuses as a percentage of base salaries by ten percentage points over the levels for fiscal year 2018 in order to emphasize variable compensation and drive revenue and earnings per share growth during the year.

Equity:  The Compensation Committee continued placing heightened emphasis on equity compensation by granting awards in the form of restricted stock awards (“RSAs”) and introducing performance stock units (“PSUs”). The Compensation Committee has adopted a practice of making executive officer equity awards approximately half-way through each fiscal year.  This equity award timing pattern, mid-way in the fiscal year, enables the Compensation Committee to make award decisions based on a clearer sense of the Company’s and the NEOs’ performance throughout the fiscal year and to allow increased opportunities for performance feedback throughout the year.

CEO Compensation

Our CEO’s total cash compensation, which consists of his salary and actual cash bonus, decreased 6% from the previous fiscal year, in spite of an increase to his base salary, because his actual cash bonus decreased by 22% from the previous fiscal year.  Our CEO’s equity compensation increased, as did our Company’s one-year trailing total shareholder return, which was a strong 24% at the time the CEO’s equity grant was made on October 23, 2018.  Furthermore, our Company’s annualized total shareholder return from the date our CEO commenced employment, July 24, 2015, through the end of fiscal year 2019, was 9% per year, which is above the 8%-per-year total shareholder return of the Russell 2000 Index over the same period.  Of our CEO’s total actual direct compensation for fiscal year 2019, 83% consisted of the fair value of RSAs and PSUs at grant, which aligns with long-term shareholder interests.

Our Fiscal Year 2019 Performance Measures for Cash Incentive Bonus; How Performance is Linked to Pay

Under our fiscal year 2019 Executive Compensation Program, each of our NEOs was eligible for a cash incentive bonus based on two performance measures, weighted equally: (i) Revenue for fiscal year 2019, and (ii) Non-GAAP Earnings Per Share (“Non-GAAP EPS”) for fiscal year 2019. These annual performance metrics are the same measures of financial performance that the Company reports to its shareholders on a quarterly basis, and the same measures on which the Company provides forward-looking financial guidance, except that all revenues, expenses and dilutive shares associated with acquisitions or divestitures that close during the fiscal year are not included in the calculation of these performance measures for purposes of executive compensation. No such adjustments were made in fiscal year 2019.  These performance measures recognize success on execution of our business plan, which we believe will create long-term value for our shareholders.

Fiscal year 2019 presented new financial and operational challenges as the Company continued to execute on the multi-year improvement program which is focused on increasing long-term revenue growth and operating margin. Cash incentives that could be earned in fiscal year 2019 were paid according to formula-based outcomes, with no discretion applied to the results against the pre-established goals. Our Revenue for fiscal year 2019 was $529.2 million, compared with $529.9 million for fiscal year 2018. Our Non-GAAP EPS for fiscal year 2019 was $0.76, compared to $0.74 for fiscal year 2018.  

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Based on the results of the cash incentive bonus performance measures, our NEOs earned formulaic cash bonuses that were equal to 62.1% of their respective bonus target amounts based on performance versus the Revenue and Non-GAAP EPS measures, as described more fully below under the section “2019 Executive Compensation Program Terms and Results – Cash Incentive Bonus.”  These bonus payment amounts, as a percentage of their target amounts, were significantly lower than the cash bonus payment amounts for the previous year, which were paid at 91% of target.  This reduced bonus payment is viewed as an outcome that aligns with performance during the year, which was short of expectations, despite total shareholder return of 23% for the fiscal year.  

Equity as a Key Component of Compensation

Equity-based compensation aligns the interests of our management team with those of our shareholders by encouraging long-term performance. In fiscal year 2019, we added performance-contingent stock units to our executive equity compensation program.  These PSUs vest based on achieving growth in total shareholder return, revenue, and adjusted earnings per share goals over the next three years.  Multi-year vesting schedules create incentives for our officers to sustain performance over the long term and to encourage retention as the Company executes its new business strategy.

Under our fiscal year 2019 executive compensation program, the restricted stock awards made in October 2018 to our CEO vest in six month increments over four years subject to continued employment with the Company, while the restricted stock awards made in October 2018 to our other NEOs vest in four equal, annual installments commencing on the first anniversary of the grant date, subject to continued employment with the Company. The PSUs awarded to our NEOs on October 23, 2018 vest only upon the achievement of specified long-term performance goals, including three-year total shareholder return through October 23, 2021, fiscal year 2021 revenue, and fiscal year 2021 adjusted earnings per share, and subject to continued employment with the Company.  

The goals used for the PSUs are different from the goals used for the cash bonus program, because they reflect performance for fiscal year 2021 (rather than for fiscal year 2019), emphasizing the long-term strategic plan and requiring robust ongoing growth to be achieved.  The performance stock units based on the total shareholder return measure require target growth of over 30% on the third anniversary of the October 23, 2018 grant date to attain 100% payout.  The performance stock units based on the fiscal year 2021 revenue measure require target growth of over 20% as compared to fiscal year 2018 revenue to attain 100% payout.  The performance stock units based on the fiscal year 2021 adjusted earnings per share measure require target growth of over 80% as compared to fiscal year 2018 adjusted earnings per share to attain 100% payout.  

Balanced Pay Opportunities

The Compensation Committee evaluates our compensation program annually to ensure it provides balanced and reasonable pay opportunities. In designing our compensation program, our Compensation Committee is guided by the following compensation principles:

 

Performance-based equity awards. During fiscal year 2019, our Compensation Committee re-introduced the practice of making performance-based equity awards to our NEOs.  The PSUs made to our NEOs in fiscal year 2019 vest only upon the achievement of specified long-term performance goals, including three-year total shareholder return, fiscal year 2021 revenue, and fiscal year 2021 adjusted earnings per share.

 

Aggregate compensation value for NEOs around the peer group median. The aggregate actual total direct compensation value for our NEOs who were with the Company at the end of the fiscal year was within 2% of the median of actual total director compensation of our Peer Group companies reviewed in fiscal year 2019. We believe this compensation value constitutes a restrained compensation philosophy for our NEOs in the midst of effecting a corporate transformation.

 

Selective use of employment agreements and severance arrangements. Only our President and Chief Executive Officer, Mr. Frantz, has an employment agreement. Mr. Frantz’s employment agreement, as amended, includes certain severance benefits to be provided, under certain circumstances, in the event that his employment is terminated outside of a change of control scenario. In addition, all of our NEOs are subject to change of control severance agreements that provide severance payments and other benefits in connection with a change of control of the Company, but only if the NEO is terminated by the Company without “cause”, or terminates his or her employment for “good reason” within the two month period before or 18 month period after a “change in control” of the Company. Also, Messrs. Frantz and Arnold were granted certain restricted stock awards that provide for partial accelerated vesting upon a qualifying termination not in connection with a change of control.

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Limited perquisites; no tax gross-ups.  We do not provide any significant perquisites to our NEOs, other than pooled use of a corporate van (which was discontinued early in the fiscal year, in June 2018) and gym membership reimbursement, as well as an allowance to our Chief Financial Officer pursuant to his employment offer letter for a corporate apartment that is shared with another member of our leadership team, as detailed in the Summary Compensation Table. We do not provide tax gross-ups to our NEOs in connection with perquisites or benefits.  

 

No corporate aircraft.  We do not provide a corporate aircraft for personal travel to any of our NEOs.

 

Executive stock ownership policy.  We have an executive stock ownership policy designed to align our NEOs’ long-term interests with those of our shareholders and to discourage excessive risk taking. The policy requires our CEO to achieve a stock ownership level of six times base salary, while the other NEOs must achieve stock ownership levels of two times base salary. Executive officers who have not achieved the ownership requirements within five years are required to hold 100% of their after-tax profit shares acquired upon option exercises or following the vesting of other shares until they are in compliance.

 

Executive compensation recovery policy (“clawback”).  Our incentive recoupment policy provides that all cash and equity incentive compensation awarded to our NEOs may be recovered in the event of a financial restatement or intentional misconduct by the NEO.

Commitment to Strong Governance Standards

We are committed to maintaining good corporate governance standards with respect to our compensation program, procedures and practices. As such, our Company’s and Compensation Committee’s practices include the following:

 

Independent compensation committee. Our Compensation Committee designs and oversees our executive compensation program. The Compensation Committee is comprised entirely of independent directors.

 

Annual say-on-pay advisory vote.  Since 2011, we have held annual say-on-pay advisory votes in accordance with good governance practices and to maintain accountability to our shareholders.

 

Performance goals. A significant portion of our NEOs’ compensation is in the form of performance-based annual cash and equity incentives that are earned upon the attainment of pre-established financial goals. These goals are tied directly to the Company’s measurable performance and designed to align the interests of our executives with those of our shareholders.

 

Risk oversight. Our Compensation Committee oversees and periodically assesses the risks associated with our compensation structure, program and practices to ensure they do not encourage excessive risk-taking.

 

Authority to engage independent consultants. Our Compensation Committee has the authority to engage its own independent compensation consultants, legal counsel or other advisers to assist in designing and assessing our executive compensation program and pay practices. For fiscal year 2019, our Compensation Committee engaged Frederic W. Cook & Co., Inc. as its independent compensation consultant.

 

Prohibition on speculative trading. Board members, officers and employees are prohibited under the Company’s insider trading policy from engaging in short-term or speculative transactions in our Company’s shares.  This includes a prohibition on pledging and hedging transactions.

Compensation Details

Compensation Philosophy, Objectives and Components

This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by executive officers and places in perspective the data presented in the tables and narratives that follow.

The Compensation Committee regularly assesses the Company’s compensation philosophy as well as target and actual compensation. The Compensation Committee is comprised solely of independent directors and has responsibility for overseeing the Company’s overall compensation program, designing and managing our executive compensation program and making recommendations to the Board concerning compensation matters for our employees and directors. The Compensation Committee attempts to create compensation paid to our executive officers that is responsible, balanced, performance-based, and competitive. Our executive compensation program is designed to reward achievement of specific performance goals. By rewarding strong management performance in the achievement of these established goals, our executive compensation program helps to ensure that management’s interests are aligned with our shareholders’ interests, with the ultimate objective of improving shareholder value.

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Our Compensation Committee designs compensation packages for our executive officers that include equity-based compensation as a key component. Our Compensation Committee believes that this use of equity-based compensation serves to further align the interests of our executive officers with those of our shareholders by encouraging long-term performance. Our Compensation Committee also strives to enable us to recruit, retain and develop effective executive talent by creating compensation opportunities that are fair in light of the Company’s performance and market position.

The Compensation Committee holds meetings following the end of the fiscal year without any members of management present to deliberate on and approve executive officer bonuses earned under the prior fiscal year’s compensation program and approve the salary and cash bonus compensation program for the next fiscal year. The Compensation Committee meets mid-way through each fiscal year, generally in October, to determine executive officer equity awards.  During the process, the Compensation Committee discusses the performance of the executive officers as well as market and industry data on compensation metrics and best practices.

The Compensation Committee assesses our Company-wide compensation structure, program and practices to help ensure that our compensation program does not incentivize excessive risk taking. Pursuant to this assessment, the Compensation Committee believes that the market level, the balance of cash and equity compensation, and the performance measures used in our compensation program are effective, and that our compensation program does not encourage excessive risk taking.

The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of an independent compensation consultant, legal counsel or other advisers to assist in carrying out the Compensation Committee’s duties and responsibilities. Prior to selecting a compensation adviser, the Compensation Committee assesses whether work performed or advice rendered by such compensation adviser would raise any conflicts of interest. From time to time, the Compensation Committee has engaged independent compensation consultants to advise it on matters of Board and executive compensation. In each case, the Compensation Committee has utilized these compensation consultants to compile and present peer-group compensation data to the Compensation Committee. For fiscal year 2019, our Compensation Committee engaged Frederic W. Cook & Co., Inc. as its independent compensation consultant, and there were no conflicts of interest with respect to this adviser. The Compensation Committee also consults publicly available compensation data from time to time as part of its executive compensation decisions.

Key components of the 2019 Executive Compensation Program were base salary in the form of cash, a cash incentive bonus program, and equity awards in the form of RSAs and PSUs. The Compensation Committee views the various components of compensation as related, but distinct, and believes that a significant percentage of total compensation should be allocated to performance incentives. The Compensation Committee determines the appropriate level for each compensation component based in part, but not exclusively, on performance, internal equity, stability and other considerations the Compensation Committee deems relevant. The Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

The Compensation Committee provides NEOs with base salaries to compensate them for services rendered during the fiscal year. The use of base salaries provides stable compensation to officers, allows us to attract high caliber executive talent and provides a base upon which officers may be rewarded for individual performance. Base salaries for NEOs are determined based on positions and responsibilities using market data and considering individual performance, company-wide performance, future contribution potential, peer compensation levels and internal equity issues. The weight given to each of these factors can vary from individual to individual and from period to period. The Compensation Committee does not allocate specific, predetermined weighting to individual factors. Base salaries are intended to be set at levels that, in combination with other forms of compensation, offer the potential to attract, retain, and motivate qualified individuals. Base salaries are targeted to be moderate yet competitive.

When evaluating the future contribution potential of an executive officer, the Compensation Committee considers, as particularly meaningful, the executive officer’s historic contributions to our earnings per share and revenue, particularly in light of the highly competitive industry in which we operate. Consideration is also given to the executive officer’s anticipated contributions to our future success. To a lesser extent, the Compensation Committee takes note, on an informal basis, of the competitive rates of pay in the corporate community, generally, and the relative standing of our compensatory practices in a peer group of similarly sized business software and healthcare information technology companies. The composition of this peer group is based on revenue, market capitalization, number of employees and other available data. For fiscal year 2019, this peer group (“Peer Group”) included the following companies:  

Peer Group  

 

ACI Worldwide, Inc.

 

Allscripts Healthcare Solutions, Inc.

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Aspen Technology, Inc.

 

AthenaHealth, Inc.

 

Blackbaud, Inc.

 

Callidus Software Inc.

 

Castlight Health, Inc.

 

CommVault Systems, Inc.

 

Computer Programs & Systems, Inc.

 

Ellie Mae, Inc.

 

Fair Isaac Corporation

 

HMS Holdings Corp.

 

Manhattan Associates Inc.

 

MicroStrategy Incorporated

 

Omnicell, Inc.

 

Progress Software Corporation

The Peer Group companies were in a similarly-sized revenue and employee count range as our Company at the time data were reviewed for fiscal year 2019 compensation decisions, with all but one of the Peer Group companies’ revenue ranging between approximately 0.3 times and 2.4 times our Company’s revenue when the data were used by our Compensation Committee in October 2018 for determining equity compensation.  Allscripts did not fall within this range but was included as it is one of our direct competitors for customers and talent in the healthcare information technology space. The Peer Group companies for fiscal year 2019 were the same as those for fiscal year 2018, except that The Advisory Board Company and Jive Software, Inc., both of which were included in the fiscal year 2018 Peer Group, were removed from the fiscal year 2019 Peer Group list because they were subsequently acquired.

The Compensation Committee does not rely solely on benchmark data and does not target a specific percentile, although all of our NEOs who were with the Company at the end of fiscal year 2019 were provided aggregate actual total direct compensation value within 2% of the median of the aggregate actual total direct compensation for comparable positions at our Peer Group companies.

2019 Executive Compensation Program Terms and Results

Based on the principles described above under the caption “Compensation Philosophy, Objectives and Components,” in May 2018 our Compensation Committee approved the cash base salary and cash incentive bonus compensation components of the fiscal year 2019 executive compensation program. In October 2018, approximately mid-way through our 2019 fiscal year, our Compensation Committee approved the equity component of our fiscal year 2019 executive compensation program, comprised of RSAs and PSUs for our NEOs.  We anticipate continuing this mid-year timing pattern for our fiscal year 2020 executive equity awards, which we anticipate making around October 2019.

Base Compensation - Cash

Salary levels are considered annually as part of our Compensation Committee’s performance review process. Fiscal year 2019 salaries were increased by an average of 3% from fiscal year 2018 levels, consistent with the budgeted increase for our other employees, and based on the Compensation Committee’s assessment of the Company’s competitiveness for executive talent, organizational structure, market trends, and the interplay of the base salary component with other features and components of our overall executive compensation program.  Fiscal year 2019 base salaries were as follows:

 

John R. Frantz - $675,000

 

James R. Arnold - $440,000

 

David A. Metcalfe - $425,000

 

Scott E. Bostick - $425,000 (1)

 

Jeffrey D. Linton - $350,000

 

 

(1)

Mr. Bostick resigned from his position as Executive Vice President and Chief Operating Officer on September 14, 2018 and continued with the Company in a non-executive officer role until January 4, 2019. For additional information, see the section of this proxy statement captioned “Separation, Termination, and Change of Control Payments.”

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Cash Incentive Bonuses

The following table sets forth the potential cash incentive bonuses payable to each of our NEOs under the 2019 Executive Compensation Program. Each NEO’s target cash bonus opportunity level was set at ten percentage points higher than 2018 levels (i.e., Mr. Frantz’s target cash bonus opportunity level increased from 100% of base salary in fiscal year 2018 to 110% of base salary in fiscal year 2019, while the other NEO’s target cash bonus opportunity levels increased from 60% of base salary in fiscal year 2018 to 70% of base salary in fiscal year 2019).

 

Name

 

Target Cash Bonus

as % of Base Salary

 

 

Target Cash

Bonus Amount

 

 

Rusty Frantz

 

 

110

%

 

$

742,500

 

 

James R. Arnold

 

 

70

%

 

 

308,000

 

 

David A. Metcalfe

 

 

70

%

 

 

297,500

 

 

Scott E. Bostick

 

 

70

%

 

 

297,500

 

(1)

Jeffrey D. Linton

 

 

70

%

 

 

245,000

 

 

 

(1)

Mr. Bostick resigned from his position as Executive Vice President and Chief Operating Officer on September 14, 2018 and continued with the Company in a non-executive officer role until January 4, 2019.  Mr. Bostick was not eligible to receive a cash bonus for fiscal year 2019, but pursuant to his separation agreement he received a pro rata offboarding bonus of $223,128.  For additional information, see the section of this proxy statement captioned “Separation, Termination, and Change of Control Payments.”

Non-GAAP Financial Measure Reconciliation

Under our fiscal year 2019 executive compensation program, the cash incentive bonus performance measures are Revenue and Non-GAAP EPS, as calculated under the legacy ASC 605 revenue guidance.  We adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASC 606”) effective April 1, 2019; however, these performance measures are calculated under the legacy revenue guidance in ASC 605 for purposes of the cash incentive bonus calculations because these performance measures are the same measures of financial performance that we reported to our shareholders on a quarterly basis, and the same measures on which we provided forward-looking financial guidance through the end of fiscal year 2019. These performance measures recognize both long-term value creation and short-term success on execution of our business plan. For these reasons, we believe these are appropriate performance measures for our executive cash incentive bonus plan.

Non-GAAP EPS is a non-GAAP (Generally Accepted Accounting Principles) performance measure. A reconciliation of this performance measure to its most directly comparable financial measures prepared in accordance with GAAP is provided below. A presentation of our reconciliation of non-GAAP performance measures with their most directly comparable GAAP financial measures is also available in our fiscal year 2019 earnings release issued on May 28, 2019 and attached as an exhibit to our current report on Form 8-K filed with the SEC on May 28, 2019.

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Reconciliation of Non-GAAP Earnings Per Share Performance Measure with GAAP Financial Measures (in thousands, except per share data)

 

 

 

Fiscal Year Ended March 31,

 

 

 

2019

 

 

2018

 

Income before provision for income taxes - GAAP

 

$

29,288

 

 

$

(410

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Acquisition costs, net

 

 

3,068

 

 

 

1,908

 

Amortization of acquired intangible assets

 

 

21,496

 

 

 

23,380

 

Amortization of deferred debt issuance costs

 

 

710

 

 

 

1,610

 

Restructuring costs

 

 

640

 

 

 

611

 

Securities litigation defense costs and settlement,

   net of insurance

 

 

(5,205

)

 

 

20,700

 

Share-based compensation

 

 

16,102

 

 

 

12,196

 

Impairment of assets

 

 

 

 

 

3,757

 

Other non-run-rate expenses*

 

 

5,471

 

 

 

263

 

Total adjustments to GAAP income before

   provision for income taxes:

 

 

42,282

 

 

 

64,425

 

Income before provision for income taxes –

   Non-GAAP

 

 

71,570

 

 

 

64,015

 

Provision for income taxes

 

 

15,745

 

 

 

19,525

 

Net income - Non-GAAP

 

$

55,825

 

 

$

44,490

 

Diluted net income per share - Non-GAAP

 

$

0.86

 

 

$

0.70

 

Weighted-average shares outstanding (diluted):

 

 

64,600

 

 

 

63,440

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF NON-GAAP DILUTED EARNINGS PER SHARE UNDER ASC 605

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes –

   Non-GAAP

 

 

71,570

 

 

 

 

 

Adjustments due to adoption of ASC 606

 

 

(8,799

)

 

 

 

 

Income before provision for income taxes –

   Non-GAAP under ASC 605

 

 

62,771

 

 

 

 

 

Provision for income taxes

 

 

13,810

 

 

 

 

 

Net income - Non-GAAP under ASC 605

 

$

48,961

 

 

 

 

 

Diluted net income per share - Non-GAAP

   under ASC 605

 

$

0.76

 

 

 

 

 

Weighted-average shares outstanding (diluted):

 

 

64,600

 

 

 

 

 

 

*

Other non-run-rate expenses consist primarily of severance and other employee-related costs and professional services costs not related to core operations.

Non-GAAP financial measures are provided only as supplemental information. Investors should consider these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. These non-GAAP measures are not in accordance with or a substitute for United States GAAP. Pursuant to the requirements of Regulation G, we have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying financial tables. Other companies may calculate non-GAAP measures differently than we do, which limits comparability between companies. We believe that our presentation of non-GAAP diluted earnings per share provides useful supplemental information to investors and management regarding our financial condition and results. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We calculate non-GAAP diluted earnings per share by excluding net acquisition costs, amortization of acquired intangible assets, amortization of deferred debt issuance costs, restructuring costs, net securities litigation defense costs and settlement, share-based compensation, impairment of assets, and other non-run-rate expenses from GAAP income before provision for income taxes.  We utilize a normalized non-GAAP tax rate to provide better consistency across the interim reporting periods within a given fiscal year by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency, and which are not necessarily reflective of the Company’s longer-term operations.

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The normalized non-GAAP tax rate applied to fiscal year 2019 was 22.0%, compared to 30.5% for fiscal year 2018, which was updated as a result of the enactment of the new tax reform legislation on December 22, 2017. The determination of this rate is based on the consideration of both historic and projected financial results. We may adjust the non-GAAP tax rate as additional information becomes available and in conjunction with any other significant events occur that may materially affect this rate, such as merger and acquisition activity, changes in business outlook, or other changes in expectations regarding tax regulations.

Cash Incentive Bonus Outcomes

In the fiscal year 2019 program, for each of our executive officers, (i) 50% of the potential cash incentive bonus was based on the Revenue performance measure, and (ii) 50% of the potential cash incentive bonus was based on the Non-GAAP EPS performance measure. Under the Revenue performance measure for fiscal year 2019, the cash incentive bonus plan was calibrated to pay 100% of each executive officer’s bonus target relating to such measure for 100% achievement of the fiscal year 2019 Revenue target, which was $542 million. The Compensation Committee determined this to be an appropriate Revenue target based on the management team’s budget as the Company’s transformation strategy continues and the Company pursues an evolving revenue profile. The plan pays 100% of the target bonus relating to such measure for achieving $0.74 in Non-GAAP EPS, which is viewed as highly challenging as the Company shifts its business mix and invests in future growth opportunities.  The $542 million Revenue goal and the $0.74 Non-GAAP EPS goal were considered highly ambitious at the time they were set, near the beginning of the 2019 fiscal year.

The table below depicts the performance schedule and payout range of the Revenue and Non-GAAP EPS performance measures for the fiscal year 2019 cash bonus program.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corresponding Payout

 

 

 

 

 

 

 

 

 

 

Performance Schedule

 

 

 

Range (% of Target)

 

 

 

Weight

 

 

 

Thresh.

 

 

Goal

 

 

Max.

 

Thresh.

 

 

Goal

 

 

Max.

 

Revenue ($M)

 

50

%

 

$

531.2

 

$

542.0

 

$

555.6

 

0

%

 

100

%

 

150

%

Non-GAAP EPS

 

50

%

 

$

0.700

 

$

0.740

 

$

0.777

 

0

%

 

100

%

 

150

%

 

Our cash incentive bonus performance measures for our fiscal year 2019 Executive Compensation Program obtained the following results: Revenue was $529.2 million and Non-GAAP EPS was $0.76. Accordingly, the Revenue performance measure did not reach the minimum threshold and achieved a payout level of 0%, and the Non-GAAP EPS performance measure achieved a payout level of 124.3%. Based on the combined achievements of the performance measures, the NEOs earned cash incentive bonus payments at 62.1% of the applicable target levels. On May 21, 2019, based on our results for the 2019 fiscal year and the terms of the 2019 Executive Compensation Program, our Compensation Committee authorized the award of cash incentive bonus payments to our NEOs under the 2019 Executive Compensation Program at 62.1% of target. The amounts of the cash incentive bonuses earned were below the target amounts and were paid formulaically according to the pre-established bonus schedule, with no discretion applied.  These cash incentive bonus outcomes are set forth in the table below.

 

Name

 

Target Cash Bonus

 

 

Cash Bonus Earned

 

Rusty Frantz

 

$

742,500

 

 

$

461,093

 

James R. Arnold

 

 

308,000

 

 

 

191,268

 

David A. Metcalfe

 

 

297,500

 

 

 

184,748

 

Scott E. Bostick (1)

 

 

297,500

 

 

N/A

 

Jeffrey D. Linton

 

 

245,000

 

 

 

152,145

 

 

(1)

Mr. Bostick resigned from his position as Executive Vice President and Chief Operating Officer on September 14, 2018 and continued with the Company in a non-executive officer role until January 4, 2019. Mr. Bostick was not eligible to receive a cash bonus for fiscal year 2019, but pursuant to his separation agreement he received a pro rata offboarding bonus of $223,128. For additional information, see the section of this proxy statement captioned “Separation, Termination, and Change of Control Payments.”

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Equity Awards – RSAs and PSUs granted in October 2018 as Part of Fiscal Year 2019 Compensation Program

In October 2018, following its assessment of our executive compensation program and competitive market practice, the Compensation Committee granted our NEOs (except Mr. Bostick, who by that time had resigned from his position as Executive Vice President and Chief Operating Officer) equity awards in the form of (i) RSAs, with strictly time-based vesting, and (ii) PSUs, with vesting dependent on long-term performance criteria including total shareholder return, revenue, and adjusted earnings per share.  The NEOs were granted a 50%/50% mix of RSAs and PSUs, except for our CEO, who was granted a 66%/34% mix of RSAs and PSUs.  Our CEO’s equity award mix was more heavily weighted toward RSAs than PSUs to make the award more retentive, to address that his equity award in fiscal year 2018 was more than 35% below the Peer Group median at the time, and to reward him for extraordinary performance.  The RSAs align our NEOs to our shareholders’ interests and foster our NEOs’ long-term retention.  The PSUs, with their performance-based vesting features based on three-year total shareholder return, fiscal year 2021 revenue, and fiscal year 2021 adjusted earnings per share, provide an incentive to execute on the Company’s long-term strategy in a manner that drives total shareholder return.

Restricted Stock Awards (“RSAs”)

Under the fiscal year 2019 executive compensation program, Messrs. Frantz, Arnold, Metcalfe and Linton were granted RSAs) on October 23, 2018.  The RSAs granted to Mr. Frantz vest over four years from the date of grant in semi-annual increments as follows:  15% vest at 6 months, 15% vest at 12 months, 15% vest at 18 months, 15% vest at 24 months, 15% vest at 30 months, 15% vest at 36 months, 5% vest at 42 months, and 5% vest at 48 months, subject to Mr. Frantz’s continued service through each vesting date.  The RSAs granted to Messrs. Arnold, Metcalfe, and Linton vest over four years from the date of grant in equal annual increments of 25%, subject to continued service through each vesting date.  The number of shares of restricted stock granted to each NEO under the fiscal year 2019 executive compensation program is set forth in the table below:

 

Name

 

RSAs

 

 

Per Share

Grant Date

Fair Value

 

 

Aggregate

Grant Date

Fair Value

 

Rusty Frantz

 

 

190,000

 

 

$

19.69

 

 

$

3,741,100

 

James R. Arnold

 

 

43,000

 

 

$

19.69

 

 

$

846,670

 

David A. Metcalfe

 

 

33,000

 

 

$

19.69

 

 

$

649,770

 

Jeffrey D. Linton

 

 

20,000

 

 

$

19.69

 

 

$

393,800

 

 

Performance Stock Units (“PSUs”)

Under the fiscal year 2019 executive compensation program, Messrs. Frantz, Arnold, Metcalfe and Linton were granted PSUs on October 23, 2018.  The PSUs vest only in the event certain performance goals are achieved and there is continuous service through the date the goals are certified.  Approximately 34% of the PSUs are tied to the Company’s cumulative 3-year total shareholder return (“TSR”) for the period from the October 23, 2018 date of grant to October 23, 2021, 33% are tied to the Company’s fiscal year 2021 revenue, and 33% are tied to the Company’s fiscal year 2021 adjusted earnings per share (“EPS”) goals.  The number of shares to be issued may vary between 50% and 200% of the number of target performance stock units depending on performance against the pre-set goals, and no such shares will be issued if threshold performance is not achieved.

The goals used for the performance stock units emphasize the Company’s long-term strategic plan and require robust ongoing growth to be achieved.  The performance stock units based on the total shareholder return measure require target growth of over 30% on the third anniversary of the October 23, 2018 grant date to attain 100% payout.  The performance stock units based on the fiscal year 2021 revenue measure require target growth of over 20% as compared to fiscal year 2018 revenue to attain 100% payout.  The performance stock units based on the fiscal year 2021 adjusted earnings per share measure require target growth of over 80% as compared to fiscal year 2018 adjusted earnings per share to attain 100% payout.

 

Name

 

PSUs

(target number)

 

 

Per Share

Grant Date

Fair Value

 

 

Aggregate

Grant Date

Fair Value

 

Rusty Frantz

 

 

101,600

 

 

$

18.98

 

 

$

1,928,404

 

James R. Arnold

 

 

43,700

 

 

$

18.98

 

 

$

829,347

 

David A. Metcalfe

 

 

33,600

 

 

$

18.98

 

 

$

637,688

 

Jeffrey D. Linton

 

 

20,400

 

 

$

18.98

 

 

$

387,256

 

 

20


 

In the event of a change of control of the Company at any time prior to the end of the performance period, the PSUs will vest based on the greater of: (i) the target number of PSUs, or (ii) the Company’s actual achievement of the performance goals during the 12 months prior to the change of control.

Separation, Termination, and Change of Control Payments

During fiscal year 2019, Scott Bostick, our former Executive Vice President and Chief Operating Officer, resigned from his position effective September 14, 2018.  Mr. Bostick continued as a Company employee until January 4, 2019 in a non-executive officer role.  In connection with his departure, Mr. Bostick and the Company executed a separation agreement effective January 21, 2019.  The separation agreement provided for Mr. Bostick to receive a payment of $425,000 (representing 12 months’ base salary), a pro-rata offboarding bonus of $223,128, and payment of premiums to continue benefits coverage pursuant to COBRA through July 31, 2020.  The separation agreement also contains a general release of claims against the Company and other customary terms.

The Company has an employment agreement with Mr. Frantz effective July 1, 2015.  The term of the employment is “at will.”  During fiscal year 2019, we executed an addendum to Mr. Frantz’s employment agreement effective January 22, 2019, pursuant to which he will be provided with certain severance benefits and other benefits, under certain circumstances, if the Company terminates Mr. Frantz’s employment without “cause” or if Mr. Frantz resigns from employment for “good reason,” and in each case outside of the period commencing two months prior to and ending 18 months following a “change of control”.  

We have also entered into change of control severance agreements with Mr. Frantz and with our other NEOs that take effect if the Company terminates the NEO’s employment without “cause” or if the NEO resigns from employment for “good reason,” and in each case within two months prior to and ending 18 months following a “change of control”.  Also, the equity awards to our NEOs, including the fiscal year 2019 RSAs and PSU awards made in 2016 and 2018, have various acceleration provisions that may be triggered in the event of a qualifying termination of employment and/or a change in control.  

For additional details concerning these matters, please see the section of this proxy statement captioned “Potential Payments Upon Termination of Employment or Change-in-Control”.

Other Benefits

We have a 401(k) plan available to substantially all of our employees. Participating employees may defer each year up to the limit set in the Internal Revenue Code of 1986, as amended (the “Code”). The annual company contribution is determined by a formula set by our Board and may include matching and/or discretionary contributions. Matching contributions for the NEOs are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year Ended March 31, 2019.

We have a deferred compensation plan available for the benefit of officers and employees who qualify for inclusion. The plan is described below in connection with the Nonqualified Deferred Compensation Table for Fiscal Year ended March 31, 2019.

These retirement plans may be amended or discontinued at the discretion of our Board.

Perquisites and Other Personal Benefits

We do not provide meaningful perquisites to our NEOs, other than gym membership reimbursement, pooled use of a corporate van (which was discontinued in June 2018), and an allowance to our Chief Financial Officer, pursuant to his employment offer letter, for a corporate apartment that is shared with another member of our leadership team, as detailed in the Summary Compensation Table for Fiscal Year Ended March 31, 2019. We do not provide tax gross-ups to our NEOs in connection with perquisites or benefits.

Executive Stock Ownership Policy

Our executive stock ownership policy requires all executive officers to acquire within five years, and retain for the full duration of their tenure as executive officers, shares of the Company’s common stock with a value of at least six times annual base salary for our Chief Executive Officer and two times annual base salary for our other executive officers. Executive officers who have not achieved the policy requirements within five years are required to hold all of their after-tax profit shares acquired upon option exercises or the vesting of other equity awards until they achieve compliance.

21


 

Insider Trading Policy

We have an insider trading policy that prohibits Board members, officers and employees from transacting in our Company's shares while in the possession of material nonpublic information.  Our policy also prohibits these individuals from engaging in short-term or speculative transactions in our Company’s shares, including short sales, publicly traded options, hedging transactions, holding Company shares in a margin account, pledging Company shares as collateral and standing and limit orders.

Clawback Policy for Compensation Recovery     

We have an executive compensation recovery policy that claws back cash and equity incentive compensation awarded to an executive officer if the result of a performance measure upon which such award was based is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award. If the result of a performance measure was considered in determining the award, but the award was not made on a formulaic basis, the Compensation Committee will determine the appropriate amount of the recovery. In addition, the Compensation Committee has the authority to recover cash and equity incentive compensation if an executive officer engaged in intentional misconduct that contributed to an award of incentive compensation that was greater than would have been awarded in the absence of such misconduct.  The purpose of this policy is to ensure that actual awards earned match actual performance achieved.

Tax and Accounting Implications

Deductibility of Executive Compensation

Section 162(m) of the Code disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year to its “covered employees.” Prior to the Tax Cuts and Jobs Act of 2017, covered employees generally consisted of a corporation’s chief executive officer and each of its other three highest compensated officers, other than its chief financial officer, and remuneration that qualified as “performance-based compensation” within the meaning of the Code was exempt from this $1.0 million deduction limitation. As part of the Tax Cuts and Jobs Act of 2017, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the determination of the covered employees was generally expanded. In light of the repeal of the performance-based compensation exception to Section 162(m) of the Code, we may not be able to take a deduction for any compensation in excess of $1.0 million that is paid to a covered employee.  

Accounting for Stock-Based Compensation

We account for stock-based payments in accordance with Accounting Standard Codification Topic 718, Compensation-Stock Compensation. For further information regarding our accounting for stock-based payments, refer to Note 13 to the Financial Statements contained in our Form 10-K for the fiscal year ended March 31, 2019.

for which authority to vote has not been withheld, in accordance with the instruction of the Board of Directors or an authorized committee thereof. If any nominee named on the reverse side declines or is unable to serve as a director, the persons named as proxies shall have the authority to vote for any other person who may be nominated at the instruction and discretion of the Board of Directors or an authorized committee thereof. Continued and to be signed on reverse side

22


 

Summary Compensation Table for Fiscal Year Ended March 31, 2019

The following table provides certain summary information concerning the compensation for the fiscal years ended March 31, 2019, 2018 and 2017 for the individuals who served as our principal executive officer (i.e., Mr. Frantz), our principal financial officer (i.e., Mr. Arnold), the other individuals who were serving as executive officers at the end of fiscal year 2019 (i.e., Messrs. Metcalfe and Linton), and Mr. Bostick, who resigned from the position of Executive Vice President and Chief Operating Officer on September 14, 2018 and continued with the Company in a non-executive officer role until January 4, 2019 (collectively, the “NEOs”).

 

Name and Title

 

Fiscal

Year

 

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($) (1)

 

 

Option

Awards

($) (1)

 

 

Non-Equity

Incentive Plan

Compensation

($) (2)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($) (3)

 

 

All Other

Compensation

($) (4)

 

 

Total

($)

 

Rusty Frantz

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

President and

Chief Executive

 

 

2019

 

 

 

675,013

 

 

 

 

 

 

5,669,504

 

 

 

 

 

 

461,093

 

 

 

 

 

 

28,346

 

 

 

6,833,956

 

Officer

 

 

2018

 

 

 

629,545

 

 

 

 

 

 

 

 

 

2,469,740

 

 

 

590,190

 

 

 

 

 

 

63,364

 

 

 

3,752,839

 

 

 

 

2017

 

 

 

600,008

 

 

 

 

 

 

1,226,961

 

 

 

1,967,000

 

 

 

420,000

 

 

 

 

 

 

43,148

 

 

 

4,257,117

 

James R. Arnold, Jr.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President and

 

 

2019

 

 

 

440,008

 

 

 

 

 

 

1,676,017

 

 

 

 

 

 

191,268

 

 

 

 

 

 

63,198

 

 

 

2,370,491

 

Chief Financial Officer

 

 

2018

 

 

 

412,005

 

 

 

 

 

 

 

 

 

939,575

 

 

 

236,076

 

 

 

 

 

 

63,142

 

 

 

1,650,798

 

 

 

 

2017

 

 

 

400,005

 

 

 

 

 

 

981,569

 

 

 

 

 

 

168,000

 

 

 

 

 

 

52,585

 

 

 

1,602,159

 

David A. Metcalfe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President and

 

 

2019

 

 

 

425,005

 

 

 

 

 

 

1,287,458

 

 

 

 

 

 

184,748

 

 

 

 

 

 

18,446

 

 

 

1,915,657

 

Chief Technology Officer

 

 

2018

 

 

 

412,005

 

 

 

 

 

 

 

 

 

751,660

 

 

 

236,076

 

 

 

 

 

 

54,589

 

 

 

1,454,330

 

 

 

 

2017

 

 

 

400,005

 

 

 

 

 

 

633,922

 

 

 

 

 

 

192,000

 

 

 

 

 

 

29,641

 

 

 

1,255,568

 

Scott E. Bostick

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Former Executive Vice President and

 

 

2019

 

 

 

374,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

693,010

 

 

 

1,067,340

 

Chief Operating Officer (5)

 

2018

 

 

 

412,005

 

 

 

100,000

 

 

 

 

 

 

751,660

 

 

 

236,076

 

 

 

 

 

 

55,975

 

 

 

1,555,716

 

 

 

2017

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey D. Linton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President,

 

 

2019

 

 

 

347,312

 

 

 

 

 

 

781,056

 

 

 

 

 

 

152,145

 

 

 

 

 

 

17,383

 

 

 

1,297,896

 

General Counsel and Secretary

 

2018

 

 

 

115,547

 

 

 

 

 

 

 

 

 

724,815

 

 

 

50,137

 

 

 

 

 

 

3,154

 

 

 

893,653

 

 

 

2017

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*

Amounts are not reported, as the individual was not a NEO for that fiscal year.

(1)

The amounts in the Stock Awards and Option Awards columns reflect the aggregate grant date fair value of such awards computed in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. The grant date fair value of the PSUs granted in 2019 that vest based on the Company’s EPS and revenue goals are determined by multiplying the target number of PSUs by the closing share price of the Company’s stock on the grant date. The grant date fair value of the PSUs granted in 2019  that vest based on the Company’s 3-year TSR goals was determined utilizing a Monte Carlo simulation using the assumptions in the table below:

 

Expected term

 

3.0 years

Expected volatility

 

32.5%

Expected dividends

 

—%

Risk-free rate

 

2.9%

 

See Note 13 of our audited financial statements for the fiscal year ended March 31, 2019, included in our Annual Report on Form 10-K filed with the SEC on May 29, 2019, for additional assumptions used in calculating the amounts on the Stock Awards and Option Awards columns.  

23


 

Amounts shown in the Stock Awards column for fiscal year 2019 include the grant date fair value of the PSUs granted in 2019 based on the probable outcome of the applicable performance conditions as of the grant date.   These values and the value of the PSUs assuming maximum achievement of the performance conditions is set forth in the table below:

 

Name

 

Grant Date Fair Value

Assuming Probable

Achievement ($)

 

Grant Date Fair Value

Assuming Maximum

Achievement ($)

Rusty Franz

 

1,928,404

 

4,001,008

James R. Arnold, Jr.

 

829,347

 

1,720,906

David A. Metcalfe

 

637,688

 

1,323,168

Jeffrey D. Linton

 

387,256

 

803,352

 

(2)

The amounts reflected in this column represent the amount earned as cash incentive compensation in the fiscal year.

(3)

No amounts are included in this column as earnings are not considered above-market or preferential.

(4)

The amounts reflected in this column represent our Company’s contributions to the 401(k) plan, health savings account, long-term disability insurance, gym membership reimbursement and for Mr. Frantz, the nonqualified deferred compensation plan, and pooled use of the Company’s corporate van for Messrs. Frantz, Metcalfe, and Bostick. The 401(k) plan contribution amounts for fiscal year 2019 were: Mr. Frantz - $7,380; Mr. Arnold - $8,632; Mr. Metcalfe - $7,252; Mr. Bostick - $6,212; Mr. Linton - $8,688. The health savings account Company contribution amounts for fiscal year 2019 were: Mr. Frantz - $375; Mr. Arnold - $1,000; Mr. Metcalfe - $0; Mr. Bostick - $0; Mr. Linton - $1,500. The long-term disability insurance Company contribution amounts for fiscal year 2019 were: Mr. Frantz - $7,584; Mr. Arnold - $9,683; Mr. Metcalfe - $9,068; Mr. Bostick - $6,482; Mr. Linton - $6,455. Gym membership reimbursement amounts for fiscal year 2019 were:  Mr. Frantz - $148; Mr. Arnold - $1,576; Mr. Metcalfe - $1,776; Mr. Bostick - $1,199; Mr. Linton - $740. The deferred compensation plan Company contribution amount for fiscal year 2019 for Mr. Frantz was $12,509. The incremental cost of the use of the corporate van for fiscal year 2019 was $350 for each of Messrs. Frantz, Metcalfe and Bostick. The corporate van was discontinued shortly after the 2019 fiscal year began.  In addition, the amount reflected in this column for Mr. Arnold includes $42,308 in reimbursement in fiscal year 2019 for a corporate apartment, as provided for in Mr. Arnold’s employment arrangement, which Mr. Arnold shares with another member of our leadership team. The amount reflected in this column for Mr. Bostick includes the $425,000 severance payment, $223,128 offboarding bonus and $30,638 in the cost of healthcare continuation under COBRA paid or accrued during fiscal year 2019 pursuant to the separation agreement between the Company and Mr. Bostick described in greater detail in the section of this proxy below captioned “Separation, Termination and Change of Control Payments.”

(5)

Mr. Bostick resigned from the position of Executive Vice President and Chief Operating Officer on September 14, 2018, continuing with the Company in a non-executive officer role until January 4, 2019.  The separation agreement between the Company and Mr. Bostick provided for Mr. Bostick to receive a payment of $425,000 (representing 12 months’ base salary), a pro-rata offboarding bonus of $223,128 and the cost of healthcare continuation under COBRA for up to until July 31, 2020. The terms of the separation agreement between Mr. Bostick and the Company are described in greater detail in the section of this proxy captioned “Separation, Termination and Change of Control Payments.”  

 

Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2019

The following table sets forth information regarding plan-based awards granted to our NEOs during the fiscal year ended March 31, 2019.

 

 

 

 

 

Estimated Possible Payouts

Under Non-Equity

Incentive Plan Awards  (1)

 

 

Estimated Possible Payouts

Under Equity Incentive

Plan Awards  (1)

 

 

All Other

Stock

Awards:

Number of

 

 

All Other

Option

Awards:

Number of

 

Exercise

or Base

 

Grant Date

Fair Value

of Stock

 

Name

 

Grant Date (2)

  

Threshold

($)

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

Performance

Shares (3)

 

Target

Performance Shares (3)

 

 

Maximum

Performance Shares (3)

 

 

Shares or

Stock or

Units (#)

 

 

Securities

Underlying

Options (#)

  

Price of

Option

Awards

 

and Option

Awards

(4)

 

Rusty Frantz

 

10/23/18

 

 

 

742,500

 

 

 

1,113,750

 

 

50,800

 

 

101,600

 

 

 

203,200

 

 

 

 

 

 

$

1,928,404

 

 

 

10/23/18

 

 

 

 

 

 

 

 

 

 

 

 

190,000

 

 

 

 

 

 

3,741,100

 

James R. Arnold, Jr.

 

10/23/18

 

 

 

308,000

 

 

 

462,000

 

 

21,850

 

43,700

 

 

87,400

 

 

 

 

 

 

 

829,347

 

 

 

10/23/18

 

 

 

 

 

 

 

 

 

 

 

 

43,000

 

 

 

 

 

 

846,670

 

David A. Metcalfe

 

10/23/18

 

 

 

297,500

 

 

 

446,250

 

 

16,800

 

33,600

 

 

67,200

 

 

 

 

 

 

 

637,688

 

 

 

10/23/18

 

 

 

 

 

 

 

 

 

 

 

 

33,000

 

 

 

 

 

 

649,770

 

Scott E. Bostick (5)

 

10/23/18

 

 

 

297,500

 

 

 

446,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffrey D. Linton

 

10/23/18

 

 

 

245,000

 

 

 

367,500

 

 

10,200

 

20,400

 

 

40,800

 

 

 

 

 

 

 

387,256

 

 

 

10/23/18