nxgn-defr14a_20200818.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

(Amendment No. 1)

Filed by Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

 

 

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

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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(1)

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(2)

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(3)

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(4)

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Fee paid previously with preliminary materials.

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

 

(1)

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EXPLANATORY NOTE

 

NextGen Healthcare, Inc. is filing this revised definitive proxy statement for the sole purpose of correcting immaterial typographical errors that appeared in certain tables in the original definitive proxy statement filed on July 7, 2020, as described below.  This revised definitive proxy statement amends and restates the original definitive proxy statement in its entirety with these errors corrected.  All other information in the original definitive proxy statement, aside from these corrections, remains unchanged in this revision.

 

 

1.

Page 25 – Table Labeled “Outstanding Equity Awards at Fiscal Year Ended March 31, 2020”

 

Under the column heading “Stock Awards”, subheading “Number of Shares or Units of Stock That Have Not Vested”, and in the row captioned “David A. Metcalfe”, the original figure 4,250 was incorrect and has been changed to the correct figure, 4,520.  Under the column heading “Stock Awards”, subheading “Market Value of Shares of Stock That Have Not Vested”, and in the row captioned “David A. Metcalfe,” the original figure 41,189 was incorrect and has been changed to the correct figure, 47,189.  

 

 

2.

Page 30 – Table Labeled “Acceleration of October 2018 PSUs – Upon a Change in Control”

 

Under the column heading “Value of Accelerated PSUs,” subheading “EPS”, in the row captioned “David A. Metcalfe”, the original figure 11,480 was incorrect and has been changed to the correct figure, 114,840.

 

 

3.

Page 33 – Table Describing Elements of the 2020 Director Compensation Program

 

Under the column captioned “Non-Employee Director – Base Compensation (Tier 1)” and in the row captioned “Value of Restricted Shares”, the original figure $145,000 was incorrect and has been changed to the correct figure, $165,000.  

 

 

4.

Page 34 – Table Under the Heading “Director Compensation

 

Under the column captioned “Stock Awards” an incorrect original figure, $165,055, was reported for each of Mr. Bristol, Ms. Klapstein, Mr. Malone, Mr. Panner, and Mr. Rosenzweig.  These entries have been changed to the correct figure for each individual, $165,005.  

 


 

 


 

NEXTGEN HEALTHCARE, INC.

18111 Von Karman Avenue, Suite 800

Irvine, California 92612

________________

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 18, 2020

To the Shareholders of NextGen Healthcare, Inc.:

The annual meeting of shareholders of NextGen Healthcare, Inc. will be held at our corporate headquarters located at 18111 Von Karman Avenue, Suite 800, Irvine, California 92612 on August 18, 2020, 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 2021 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, 2021; and

 

4.

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 25, 2020, 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, AND “FOR” PROPOSAL 3.

 

By Order of the Board of Directors,

NEXTGEN HEALTHCARE, INC.

 

 

 

Jeffrey D. Linton

Executive Vice President, General Counsel and Secretary

Irvine, California

July 7, 2020

 

 


 

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, 2020

 

23

 

Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2020

 

24

 

Outstanding Equity Awards at Fiscal Year Ended March 31, 2020

 

25

 

Option Exercises and Stock Vested During Fiscal Year Ended March 31, 2020

 

27

 

Pension Benefits

 

27

 

Nonqualified Deferred Compensation for Fiscal Year Ended March 31, 2020

 

27

 

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

 

28

 

Director Compensation for Fiscal Year Ended March 31, 2020

 

32

 

Compensation Committee Interlocks and Insider Participation

 

34

 

Compensation Committee Report

 

34

 

CEO Pay Ratio

 

35

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

 

35

 

Board of Directors

 

35

 

Board Committees and Charters

 

37

 

Related Matters

 

39

CORPORATE SOCIAL RESPONSIBILITY

 

40

DELINQUENT SECTION 16(A) REPORTS

 

41

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

41

 

Review, Approval or Ratification of Transactions with Related Persons

 

41

 

Related Person Transactions

 

42

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

 

42

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

 

45

 

Audit and Non-Audit Fees

 

45

 

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

 

45

ANNUAL REPORT AND AVAILABLE INFORMATION

 

46

PROPOSALS OF SHAREHOLDERS

 

46

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

 

46

OTHER MATTERS

 

47

 

 

 

 

18111 Von Karman Avenue, Suite 800

Irvine, California 92612

______________

 

 

 

 


 

NEXTGEN HEALTHCARE, INC.

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 18, 2020

 

PROXY STATEMENT

 

SOLICITATION OF PROXIES

The accompanying proxy is solicited by the Board of Directors (“Board”) of NextGen Healthcare, Inc. (“NextGen Healthcare,” the “Company,” “us,” “we” or “our”) for use at our annual meeting of shareholders to be held at our corporate headquarters located at 18111 Von Karman Avenue, Suite 800, Irvine, California 92612, on August 18, 2020, 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 17, 2020 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 2020 annual report are being made available to our shareholders on or about July 7, 2020.

 

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 18, 2020.

This proxy statement, the notice of our 2020 annual meeting of shareholders and the Company’s 2020 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 66,712,695 shares of our common stock outstanding at the close of business on the record date, June 25, 2020, 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 2020 annual meeting has passed, we believe it is less likely that cumulative voting will be invoked at the 2020 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.

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. 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.

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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 2020 annual meeting has passed, we believe it is less likely that cumulative voting will be invoked at the 2020 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, the impact of the COVID-19 pandemic, 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, 2020, 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, 2020, 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 2019 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 53, was appointed our President and Chief Executive Officer effective July 1, 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. Mr. Frantz’s position as our President and Chief Executive Officer, as well as his prior executive experience with other companies, 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 52, is a director and has served as our Vice Chairman of the Board since November 2015. 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 Landec Corporation (Nasdaq: LNDC), where he is a member of the Compensation Committee.  Mr. Barbarosh previously served on the boards of Aratana Therapeutics, Inc. (Nasdaq: PETX), where he was a member of the Compensation Committee and Chair of the Strategic Review Committee, 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. (NYSE MKT: BPMX), where he was a member of the Compensation Committee. Mr. Barbarosh also served as the independent board observer for Payless Holdings, LLC during its Chapter 11 proceeding.  Mr. Barbarosh is a partner at the international law firm of Katten Muchin Rosenman LLP, a position he has held since June 2012. Previously, Mr. Barbarosh was a partner of the international law firm of Pillsbury Winthrop Shaw Pittman LLP. Mr. Barbarosh is a nationally recognized restructuring expert who, during the nearly three decades of his legal career, has represented lenders, indenture trustees and bondholders and other investors and their agents in some of the largest corporate restructuring cases in the country. 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 completed a seven-year term on the firm’s Board of Directors including a four-year term on the firm’s twelve-person Executive Committee which oversees the business operations of the firm. 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), from the University of Pennsylvania Wharton School program on Corporate Valuation (2019), and from the Carnegie Mellon University program in Cybersecurity Oversight (2019). Mr. Barbarosh is also a frequent speaker and author on restructuring and governance issues and has published several articles addressing business, governance, and legal topics. 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 transactions, securities offerings, compliance, governance, executive compensation shareholder relationships, leadership coaching and development, and dispute resolution, and because of his extensive background serving in various leadership roles.  Mr. Barbarosh has been a director since 2009.

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George H. Bristol, age 71, 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 65, 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 two private companies, eSolutions, Inc., which specializes in revenue cycle management solutions, and Revecore, which specializes in underpayments and denials for hospitals. 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 including healthcare information technology, relevant executive and management experience, and public company board experience. Ms. Klapstein has been a director since 2017.

James C. Malone, age 71, 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.

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Jeffrey H. Margolis, age 57, is a director and has served as our Chairman of the Board since November 2015. Currently, Mr. Margolis is chairman of Welltok, Inc., a data-driven, enterprise SaaS company that delivers the healthcare industry’s leading consumer activation platform. He served as Welltok Inc.’s CEO from April 2013 through April 2020. 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 (publicly 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 57, 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. 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 82, 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 is also a co-founder and board chairman of SurePrep, LLC, a tax technology and service company. In addition, he is the board chairman of LoanBeam, a company spun-off of SurePrep, LLC that automates loan processing. 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

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continues to be a technology and healthcare visionary as well as an outstanding entrepreneur whose insights and guidance are invaluable the Company. Mr. Razin has been a director since 1974.

Lance E. Rosenzweig, age 57, is a director. Mr. Rosenzweig currently serves as a chairman of the board of Boingo Wireless. From 2018 to 2020, Mr. Rosenzweig served as CEO of Startek, a global business processing company with over 45,000 employees.  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 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 was 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. Mr. Rosenzweig held a variety of management and entrepreneurial roles from 1985 to 2002. 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 63, 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 57, 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 57, 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.

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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 25, 2020, 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 66,712,695 shares of common stock outstanding as of the record date, June 25, 2020.

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 2020 were Messrs. Frantz, Arnold, Metcalfe and Linton. Our executive officers as of the record date, June 25, 2020, 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

 

9,875,121

 

 

 

14.8%

Craig A. Barbarosh

 

85,240

 

 

 

*

George H. Bristol

 

60,024

 

 

 

*

Julie D. Klapstein

 

27,239

 

 

 

*

James C. Malone

 

58,653

 

 

 

*

Jeffrey H. Margolis

 

96,104

 

 

 

*

Morris Panner

 

57,178

 

 

 

*

Lance E. Rosenzweig

 

61,096

 

 

 

*

John R. “Rusty” Frantz

 

1,242,722

 

(1)

 

1.8%

James R. Arnold, Jr.

 

668,230

 

(2)

 

*

David A. Metcalfe

 

387,539

 

(3)

 

*

Jeffrey D. Linton

 

121,590

 

(4)

 

*

BlackRock, Inc.

 

8,102,253

 

(5)

 

12.1%

Brown Capital Management, LLC and affiliates

 

9,041,574

 

(6)

 

13.6%

The Vanguard Group

 

5,218,227

 

(7)

 

7.8%

All directors, director nominees and executive officers as a group

 

12,740,736

 

(8)

 

18.7%

 

*

Represents less than 1.0%.

**

The table does not include beneficial ownership information for Ahmed Hussein, a former director of the Company who resigned on May 14, 2013 and who in prior years reported a beneficial ownership level over 5 percent. According to a Schedule 13G/A filed on April 10, 2020, Mr. Hussein now has beneficial ownership of 1,145,828 shares, which falls below the 5 percent reporting threshold.

(1)

Includes 760,000 shares underlying options vested as of the record date or within 60 days thereafter.

(2)

Includes 337,500 shares underlying options vested as of the record date or within 60 days thereafter.

(3)

Includes 270,000 shares underlying options vested as of the record date or within 60 days thereafter.

(4)

Includes 67,500 shares underlying options vested as of the record date or within 60 days thereafter.

(5)

This information is derived from a Schedule 13G filed by BlackRock, Inc. on February 4, 2020. According to the Schedule 13G, BlackRock, Inc. had sole power to vote 7,957,383 shares, sole power to dispose of 8,102,253 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.

(6)

This information is derived from a Schedule 13G/A filed by Brown Capital Management, LLC as primary filer on February 14, 2020. Brown Capital Management, LLC beneficially owned 9,041,574 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 5,194,388 shares, sole power to dispose of 9,041,574 shares, and no shared power to vote

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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.

(7)

This information is derived from a Schedule 13G/A filed by The Vanguard Group on February 12, 2020. According to the Schedule 13G/A, The Vanguard Group had sole power to vote 111,744 shares, shared power to vote 11,970 shares, sole power to dispose of 5,099,273 shares, and shared power to dispose of 118,954 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

(8)

Includes 1,435,000 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, 2020.

 

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

 

 

3,529,077

 

(1)

 

$

14.83

 

(2)

 

 

10,298,054

 

(3)

Equity compensation plans not approved by security holders

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

3,529,077

 

(1)

 

$

14.83

 

(2)

 

 

10,298,054

 

(3)

 

(1)

Represents 3,001,350 shares of common stock underlying outstanding options and 527,727 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 527,727 shares of common stock issuable pursuant to outstanding performance stock units at target.

(3)

Represents 6,884,156 shares of common stock available for issuance under options or awards that may be issued under our Amended 2015 Equity Incentive Plan and 3,413,898 shares of common stock available for issuance under our 2014 Employee Share Purchase Plan (the “ESPP”). 70,466 shares were issued under the purchase period in effect as of March 31, 2020 under the ESPP, which purchase period ended on June 15, 2020.

 

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EXECUTIVE AND DIRECTOR COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis section describes our executive compensation program for all of our named executive officers, or “NEOs”, for our fiscal year 2020 (which began on April 1, 2019 and ended on March 31, 2020). These four individuals were our only executive officers and NEOs during fiscal year 2020.  These NEOs were:

 

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

 

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

 

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

 

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

Executive Summary

NextGen Healthcare, Inc. is a leading provider of software and services that empower ambulatory healthcare practices to manage the risk and complexity of delivering care in the rapidly evolving U.S. healthcare system. Our combination of technological breadth, depth and domain expertise makes us a preferred solution provider and trusted advisor for our clients. In addition to highly configurable core clinical and financial capabilities, our portfolio includes tightly integrated solutions that deliver on ambulatory healthcare imperatives including: population health, care management, patient outreach, managed services, telemedicine and nationwide clinical information exchange. 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 2020

We are continuing to transform the Company into a more nimble, client-focused organization under the leadership of our executive management team. Our Chief Executive Officer (Mr. Frantz), Chief Financial Officer (Mr. Arnold), Chief Technology Officer (Mr. Metcalfe), and General Counsel (Mr. Linton) all joined the Company within the past several years.  Our executive team continued to make substantial progress in fiscal year 2020 on the Company’s transformation that began with the hiring of our CEO in 2015 and the subsequent hiring of the remainder of the current executive team.  The Company is continuing to enable more efficient, integrated, and client-centered delivery of software and services solutions, ultimately leading to improved growth, profit, and long-term shareholder value. The new strategic direction to date has improved product usability for customers, broadened our solution set, and produced noteworthy customer satisfaction results.  Some of the achievements in fiscal year 2020 include:

 

Increased cash flow from operations to $85.6 million, from $50.5 million for the previous fiscal year;

 

Recognized by KLAS Research as Top Practice Management Solution (NextGen® Enterprise) in the 2020 Best in KLAS Report (11-75 providers);

 

Recognized by Frost & Sullivan with the North American Enabling Technology Leadership Award for Ambulatory Revenue Cycle Management Services;

 

Continued growth in client satisfaction, as evidenced by a 316% increase in our net promoter score over the prior year;

 

Closed three acquisitions that strengthened our technology solutions and expanded our commercial capabilities, one of which added a highly-rated, market-ready telehealth solution;

 

Navigated the initial phase of the COVID-19 pandemic, including migration to a remote workforce and expansion of cash through our revolving credit agreement.

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Shareholder Support for our Compensation Decisions

At our annual meeting of shareholders in August 2019, approximately 97% of the shares represented and voting on the “say-on-pay” proposal voted in favor of the compensation of our fiscal year 2019 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.  The Company does not target a particular benchmark level, but actual total direct compensation of all of our NEOs was generally at or below the median of the Peer Group (as defined below) during fiscal year 2020.  Also, in fiscal year 2020 we continued with performance-based equity awards for our NEOs that had been re-introduced in fiscal year 2019, and we added a special one-time cash bonus opportunity based on achieving Adjusted EBITDA (as defined below) of at least $97.3 million for the fiscal year, which was viewed as a critical value-driver for the business.  

1. Base Salaries:  For fiscal year 2020, the Compensation Committee increased base salaries for our NEOs by an average of 8.9% over fiscal year 2019 levels, although the CEO was not provided any salary increase during fiscal year 2020. This resulted in salaries for our NEOs that were still 8% below the median of our Peer Group companies, on average (including the CEO).  

2. Cash Bonuses:  For fiscal year 2020, the Compensation Committee did not increase the target cash bonus of the CEO, Mr. Frantz, but increased the target cash bonus as a percentage of base salary for Mr. Arnold and Mr. Metcalfe in light of the expected increase in contribution of these NEOs and consistent with Peer Group market data for their roles. The fiscal year 2020 cash bonus program for the NEOs had two performance measures: Revenue and Non-GAAP earnings per share (“Non-GAAP EPS”).  In addition, during fiscal year 2020, the Compensation Committee devised a special, one-time cash bonus opportunity based on an Adjusted EBITDA performance measure.  For a reconciliation of non-GAAP performance measures to the more directly comparable GAAP measures, please see the section below captioned “Non-GAAP Financial Measure Reconciliation.”  

3. Equity:  The Compensation Committee continued emphasizing equity compensation by granting awards in the form of restricted stock awards (“RSAs”) and performance stock units (“PSUs”). The Compensation Committee has adopted a practice of making executive officer equity awards during the second half of the fiscal year. This equity award timing pattern 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 actual total direct compensation, which consists of his salary, actual cash bonus, and the fair value of his equity awards, decreased by approximately 8% from the prior fiscal year, even though his base salary remained the same.  The decrease was due to an actual cash bonus that was approximately 25% lower than the previous fiscal year as well as due to equity compensation value that was approximately 7% lower than during fiscal year 2019.

Compensation Philosophy and Objectives

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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The Compensation Committee designs compensation packages for our executive officers that include equity-based compensation as a key component to further align the interests of our executive officers with those of our shareholders by encouraging long-term performance. The Compensation Committee strives for the program 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 approximately mid-way through each fiscal year 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 met fourteen (14) times during fiscal year 2020.

The Compensation Committee assesses our Company-wide compensation structure, program and practices annually. 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 2020, 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.

Components of Compensation

Key components of the 2020 executive compensation program were base salary in the form of cash, a cash incentive bonus program based on Revenue and Non-GAAP EPS performance measures, a special one-time supplemental cash bonus opportunity based on an Adjusted EBITDA performance measure, 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.

Peer Group

When evaluating the future contribution potential of an executive officer, the Compensation Committee considers both past contribution and 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 2020, this peer group (“Peer Group”) included the following companies:  

 

ACI Worldwide, Inc.

 

Allscripts Healthcare Solutions, Inc.

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Aspen Technology, Inc.

 

Blackbaud, Inc.

 

Castlight Health, Inc.

 

CommVault Systems, Inc.

 

Computer Programs & Systems, Inc.

 

Fair Isaac Corporation

 

HMS Holdings Corp.

 

Manhattan Associates Inc.

 

MicroStrategy Incorporated

 

Omnicell, Inc.

 

Progress Software Corporation

 

PROS Holdings

 

SPS Compliance

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 2020 compensation decisions, with all but one of the Peer Group companies’ revenue ranging between approximately 0.2 times and 3.2 times our Company’s estimated fiscal year 2020 revenue when the data were used by our Compensation Committee in fiscal year 2020 for determining cash compensation changes and new equity compensation awards.  The Peer Group companies for fiscal year 2020 were the same as those for fiscal year 2019, except that three companies were removed as a result of being acquired (athenahealth, Callidus Software, and Ellie Mae), while two new business-facing software companies with lower revenue than NextGen Healthcare were added to the Peer Group.

The Compensation Committee does not rely solely on benchmark data and does not target a specific percentile, although all of our NEOs have actual total direct compensation value that is no more than 3% above the median (i.e., median was a rough cap in fiscal year 2020), and most have total compensation that is below the median of the actual total direct compensation for comparable positions at our Peer Group companies.

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 2020, our Compensation Committee continued the practice of making performance-based equity awards to our NEOs.  The PSUs made to our NEOs in fiscal year 2020 vest after three years upon the achievement of specified long-term performance goals, including increasing fiscal year 2021 and fiscal year 2022 revenue goals, as modified for cumulative 3-year total shareholder return.

 

Total direct compensation value for NEOs at or below the peer group median. All of the NEOs earned fiscal year 2020 actual total direct compensation value that was effectively at or below the median of the Peer Group (within 2% of the median). 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 vesting acceleration upon a qualifying termination that is 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 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. All goals reflected growth over prior year performance.

 

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 2020, 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.

Base Salary

Salary levels are considered annually as part of our Compensation Committee’s performance review process. Fiscal year 2020 salaries were increased by an average of 8.9% from fiscal year 2019 levels, although the CEO was not provided a salary increase in fiscal year 2020 because his salary was viewed as competitive following the increase in fiscal year 2019. In May 2019 our Compensation Committee approved the cash base salary component of the fiscal year 2020 executive compensation program. Fiscal year 2020 base salaries were as follows:

 

John R. Frantz - $675,000

 

James R. Arnold - $500,000

 

David A. Metcalfe - $475,000

 

Jeffrey D. Linton - $385,000

Cash Bonuses

In May 2019, our Compensation Committee approved the cash incentive bonus compensation component of the fiscal year 2020 executive compensation program based on two performance measures, Revenue and Non-GAAP EPS. In

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addition, during the second half of fiscal year 2020, the Compensation Committee approved a special one-time supplemental cash bonus opportunity based on a single performance measure, Adjusted EBITDA.  For a reconciliation of non-GAAP performance measures to the more directly comparable GAAP measures, see the section below captioned “Non-GAAP Financial Measure Reconciliation.” The cash incentive bonus program and the special, one-time supplemental cash bonus opportunity are discussed separately below under the headings “Cash Incentive Bonus Program – Based on Revenue and Non-GAAP EPS Performance Measures” and “Special Supplemental Cash Bonus Opportunity – Based on Adjusted EBITDA Performance Measure”.  

Cash Incentive Bonus Program – Based on Revenue and Non-GAAP EPS Performance Measures:

Bonus Metrics and Goals

Under our fiscal year 2020 executive compensation program cash incentive bonus program, each of our NEOs was eligible for a cash incentive bonus based on two performance measures, weighted equally: (i) Revenue for fiscal year 2020, and (ii) Non-GAAP EPS for fiscal year 2020. The metrics are the same as in fiscal year 2019 and were used because the Company believes that it is critical to both increase top-line contribution and that the revenue should be profitable for shareholders.  These annual performance metrics are the same measures of financial performance that the Company reports to its shareholders on a quarterly basis, except that all 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.  These performance measures recognize success on execution of our business plan, which is focused on increasing long-term revenue growth and operating margin, and which we believe will create long-term value for our shareholders.

The following table sets forth the potential cash incentive bonuses payable to each of our NEOs under the fiscal year 2020 executive compensation program. Mr. Frantz’s target cash bonus opportunity level for fiscal year 2020 remained at the same level as in fiscal year 2019, 110% of base salary.  Mr. Arnold’s target cash bonus opportunity level increased from 70% of base salary in fiscal year 2019 to 80% of base salary in fiscal year 2020 as a result of his leadership and contribution to the Company’s results.  Mr. Metcalfe’s target cash bonus opportunity level increased from 70% of base salary in fiscal year 2019 to 75% of base salary in fiscal year 2020 to increase the emphasis on performance-based incentives for the critical Chief Technology Officer position.  Mr. Linton’s target cash bonus opportunity level for fiscal year 2020 remained at the same level as in fiscal year 2019, 70%.

 

Name

 

Target Cash Bonus

as % of Base Salary

 

 

Target Cash

Bonus Amount

 

 

Rusty Frantz

 

 

110

%

 

$

742,500

 

 

James R. Arnold

 

 

80

%

 

 

400,000

 

 

David A. Metcalfe

 

 

75

%

 

 

356,250

 

 

Jeffrey D. Linton

 

 

70

%

 

 

269,500

 

 

 

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. They are weighted equally because they are viewed as equally important.  Each executive officer was able to earn 100% of their bonus target relating to Revenue for achieving $560.1 million of annual revenue. The Revenue goal was based on the annual budget, which includes the Company’s transformation strategy. The plan pays 100% of the target bonus relating to the Non-GAAP EPS performance measure for achieving $0.90 in Non-GAAP EPS, which was viewed as quite challenging as the Company works to shift its business mix while investing in future growth opportunities.  Both goals reflected growth over fiscal year 2019 performance.

The table below depicts the performance schedule and payout range of the Revenue and Non-GAAP EPS performance measures for the fiscal year 2020 cash incentive bonus program.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corresponding Payout

 

 

 

 

 

 

 

 

 

 

Performance Schedule

 

 

 

Range (% of Target)

 

 

 

Weight

 

 

 

Thresh.

 

 

Goal

 

 

Max.

 

Thresh.

 

 

Goal

 

 

Max.

 

Revenue ($M)

 

50

%

 

$

540.7

 

$

560.1

 

$

571.3

 

0

%

 

100

%

 

150

%

Non-GAAP EPS

 

50

%

 

$

0.853

 

$

0.900

 

$

0.945

 

0

%

 

100

%

 

150

%

 


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Outcomes

Cash incentives that could be earned in fiscal year 2020 were calculated according to formula-based outcomes based on pre-established goals that had been established by the Compensation Committee in May 2019. Our Revenue for fiscal year 2020 was $540.2 million, compared with $529.2 million for fiscal year 2019. Our Non-GAAP EPS for fiscal year 2020, adjusted to exclude the effect of acquisitions closed during fiscal year 2020, was $0.83, compared to $0.86 for fiscal year 2019. This modest EPS decrease was partly due to the business slowdown associated with the COVID-19 pandemic in the final month of the fiscal year.  Accordingly, the Revenue performance measure did not reach the minimum threshold and achieved a payout level of 0%, and the adjusted Non-GAAP EPS performance measure achieved a payout level of 59%.  Based on the combined achievements of the performance measures, the NEOs earned cash incentive bonus payments at 29.5% of the applicable combined target levels. 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 62.1% of target. The NEO bonuses were also lower as a percent of target than the non-NEO employee bonus pool, which was funded at 55.1% of target.  

 

The cash incentive bonus payment outcomes for our NEOs are set forth in the table below.

 

Name

 

Target Cash Bonus

 

 

Cash Bonus Earned

 

Rusty Frantz

 

$

742,500

 

 

$

219,038

 

James R. Arnold

 

 

400,000

 

 

 

118,000

 

David A. Metcalfe

 

 

356,250

 

 

 

105,094

 

Jeffrey D. Linton

 

 

269,500

 

 

 

79,503

 

 

In deciding upon the NEOs’ cash bonus payments, the Compensation Committee considered the cost of a supplemental broad-based bonus payment that the Company had made to its non-NEO employees under a separate non-NEO employee cash bonus plan.  EPS is one of the performance measures under the non-NEO employees’ bonus plan.  The COVID-19 pandemic and associated government mandates resulted in quantifiable reduced purchasing activity by our clients, resulting in lower EPS. Some significant transactions that we anticipated to close within the final weeks of fiscal year 2020 (i.e., in March 2020) were delayed as these clients perceived the need to defer purchasing decisions until more clarity emerged concerning the pandemic and government mandates to delay non-essential medical procedures.  The Company identified at least $2.9 million of revenue, which would have contributed operating income of roughly $2.35 million and EPS of $0.028, that was delayed as a result of the COVID-19 pandemic in March 2020, the final month of fiscal year 2020.  This reduction in EPS resulted in lower formulaic bonus amounts for the Company’s non-NEO employees. However, the Company decided to give the non-NEO employees a supplemental bonus to partially offset the effect on their formulaic bonus payments of the EPS lost due to the COVID-19 pandemic (the NEOs did not participate in the supplemental bonus related to the COVID-19 pandemic). The Company awarded this supplemental bonus to the non-NEO employees in order to avoid penalizing them for an unforeseen event out of their control and unrelated to their efforts.  This resulted in overall non-NEO employee bonus payments at 55.1% of target (the NEOs were paid bonuses at 29.5% of target).  The Compensation Committee exercised its discretion to exclude the costs of the supplemental, broad-based non-NEO employee bonus payments from the EPS amount used to calculate bonuses for the NEOs.  Accordingly, the NEO bonuses were earned based on revenue and EPS without any adjustment for the effect of the COVID-19 pandemic, other than adding back the costs associated with the supplemental non-NEO employee bonus pool to the NEO bonus plan EPS.  The Compensation Committee did not partially offset the bonus calculation for the NEOs by giving credit for EPS delayed due to the COVID-19 pandemic because the NEOs were viewed as accountable to shareholders for all results, even if outside of their control.  

 

Special Supplemental Cash Bonus Opportunity – Based on Adjusted EBITDA Performance Measure:

In addition to the fiscal year 2020 cash incentive bonus program described above, during the second half of fiscal year 2020, the Compensation Committee approved a special, one-time supplemental cash bonus opportunity for the NEOs.  The performance measure for this supplemental cash bonus opportunity is Non-GAAP income before provision for income taxes, less interest income, plus interest expense, excluding amortization of deferred debt issuance cost, less net other income, plus depreciation, and plus amortization of capitalized software costs, adjusted for expected EBITDA from acquisitions closed during fiscal year 2020 (“Adjusted EBITDA”). Adjusted EBITDA is viewed as a key metric for operating health and a driver of shareholder value of a software and services company, and this special bonus was created to drive both top-line growth and cost containment.  

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Goals

The fiscal year 2020 Adjusted EBITDA goal for this special, one-time supplemental cash bonus opportunity was $97.3 million.  Achievement of 100% of the $97.3 million goal results in payment of 100% of the target amounts in the table below.  The threshold for payment of any supplemental cash bonus amount is achievement of 90% of the fiscal year Adjusted EBITDA amount ($87.6 million).  There was no ability to earn above the target level and the differences in the opportunity reflected the Compensation Committee’s view of each NEO’s importance and contribution to generating EBITDA as well as their role on the leadership team.  The supplemental Adjusted EBITDA bonus opportunity was expressed as a dollar value, rather than a percent of salary, as set forth in the table below:

 

Name

 

 

 

Target Supplemental

Cash

Bonus Amount

 

 

Rusty Frantz

 

 

$

125,000

 

 

James R. Arnold

 

 

 

75,000

 

 

David A. Metcalfe

 

 

 

75,000

 

 

Jeffrey D. Linton

 

 

 

50,000

 

 

 

Outcomes

Fiscal year 2020 Adjusted EBITDA was $97.3 million, which was equal to the $97.3 million goal.  Accordingly, the NEOs earned the supplemental bonus opportunity at 100% of target, in the amounts set forth in the table below.  However, the Compensation Committee deferred payment of these amounts until a later date, as an encouragement to accelerate to a positive free cash flow position.  At the time of this proxy statement, these amounts have not yet been paid.

 

Name

 

Supplemental Cash Bonus Amount Earned

 

 

Rusty Frantz

 

$

125,000

 

 

 

James R. Arnold

 

 

75,000

 

 

 

David A. Metcalfe

 

 

75,000

 

 

 

Jeffrey D. Linton

 

 

50,000

 

 

 

 

Equity Compensation

Equity-based compensation aligns the interests of our management team with those of our shareholders by encouraging long-term performance. During the second half of fiscal year 2020, following its assessment of our executive compensation program and competitive market practice, the Compensation Committee approved the equity component of our fiscal year 2020 executive compensation program. The Compensation Committee granted our NEOs equity awards in the form of (i) of restricted stock awards (“RSAs”), with strictly time-based vesting, and (ii) performance stock units (“PSUs”), with three-year cliff vesting dependent on long-term performance criteria including fiscal year 2021 and fiscal year 2022 revenue performance as modified by three-year total shareholder return.  These awards were granted in December 2019 to Messrs. Arnold, Metcalfe, and Linton, and in January 2020 to Mr. Frantz.  The RSAs align our NEOs to our shareholders’ interests and foster our NEOs’ long-term retention.  The PSUs, with their performance-based three-year vesting features based on fiscal year 2021 and 2022 revenue and modified by three-year total shareholder return, provide an incentive to execute on the Company’s long-term strategy in a manner that drives total shareholder return. Multi-year vesting schedules create incentives for our NEOs to sustain performance over the long term and to encourage retention as the Company executes its new business strategy. We anticipate continuing this second half of the fiscal year timing pattern for our fiscal year 2021 executive equity awards, which we anticipate making in late calendar year 2020.


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Restricted Stock Awards

Under our fiscal year 2020 executive compensation program, the restricted stock awards made in December 2019 to Messrs. Arnold, Metcalfe, and Linton, and in January 2020 to Mr. Frantz, vest over three years from December 26, 2019 in semi-annual increments as follows: 16.66% vest at 6 months; 16.66% vest at 12 months; 16.66% vest at 18 months; 16.66% vest at 24 months; 16.66% vest at 30 months; and 16.7% vest at 36 months, subject to continued service through each vesting date. The number of shares of restricted stock granted to each NEO under the fiscal year 2020 executive compensation program is set forth in the table below:

 

Name

 

RSAs

 

 

Stock Price*

 

 

Aggregate

Grant Value*

 

Rusty Frantz

 

 

236,230

 

 

$

16.31

 

 

$

3,852,911

 

James R. Arnold

 

 

65,360

 

 

$

16.31

 

 

$

1,066,022

 

David A. Metcalfe

 

 

51,442

 

 

$

16.31

 

 

$

839,019

 

Jeffrey D. Linton

 

 

33,293

 

 

$

16.31

 

 

$

543,009

 

 

 

*

The aggregate grant value for the NEOs was calculated based on the closing market price of the Company’s common stock on December 26, 2019.

 

 

Performance Stock Units

Under our fiscal year 2020 executive compensation program, the PSUs awarded in December 2019 to Messrs. Arnold, Metcalfe, and Linton, and in January 2020 to Mr. Frantz, vest only in the event certain performance goals are achieved and there is continuous service through the date the goals are certified. Approximately 80% of the performance stock units are tied to the Company’s fiscal year 2021 revenue goal and 20% are tied to the Company’s fiscal year 2022 revenue goal. Performance stock unit awards funded for fiscal year 2021 and fiscal year 2022 revenue performance are then subject to modification for cumulative three-year total shareholder return (“TSR”) on the three-year grant anniversary, which is also the cliff vest date. The number of shares to be issued may vary between 42.5% and 172.5% of the number of performance stock units depending on performance, and no such shares will be issued if threshold performance is not achieved.  The PSU revenue goals reflect growth over fiscal year 2020 revenue.

The goals used for the PSUs are different from the goals used for the cash bonus program because the Company desires to focus management’s short-term incentives on both growth and on cost containment, while it wants to focus long-term rewards on revenue growth that drives total shareholder return.  The goals used for the PSUs emphasize the Company’s long-term strategic plan and require robust ongoing growth to be achieved.  

 

Name

 

PSUs

(target number)

 

 

Per Share

Grant Date

Fair Value

 

 

Aggregate

Grant Date

Fair Value*

 

Rusty Frantz

 

 

119,559

 

 

$

14.92

 

 

$

1,783,820

 

James R. Arnold

 

 

51,503

 

 

$

16.84

 

 

$

867,311

 

David A. Metcalfe

 

 

39,547

 

 

$

16.84

 

 

$

665,971

 

Jeffrey D. Linton

 

 

23,912

 

 

$

16.84

 

 

$

402,678

 

 

 

*

The aggregate grant date fair value for the NEOs was estimated using a Monte Carlo-based valuation model for the awards based on total shareholder return and using a probability-adjusted achievement rate of the applicable targets combined with the market price of the Company’s common stock on the respective grant date for each NEO.

 

 

Non-GAAP Financial Measure Reconciliation

Under our fiscal year 2020 executive compensation program, the cash incentive bonus performance measures are Revenue and Non-GAAP EPS. 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 press release issued on June 1, 2020 and attached as an exhibit to our current report on Form 8-K filed with the SEC on June 1, 2020.

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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, impairment of assets, restructuring costs, net securities litigation defense costs and settlement, share-based compensation, 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.

The normalized non-GAAP tax rate applied to each quarter of fiscal year 2020 was 22.0%. The normalized non-GAAP tax rate expected to be applied to each quarter of fiscal year 2021 is 20.0%. The determination of this rate is based on the consideration of both historic and projected financial results. The Company may adjust its 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.

Reconciliation of Non-GAAP EPS with GAAP financial measures (in thousands, except per share data)

 

 

 

Fiscal Year Ended March 31,

 

 

 

2020

 

 

2019

 

Income before provision for income taxes - GAAP

 

$

4,259

 

 

$

29,288

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Acquisition costs, net

 

 

2,112

 

 

 

3,068

 

Amortization of acquired intangible assets

 

 

22,536

 

 

 

21,496

 

Amortization of deferred debt issuance costs

 

 

710

 

 

 

710

 

Impairment of assets

 

 

12,571

 

 

 

 

Restructuring costs

 

 

2,505

 

 

 

640

 

Securities litigation defense costs and settlement, net of insurance

 

 

2,426

 

 

 

(5,205

)

Share-based compensation

 

 

19,694

 

 

 

16,102

 

Other non-run-rate expenses*

 

 

3,226

 

 

 

5,471

 

Total adjustments to GAAP income before provision for income taxes:

 

 

65,780

 

 

 

42,282

 

Income before provision for income taxes – Non-GAAP

 

 

70,039

 

 

 

71,570

 

Provision for income taxes

 

 

15,409

 

 

 

15,745

 

Net income - Non-GAAP

 

$

54,630

 

 

$

55,825

 

Diluted net income per share - Non-GAAP

 

$

0.83

 

 

$

0.86

 

Weighted-average shares outstanding (diluted):

 

 

65,612

 

 

 

64,600

 

 

 

*

Other non-run-rate expenses for the year ended March 31, 2020 consist primarily of excess lease-related expense for vacated facilities and other costs, including retention bonuses, related to the restructuring plan, professional services costs not related to core operations, and incremental costs and penalties primarily due to the cancellation of certain events directly associated with the COVID-19 pandemic.  Other non-run-rate expenses for the fiscal year ended March 31, 2019 consist primarily of severance and other employee-related costs and professional services costs not related to core operations.

 

 

The potential payout of the special, one-time supplemental cash bonus is based on fiscal year 2020 Adjusted EBITDA, adjusted to exclude the effect of acquisitions closed during fiscal year 2020. Adjusted EBITDA is a non-GAAP performance measure and is calculated as Non-GAAP income before provision for income taxes, less interest income, plus interest expense, excluding amortization of deferred debt issuance cost, less net other income, plus depreciation, and plus amortization of capitalized software costs, adjusted for expected EBITDA from acquisitions closed during fiscal year 2020. A

20

 


 

reconciliation of this performance measure to its most directly comparable financial measures prepared in accordance with GAAP is provided below.

 

 

 

Fiscal Year Ended March 31, 2020

 

Income before provision for income taxes – Non-GAAP (from above)

 

$

70,039

 

Interest income

 

 

(256

)

Interest expense*

 

 

1,245

 

Other income, net

 

 

(846

)

Depreciation

 

 

8,172

 

Amortization of capitalized software costs

 

 

17,085

 

Total adjusted EBITDA**

$

 

95,439

 

 

 

 

 

 

 

*

Excluding $710 amortization of deferred debt issuance costs, which is already excluded from Non-GAAP income before provision for income taxes

 

**

For the purposes of calculating the achievement rate of the special supplemental cash bonus opportunity, adjusted EBITDA was adjusted for expected EBITDA from acquisitions closed during fiscal year 2020. Total adjusted EBITDA as presented in the table has not been adjusted for the effect of acquisitions closed during fiscal year 2020.

Other Executive Compensation Matters

Separation, Termination, and Change of Control Payments

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 have various vesting 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, 2020.

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, 2020.

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 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, 2020. 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

21

 


 

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.

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 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 Implications - 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 14 to the Financial Statements contained in our Form 10-K for the fiscal year ended March 31, 2020.

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

 

 

 

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, 2020

The following table provides certain summary information concerning the compensation for the fiscal years ended March 31, 2020, 2019 and 2018 for the individuals who served as our principal executive officer (i.e., Mr. Frantz), our principal financial officer (i.e., Mr. Arnold), and the other individuals who were serving as executive officers at the end of fiscal year 2020 (i.e., Messrs. Metcalfe and Linton) (collectively, the “NEOs”). These are the only four individuals who have been executive officers and NEOs during our fiscal year 2020.  Our executive compensation disclosure in this proxy statement includes all of our NEOs for fiscal year 2020. No executive officers who would otherwise have been includable in the table on the basis of total compensation for fiscal year 2020 have been excluded by reason of their termination of employment or change in officer status during that year.

 

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

 

 

2020

 

 

$

675,022

 

 

$

 

 

$

5,261,126

 

 

$

 

 

$

344,038

 

 

$

 

 

$

26,681

 

 

$

6,306,867

 

Officer

 

 

2019

 

 

 

675,013

 

 

 

 

 

 

5,669,504

 

 

 

 

 

 

461,093

 

 

 

 

 

 

28,346

 

 

 

6,833,956

 

 

 

 

2018

 

 

 

629,545

 

 

 

 

 

 

 

 

 

2,469,740

 

 

 

590,190

 

 

 

 

 

 

63,364

 

 

 

3,752,839

 

James R. Arnold, Jr.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President and

 

 

2020

 

 

 

498,862

 

 

 

 

 

 

1,933,332

 

 

 

 

 

 

193,000

 

 

 

 

 

 

61,870

 

 

 

2,687,064

 

Chief Financial Officer

 

 

2019

 

 

 

440,008

 

 

 

 

 

 

1,676,017

 

 

 

 

 

 

191,268

 

 

 

 

 

 

63,198

 

 

 

2,370,491

 

 

 

 

2018

 

 

 

412,005

 

 

 

 

 

 

 

 

 

939,575

 

 

 

236,076

 

 

 

 

 

 

63,142

 

 

 

1,650,798

 

David A. Metcalfe

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President and

 

 

2020

 

 

 

468,403

 

 

 

 

 

 

1,504,991

 

 

 

 

 

 

180,094

 

 

 

 

 

 

19,295

 

 

 

2,172,783

 

Chief Technology Officer

 

 

2019

 

 

 

425,005

 

 

 

 

 

 

1,287,458

 

 

 

 

 

 

184,748

 

 

 

 

 

 

18,446

 

 

 

1,915,657

 

 

 

 

2018

 

 

 

412,005

 

 

 

 

 

 

 

 

 

751,660

 

 

 

236,076

 

 

 

 

 

 

54,589

 

 

 

1,454,330

 

Jeffrey D. Linton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Vice President,

 

 

2020

 

 

 

380,383

 

 

 

 

 

 

945,687

 

 

 

 

 

 

129,503

 

 

 

 

 

 

16,733

 

 

 

1,472,306

 

General Counsel and

 

 

2019

 

 

 

347,312

 

 

 

 

 

 

781,056

 

 

 

 

 

 

152,145

 

 

 

 

 

 

17,383

 

 

 

1,297,896

 

Secretary

 

 

2018

 

 

 

115,547

 

 

 

 

 

 

 

 

 

724,815

 

 

 

50,137

 

 

 

 

 

 

3,154

 

 

 

893,653

 

 

(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 fiscal year 2020 was estimated based on a probability-adjusted achievement rate of fiscal year 2021 and fiscal year 2022 revenue performance targets combined with a modifier based on cumulative 3-year total shareholder return on the three-year grant anniversary, which is also the cliff vest date. The grant date fair value of the PSUs granted in fiscal year 2020 that vest based on the performance goals was determined utilizing a Monte Carlo simulation using the assumptions in the table below:

 

Grant Date

 

December 26, 2019

 

January 27, 2020

Expected term

 

3.0 years

 

2.9 years

Expected volatility

 

38.4%

 

39.0%

Expected dividends

 

—%

 

—%

Risk-free rate

 

1.64%

 

1.40%

 

See Note 14 of our audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K filed with the SEC on June 1, 2020, for additional assumptions used in calculating the amounts on the Stock Awards and Option Awards columns.  

Amounts shown in the Stock Awards column for fiscal year 2020 include the grant date fair value of the PSUs granted in fiscal year 2020 based on the probable outcome of the applicable performance conditions, assuming a 100% achievement rate, as of the grant date. These values and the value of the PSUs assuming maximum achievement of the performance conditions are set forth in the table below:

 

Name

 

 

Grant Date Fair Value

Assuming Probable

Achievement ($)

 

 

Grant Date Fair Value

Assuming Maximum

Achievement ($)

Rusty Franz

 

$

1,783,820

 

$

3,077,086

James R. Arnold, Jr.

 

 

867,311

 

 

1,496,116

David A. Metcalfe

 

 

665,971

 

 

1,148,808

Jeffrey D. Linton

 

 

402,678

 

 

694,616

 

23

 


 

(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. The 401(k) plan contribution amounts for fiscal year 2020 were: Mr. Frantz - $6,361; Mr. Arnold - $10,153; Mr. Metcalfe - $8,525; Mr. Linton - $8,663. The health savings account Company contribution amounts for fiscal year 2020 were: Mr. Frantz - $1,375; Mr. Arnold - $1,000; Mr. Metcalfe - $0; Mr. Linton - $1,500. The long-term disability insurance Company contribution amounts for fiscal year 2020 were: Mr. Frantz - $7,584; Mr. Arnold - $9,752 Mr. Metcalfe - $9,068; Mr. Linton - $6,570. Gym membership reimbursement amounts for fiscal year 2020 were:  Mr. Frantz - $0; Mr. Arnold - $554; Mr. Metcalfe - $1,702; Mr. Linton - $0. The deferred compensation plan Company contribution amount for fiscal year 2020 for Mr. Frantz was $11,361. In addition, the amount reflected in this column for Mr. Arnold includes $40,412 in reimbursement in fiscal year 2020 for a corporate apartment, as provided for in Mr. Arnold’s employment arrangement, which Mr. Arnold shares with another member of our leadership team.

 

Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2020

The following table sets forth information regarding plan-based awards granted to our NEOs during the fiscal year ended March 31, 2020.

 

 

 

 

 

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

 

01/27/20

 

$      —

 

 

$ 742,500

 

 

 

$ 1,113,750

 

 

50,813

 

 

119,559

 

 

 

206,2239

 

 

 

 

 

 

$

1,783,820

 

 

 

01/27/20

 

 

 

 

 

 

 

 

 

 

 

 

236,230

 

 

 

 

 

 

3,477,306

 

James R. Arnold, Jr.

 

12/26/19

 

 

 

400,000

 

 

 

600,000

 

 

21,889

 

51,503

 

 

88,843

 

 

 

 

 

 

 

867,311

 

 

 

12/26/19

 

 

 

 

 

 

 

 

 

 

 

 

65,360

 

 

 

 

 

 

1,066,022

 

David A. Metcalfe

 

12/26/19

 

 

 

356,250

 

 

 

446,250

 

 

16,807

 

39,547

 

 

68,219

 

 

 

 

 

 

 

665,971

 

 

 

12/26/19

 

 

 

 

 

 

 

 

 

 

 

 

51,442

 

 

 

 

 

 

839,019

 

Jeffrey D. Linton

 

12/26/19

 

 

 

269,500

 

 

 

404,250

 

 

10,163

 

23,912

 

 

41,248

 

 

 

 

 

 

 

402,678

 

 

 

12/26/19

 

 

 

 

 

 

 

 

 

 

 

 

33,293

 

 

 

 

 

 

543,009

 

 

(1)

Amounts in these columns represents threshold, target, and maximum cash or share incentive awards possible based on fiscal year 2020 performance under our fiscal year 2020 cash incentive program and the PSUs granted in fiscal year 2020 as described in the “Compensation Discussion and Analysis” section of this proxy statement. The actual cash incentive compensation paid is included in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above.

(2)

All equity grants in fiscal year 2020 were made under our Amended 2015 Equity Incentive Plan.

(3)

The amounts set forth in these columns reflect the threshold, target and maximum number of shares that could be issued under the PSUs granted in fiscal year 2020, which may be earned based on the Company’s three-year TSR and fiscal year 2021 and 2022 revenue.

(4)

The amounts set forth in this column reflects the grant date fair value of the stock awards, computed in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. The grant date fair value of the PSUs granted in fiscal year 2020 was estimated based on a probability-adjusted achievement rate of fiscal year 2021 and fiscal year 2022 revenue performance targets combined with a modifier based on cumulative 3-year total shareholder return on the three-year grant anniversary, which is also the cliff vest date. The grant date fair value of the PSUs granted in fiscal year 2020 that vest based on the performance goals was determined utilizing a Monte Carlo simulation using the assumptions in the table below:

 

Grant Date

 

December 26, 2019

 

January 27, 2020

Expected term

 

3.0 years

 

2.9 years

Expected volatility

 

38.4%

 

39.0%

Expected dividends

 

—%

 

—%

Risk-free rate

 

1.64%

 

1.40%

 

For PSUs, the amount shown is based on the probable outcome of the applicable performance goals as of the grant date.

 

24

 


 

Outstanding Equity Awards at Fiscal Year Ended March 31, 2020

 

 

 

Option Awards

  

 

Stock Awards

 

Name

 

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

 

 

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

 

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying Unexercised

Unearned

Options

(#)

 

 

Option

Exercise

Price

($)

 

 

Option

Expiration

Date

 

 

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)

 

 

 

Market Value

of Shares

of Stock That

Have Not

Vested

($)(17)

 

 

Equity

Incentive Plan

Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

(#)

 

 

 

Equity

Incentive Plan

Awards:

Market or

Payout Value of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

($)(17)

 

Rusty Frantz

 

 

120,000

 

 

 

30,000

 

(1)

 

 

 

 

 

$ 12.80

 

 

08/17/23

 

 

 

 

 

 

 

$                 —

 

 

 

 

 

 

 

$              —

 

 

 

 

225,000

 

 

 

75,000

 

(2)

 

 

 

 

 

12.93

 

 

05/24/24