AdaptHealth Corp DEF 14A, filed May 1, 2023
AdaptHealth Corp. (AHCO)
About this DEF 14A
AdaptHealth Corp filed this DEF 14A on May 1, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 21, 2023
Dear Stockholders of AdaptHealth Corp.:
You are cordially invited to attend the Annual Meeting of Stockholders of AdaptHealth Corp. The meeting will be held on June 21, 2023 at 10:30 a.m. Eastern Time. The Annual Meeting will be a completely virtual meeting of stockholders conducted via live audio webcast. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AHCO2023. We are holding the Annual Meeting for the following purposes, which are more fully described in the proxy statement accompanying this notice:
| (1) | To elect three Class I directors for a three-year term; |
| (2) | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023; |
| (3) | To approve, in a non-binding advisory vote, the compensation of our named executive officers as described in this proxy statement (“say-on-pay”); and |
| (4) | To transact such other business as may properly come before the meeting or any adjournment thereof. |
The record date for the Annual Meeting is April 25, 2023. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof. The Notice of Internet Availability of Proxy Materials (Notice), proxy statement and form of proxy are being distributed and made available on the Internet on or about May 12, 2023.
| By Order of the Board of Directors | |
| /s/ Christopher Joyce | |
| Christopher Joyce | |
| Secretary |
April 28, 2023
Whether or not you expect to attend the Annual Meeting, please vote at your earliest convenience by following the instructions in your proxy materials.
TABLE OF CONTENTS
| i |
ADAPTHEALTH CORP.
220 WEST GERMANTOWN PIKE SUITE 250
PLYMOUTH MEETING, PA
PROXY STATEMENT
2023 ANNUAL MEETING OF STOCKHOLDERS
June 21, 2023
INFORMATION CONCERNING SOLICITATION AND VOTING
Our board of directors is soliciting proxies for our 2023 Annual Meeting of Stockholders, or the Annual Meeting, to be held on June 21, 2023 at 10:30 a.m. Eastern Time. The Annual Meeting will be a completely virtual meeting of stockholders conducted via live audio webcast. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AHCO2023.
We will provide access to our proxy materials via the Internet at https://www.adapthealth.com/investorrelations, rather than in hard copy. We will mail a notice containing instructions on how to access this proxy statement and our annual report on or about May 12, 2023 to all stockholders entitled to vote at the Annual Meeting. The proxy statement, form of proxy and our Annual Report on Form 10-K for the year ended December 31, 2022 are being distributed and made available on the Internet on or about May 12, 2023.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on June 21, 2023:
Pursuant to the rules adopted by the Securities and Exchange Commission, or the SEC, we have elected to provide access to our proxy materials, including this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2022, over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials, or the Notice, to our stockholders of record entitled to vote at the Annual Meeting with instructions for accessing the proxy materials and voting over the Internet or by telephone. We intend to mail the Notice on or about May 12, 2023 to all stockholders entitled to vote at the Annual Meeting.
All stockholders entitled to vote at the Annual Meeting will have the ability to access the proxy materials on the website referred to in the Notice and to request to receive a printed set of the proxy materials. This makes the proxy distribution process more efficient and less costly and helps conserve natural resources. Instructions on how to access the proxy materials over the Internet or to request a printed copy of the proxy materials may be found in the Notice.
The Notice will also identify the date and time of the Annual Meeting; the matters to be acted upon at the meeting and the board of directors’ recommendation with regard to each matter; a toll-free telephone number, an e-mail address, and a website where stockholders can request to receive, free of charge, a paper or e-mail copy of this proxy statement, our Annual Report on Form 10-K for the year ended December 31, 2022, and a form of proxy relating to the Annual Meeting; information on how to access and vote the form of proxy; and information on how to attend the virtual meeting and vote should stockholders choose to do so.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
| Why did I receive these materials? | We have sent you these proxy materials because the board of directors (the “board”) of AdaptHealth Corp. (the “Company”) is soliciting your proxy to vote at our Annual Meeting of Stockholders on June 21, 2023 (the “Annual Meeting”). These proxy materials contain information about the items being voted on at the Annual Meeting and information about us. | |
| How can I attend and participate in the Annual Meeting? | The Annual Meeting will be a completely virtual meeting of stockholders conducted exclusively via live audio webcast. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AHCO2023. To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice, proxy card, or voting instruction card. The Annual Meeting will begin promptly at 10:30 a.m. Eastern Time on June 21, 2023. We encourage you to access the virtual meeting website prior to the start time. |
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| What if I have technical difficulties or trouble accessing the virtual meeting website? | Technicians will be available to assist you if you experience technical difficulties accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting website login page. | |
| Who is entitled to vote? | The record date for the Annual Meeting is April 25, 2023. This means that holders of our Common Stock on such date are entitled to vote at the Annual Meeting. As of April 25, 2022, there were 135,552,048 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. | |
| How many votes do I have? | Each share of our Common Stock is entitled to one vote on each matter properly submitted for stockholder action at the Annual Meeting. | |
| What am I voting on? | You will be voting on the following: | |
| ● To elect to the board of directors the three nominees named in this proxy statement who have been nominated by the board of directors to continue to serve as Class I directors and whose current terms will expire at the Annual Meeting; | ||
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● To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2023; and ● To approve, in a non-binding advisory vote, the compensation of our named executive officers as described in this proxy statement (“say-on-pay”). | ||
| How do I vote? | You may vote in the following ways: | |
| ● At the Annual Meeting: You may vote your shares electronically at the Annual Meeting by using the control number on your Notice, proxy card, or voting instruction form and following the instructions at www.virtualshareholdermeeting.com/AHCO2023. If you have already voted previously by telephone or Internet, there is no need to vote again at the Annual Meeting unless you wish to revoke and change your vote. | ||
| ● By Telephone or Internet: If you hold your shares in street name or in an account at a brokerage firm or bank, you may be able to vote your shares by telephone or over the Internet. Please follow the instructions on your proxy or voting instruction card. | ||
| ● By Mail: You may vote by marking, dating and signing your proxy card and promptly returning it by mail in the enclosed envelope. | ||
| What if I return my proxy or voting instruction card but do not mark it to show how I am voting? | Your shares will be voted according to the instructions you have indicated on your proxy or voting instruction card. If no direction is indicated, your shares will be voted “FOR” the election of the Class I nominees and “FOR” Proposals 2 and 3. |
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| How do I change or revoke my proxy? | Any person signing a proxy in the form accompanying this proxy statement has the power to revoke it prior to the Annual Meeting or at the Annual Meeting prior to the vote pursuant to the proxy. A proxy may be revoked by a writing delivered to us stating that the proxy is revoked, by a subsequent proxy that is signed by the person who signed the earlier proxy and is delivered before or at the Annual Meeting, by voting again on a later date on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), or by attendance at the Annual Meeting and voting electronically. | |
| What does it mean if I receive more than one proxy or voting instruction card? | It means you have multiple accounts at the transfer agent and/or with banks and stockbrokers. Please vote all of your shares. | |
| What constitutes a quorum? | Any number of stockholders, together holding at least a majority in voting power of the capital stock of the Company issued and outstanding and generally entitled to vote in the election of directors, present or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of all business. Abstentions and “broker non-votes” are counted as shares “present” at the meeting for purposes of determining whether a quorum exists. A “broker non-vote” occurs when shares held of record by a bank, broker or other holder of record for a beneficial owner are deemed present at the meeting for purposes of a quorum but are not voted on a particular proposal because that record holder does not have discretionary voting power for that particular matter under the applicable rules of the Nasdaq Stock Market and has not received voting instructions from the beneficial owner. | |
| What vote is required in order to approve Proposals 1, 2 and 3? | Proposal 1 (Election of Directors): The three nominees named in this proxy statement who have been nominated by the board of directors to continue to serve as Class I directors will be elected to the Class I directorships by plurality vote. This means that the three nominees with the most votes cast in their favor will be elected to the Class I directorships. Votes withheld from one or more director nominees will have no effect on the election of any director from whom votes are withheld. If you do not want to vote your shares for a nominee, you may indicate that in the space provided on the proxy card or the voting instruction card or withhold authority as prompted during telephone or Internet voting. In the unanticipated event that a director nominee is unable or declines to serve, the proxy will be voted for such other person as shall be designated by the board of directors to replace the nominee, or in lieu thereof, the board may reduce the number of directors. | |
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Proposal 2 (Ratification of Appointment of KPMG LLP): This proposal requires the affirmative vote of a majority of the votes cast by the holders of our outstanding Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2. Abstentions and broker non-votes will have no effect on the outcome of the proposal.
Proposal 3 (Say-on-Pay): Please note that the “say-on-pay” vote is only advisory in nature and has no binding effect on us or our board of directors. Our board of directors will consider Proposal 3 approved if the votes cast in favor of such proposal exceed the votes cast against such proposal. |
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| May my broker vote my shares? | Brokers may no longer use discretionary authority to vote shares on the election of directors or non-routine matters if they have not received instructions from their clients. It is important, therefore, that you cast your vote if you want it to count in the election of directors (Proposal 1) and Say-on-Pay (Proposal 3). Your broker has the authority to exercise discretion with respect to ratification of appointment of KPMG LLP (Proposal 2) if it has not received your instructions for that proposal because that matter is treated as routine under applicable rules. | |
| How will voting on any other business be conducted? | We do not know of any business or proposals to be considered at the Annual Meeting other than those set forth in this proxy statement. If any other business is properly presented at the Annual Meeting, the proxies received from our stockholders give the proxy holders the authority to vote on the matter in their sole discretion. In accordance with our bylaws, no business (other than the election of the three Class I nominees, Proposal 2 or Proposal 3) may be brought before the Annual Meeting, or any adjournment or postponement thereof, unless such business is brought by or at the direction of the board of directors or a committee of the board of directors. | |
| Who will count the votes? | Broadridge Financial Solutions, Inc. will act as the inspector of elections and will tabulate the votes. |
Important Notice Regarding the Availability of Proxy Materials
for the Stockholder Meeting to Be Held on June 21, 2023
The 2023 Proxy Statement, a form of proxy and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 are available at: https://www.adapthealth.com/investorrelations.
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CERTAIN DEFINED TERMS
Unless the context otherwise requires, references in this proxy statement to:
| • | “AeroCare Merger Agreement” are to the merger agreement, dated as of December 1, 2020, by and between the Company, AH Apollo Merger Sub Inc., AH Apollo Merger Sub II, Inc., AeroCare Holdings, Inc. and Peloton Equity, LLC; |
| • | “AdaptHealth Holdings” are to AdaptHealth Holdings LLC; |
| • | “BlueMountain” are to BlueMountain Capital Management LLC and its affiliates, collectively; |
| • | “BlueMountain Entities” are to BlueMountain Summit Opportunities Fund II (US) L.P., BMSB L.P., BlueMountain Foinaven Master Fund L.P. and BlueMountain Fursan Fund L.P., collectively; |
| • | “BlueMountain Board Designee Rights Letter Agreement” are to the letter agreement, dated as of November 8, 2019, by and between the Company, AdaptHealth Holdings and the BlueMountain Entities; |
| • | “BM Notes” are to the promissory notes previously made by AdaptHealth Holdings to the BlueMountain Entities (or their permitted transferees), collectively; |
| • | “Business Combination” are to the transactions contemplated by the Agreement and Plan of Merger, dated July 8, 2019 and as amended on October 15, 2019, by and between AdaptHealth Holdings and DFB Healthcare Acquisitions Corp.; |
| • | “Common Stock” are to our Common Stock, par value $0.0001 per share; |
| • | “Deerfield” are to Deerfield Private Design Fund IV, L.P.; |
| • | “Deerfield Subscription Agreement” are to the Amended and Restated Subscription Agreement, dated as of October 15, 2019, among DFB, Deerfield and RAB Ventures (DFB) LLC; |
| • | “Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
| • | “management” or our “management team” are to our officers and directors; |
| • | “OEP” are to One Equity Partners VII, L.P. and its affiliates, collectively; |
| • | “OEP Investment Agreement” are to the investment agreement, dated as of May 25, 2020, by and between the Company, OEP AHCO Investment Holdings, LLC and solely for purposes of Section 3.10 thereof, OEP; and |
| • | “Securities Act” are to the Securities Act of 1933, as amended. |
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PROPOSAL NO. 1 — ELECTION OF DIRECTORS
Our board of directors is divided into three staggered classes of directors, designated Class I, Class II and Class III, with each class having a three-year term. Vacancies on the board of directors may be filled by the affirmative vote of a majority of the remaining directors. A director elected by the board of directors to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified.
There are three directors in Class I whose term of office expires in 2023. Each of the nominees for election to Class I, Messrs. Richard Barasch, Stephen Griggs and Gregory Belinfanti, has been recommended by the Nominating and Governance Committee of the board of directors for election and nominated by the board of directors for election at the Annual Meeting and each is currently a member of our board of directors. If re-elected at the Annual Meeting, each of these nominees would serve until our 2026 annual meeting of stockholders and until his successor is duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by us. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve.
Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting—Class I
The following table sets forth the name, age and position of each of our Class I directors as of April 28, 2023:
| Name | Age | Position | ||
| Richard Barasch | 69 | Chairman of the Board | ||
| Stephen Griggs | 65 | Chief Executive Officer, Director | ||
| Gregory Belinfanti | 48 | Director |
Richard Barasch has served as our Chairman since our formation and served as the President and Chief Executive Officer of DFB from our formation to the closing of the Business Combination. Mr. Barasch was Chief Executive Officer of Universal American Corp., a publicly-traded health insurance and services company focused on the senior market and government programs, from 1995 until Universal American’s acquisition by WellCare Health Plans in May 2017. Mr. Barasch has developed an extensive network of contacts throughout the healthcare industry and speaks regularly at industry conferences as a healthcare services expert. He is currently Executive Chairman of DFP Healthcare Acquisitions Corp and Deerfield Healthcare Technology Acquisitions Corp. He serves on the Board of Advisors of the Health Policy and Management program at the Columbia University School of Public Health and the Brown School of Public Health. He also serves on the Board of Trustees of the Maimonides Medical Center in Brooklyn, New York. Mr. Barasch graduated from Swarthmore College and Columbia University Law School.
Stephen Griggs joined the Company as Co-Chief Executive Officer in February 2021 and became Chief Executive Officer in June 2021. In November of 2000, Mr. Griggs formed AeroCare and served as its Chairman and Chief Executive Officer. Prior to joining AeroCare, Mr. Griggs served as President of Rotech Medical Corp., a publicly-traded provider of home medical equipment, respiratory equipment and services, and respiratory (nebulizer) medications for home use. Mr. Griggs practiced as a CPA with a prominent accounting firm located in Orlando, Florida. Mr. Griggs was one of the founders of Nexus Group, Inc. and is one of its principals and Managing Directors. Nexus Group provides advisory services in the area of mergers and acquisitions. Mr. Griggs holds a B.S.B.A. in Business Management from East Tennessee State University and a B.S.B.A. in Accounting from University of Central Florida.
Gregory Belinfanti has served on our board of directors since September 2021. Greg is a Senior Managing Director and a member of the Investment Committee at One Equity Partners. During his tenure at OEP, Mr. Belinfanti has worked on a number of investments in the healthcare and business services industries and has led many of OEP’s healthcare transactions. Mr. Belinfanti is a member of the Board of Directors of InfuCareRx, Montgomery Transportation, Ernest Health and AMT, and has previously been a member of the Board of Directors of The Results Companies, PS Logistics, Apollo Health Street, ArthroCare, Celltrion Healthcare, EGS, OneLink, Prodigy, Simplura Health Group, and Systagenix. Prior to joining OEP, Mr. Belinfanti served as a Vice President in the Investment Banking division of Lehman Brothers, specializing in Global Healthcare. Mr. Belinfanti received his B.A. in Politics from New York University and his J.D. from Harvard University.
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If a quorum is present and voting at the Annual Meeting, the nominees receiving the highest number of votes will be elected to our board of directors. Votes withheld from any nominee, abstentions and broker non-votes will be counted only for purposes of determining a quorum. Broker non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.
OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH NAMED NOMINEE.
Directors Continuing in Office Until the 2024 Annual Meeting—Class II
The following table sets forth the name, age and position of each of our Class II directors as of April 28, 2023:
| Name | Age | Position | ||
| Terence Connors | 68 | Director | ||
| Ted Lundberg | 48 | Director | ||
| Joshua Parnes | 45 | President, Director | ||
| David Williams III | 50 | Director |
The following is biographical information as of April 28, 2023 for our Class II directors:
Terence Connors has been a member of our board of directors since the closing of the Business Combination. Mr. Connors brings to the board 40 years of public accounting experience. Mr. Connors retired in September 2015 from KPMG LLP, where he served as Professional Practice Partner, SEC Reviewing Partner and as a member of KPMG’s board of directors (2011-2015), where he chaired the Audit, Finance & Operations Committee. Prior to joining KPMG in 2002, he was a partner with another international accounting firm. During his career, he served as a senior audit and global lead partner for numerous public companies, including Fortune 500 companies. Mr. Connors currently serves as a board member and audit committee chairman of two other public companies: Suburban Propane Partners L.P. and FS Credit Real Estate Investment Trust, Inc. Mr. Connors previously served as a trustee of St. Joseph’s Preparatory School in Philadelphia and also served as Chairman and President of the Philadelphia Chapter of the National Association of Corporate Directors (NACD). Mr. Connors received his undergraduate degree in Accounting from LaSalle University.
Ted Lundberg has served on our board of directors since February 2021. Mr. Lundberg is a Founding Partner at Peloton Equity, LLC. Peloton Equity is a private equity firm that focuses on investing in growing healthcare companies. He previously worked at Ferrer Freeman & Company and prior to that, Donaldson, Lufkin and Jenrette. Mr. Lundberg currently serves on the boards of Arcadia Solutions, Inc. HPOne, Inc., Friday Health Plans, Inc., ClearSky Health, Inc., Aerosafe Global, Inc. and IDX, Inc. Mr. Lundberg holds a B.A. degree from Princeton University.
Joshua Parnes joined AdaptHealth Holdings in 2013 with the acquisition of Ocean Home Health and was appointed President of AdaptHealth Holdings in August 2017. Mr. Parnes has served on our board of directors since the closing of the Business Combination. Mr. Parnes is a home medical equipment (“HME”) entrepreneur building Ocean Home Health from a startup into a technology-focused HME and Diabetes provider and has over 19 years of Strategy and operating experience in the home medical equipment industry. Mr. Parnes focuses on Technology, Strategy and Operations.
David S. Williams III has served on our board of directors since July 2020. Mr. Williams is a serial entrepreneur and currently co-founder and CEO of Care3, a digital health equity solution for health plans and providers. Prior to Care3, Mr. Williams was Co-Founder and CEO of InvolveCare (funded by Aetna) and a Founding Executive of PatientsLikeMe (acquired by United Health Group). He has also held corporate positions at Eli Lilly and Company and Deloitte. Mr. Williams also currently serves on the board of directors of Lifespace Communities, Inc., a private senior living company with 14 locations in seven states. Mr. Williams is a Henry Crown Fellow of The Aspen Institute and a member of the Aspen Global Leadership Network. Mr. Williams earned a BS in Economics and Entrepreneurial Management from The Wharton School of the University of Pennsylvania and an MBA in Digital Strategy with a certificate in Corporate Governance from the UCLA Anderson School of Management.
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Directors Continuing in Office Until the 2025 Annual Meeting—Class III
The following table sets forth the name, age and position of each of our nominees as of April 28, 2023:
| Name | Age | Position | ||
| Brad Coppens | 41 | Director | ||
| Dr. Susan Weaver | 62 | Director | ||
| Dale Wolf | 69 | Director |
The following is biographical information as of April 28, 2023 for our nominees:
Brad Coppens has served on our board of directors since July 2020. Mr. Coppens is a Senior Managing Director of InTandem Capital Partners. Brad has been identifying, evaluating and executing private equity transactions in the healthcare services sector for more than 17 years. In addition to AdaptHealth, Brad serves on the board of directors at BeBright, HouseWorks, Vivo Infusion and Providence Care. Before joining InTandem, he was a Senior Managing Director at One Equity Partners. At One Equity Partners, Mr. Coppens has focused principally in the healthcare industry and has worked on numerous investments in both the healthcare and technology-enabled services industries. From 2012 to 2014, Brad lived in São Paulo, Brazil and led One Equity Partners’ prior investing efforts in the region. Mr. Coppens has served as a member of the boards of directors of AdaptHealth, AMT/RestorixHealth, Ernest Health, OneLink, ResultsCX, Allied, Cless Cosméticos, Portal de Documentos, Prodigy Health Group, Simplura Health Group, Systagenix Wound Management, Unicoba, Wow! Nutrition and X-Rite. Mr. Coppens was also deeply involved in One Equity Partners’ investments in ArthroCare and Wright Medical. Prior to One Equity Partners, Mr. Coppens worked in the investment banking division of JPMorgan in the mergers and acquisitions group where he focused on healthcare and various other industries. Mr. Coppens is actively involved in a number of non-profit organizations and serves as a board member of The TEAK Fellowship. Mr. Coppens received his B.B.A. from the Stephen M. Ross School of Business at the University of Michigan, where he graduated with high distinction.
Susan Weaver, M.D. has served on our board of directors since February 2018. Dr. Weaver served as President and then Chief Executive Officer of KEPRO, a technology enabled healthcare services company, from July 2018 until the successful sale of the company in December 2022. She previously served as the Chief Executive Officer of C 3 HealthcareRX and as the Founder and President of Transformation Health Partners, LLC. Dr. Weaver also served as the Chief Medical Officer for Blue Cross Blue Shield of North Carolina from 2014 to 2015 after serving as the Vice President, Health Delivery Redesign from 2012 to early 2014. Prior to joining Blue Cross Blue Shield of North Carolina, Dr. Weaver served in various leadership roles at WakeMed Health & Hospitals including Executive Vice President, Medical Affairs. Dr. Weaver also previously served as an Executive Director and Physician and founding member for Alliance Medical Ministry, a 501(c)(3) providing medical care to the working uninsured of Wake County, North Carolina. She holds an M.D. from Duke University School of Medicine and a B.S. in Psychology from Duke University.
Dale Wolf has served on our board of directors since the closing of the Business Combination. Mr. Wolf has served as a member of the board of directors of EHealth, Inc. since 2019 and as chairman of the board since 2021. He has also served as a member of the board of directors of Molina Healthcare, Inc. since 2013 and as chairman of the board since 2017. Mr. Wolf served as the President and Chief Executive Officer of Onecall Care Management Inc. from January 2016 to February 2019 and as executive chairman from September 2015 to January 2016. Mr. Wolf served as the President and Chief Executive Officer of DBW Healthcare, Inc. from January 2014 to June 2018. Mr. Wolf served as the executive chairman of Correctional Healthcare Companies, Inc., a national provider of correctional health care solutions, from December 2012 to July 2014. From 2005 to 2009, Mr. Wolf served as Chief Executive Officer of Coventry Health Care, Inc., a diversified national health care company, and served as the Executive Vice President, Chief Financial Officer and Treasurer of Coventry Health Care, Inc. from 1996 to 2005. Mr. Wolf was also a member of the boards of directors of Correctional Healthcare Companies, Inc. from 2012 to 2014, Coventry Healthcare, Inc. from 2005 to 2009 and Catalyst Health Solutions, Inc. from 2003 to 2012. Mr. Wolf graduated from Eastern Nazarene College with a Bachelor of Arts degree in Mathematics, with honors, and from the MIT Sloan School Senior Executive Program. He has also been a fellow in the Society of Actuaries since 1979.
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PROPOSAL NO. 2 — RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2023 and has further directed that the selection of the independent registered public accounting firm be submitted for ratification by our stockholders at the Annual Meeting. KPMG LLP has advised the Company that it has no direct or indirect financial interest in the Company or any of its subsidiaries and that it has had, during the last three years, no connection with the Company or any of its subsidiaries other than as our independent registered public accounting firm and certain other activities as described below.
Neither our bylaws nor our other organizational documents or applicable law require stockholder ratification of the selection of KPMG LLP as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests or those of our stockholders.
KPMG LLP will have a representative present at the meeting who will have an opportunity to make a statement if he or she so desires and to respond to appropriate questions from stockholders.
Independent Registered Public Accounting Firm
KPMG LLP, which served as our independent registered public accounting firm for the fiscal years ended December 31, 2022 and 2021, provided audit, audit-related and tax services to us during those fiscal years. The following table presents fees for professional services rendered by our independent registered public accounting firm:
| Type of Fees | Fiscal 2022 | Fiscal 2021 | ||||||
| Audit Fees | $ | 5,201,363 | $ | 4,560,000 | ||||
| Audit-Related Fees | --- | --- | ||||||
| Tax Fees | 1,576,204 | 1,863,155 | ||||||
| All Other Fees | --- | --- | ||||||
| Total | $ | 6,777,567 | $ | 6,423,155 | ||||
Audit Fees
This category includes fees associated with our annual audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting and the review of our quarterly reports on Form 10-Q. This category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of our interim financial statements, and the review of our SEC regulatory filings as well as audits of acquired entities.
Audit-Related Fees
This category includes fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements and are not reported as “audit fees”. No audit-related fees were billed to us for 2022 or 2021.
Tax Fees
This category includes fees for services provided for tax compliance, tax planning and advice on mergers and acquisitions.
All Other Fees
There were no other fees billed to us for 2022 or 2021.
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Audit Committee Pre-Approval Policies and Procedures
Our policy is that all audit and non-audit services must be pre-approved by the Audit Committee. The authority to grant pre-approvals of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. All of such services and fees were pre-approved during the fiscal year ended December 31, 2022.
Vote Required for Approval
The approval of the ratification of appointment of KPMG LLP requires the affirmative vote of a majority of the votes cast by the holders present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2. Failure to vote by proxy or to vote in person at the special meeting or an abstention from voting will have no effect on the outcome of the vote on the ratification of appointment of KPMG LLP.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE RATIFICATION OF SELECTION OF KPMG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2023.
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PROPOSAL NO. 3 – SAY-ON-PAY
Background
Section 14A of the Exchange Act requires us to request stockholder approval, on an advisory basis, of the compensation paid to our named executive officers (“NEOs”) as disclosed pursuant to the SEC’s compensation disclosure rules. This proposal is commonly known as a “say-on-pay” proposal.
As part of our Compensation Committee’s efforts to ensure that the interests of our NEOs are aligned with those of our stockholders, our Compensation Committee will consider the results of this “say-on-pay” vote on executive compensation. Our Compensation Committee will consider stockholder feedback when reviewing, designing and implementing our executive compensation program.
The Compensation Discussion and Analysis beginning on page 21 of this proxy statement sets forth detailed information about our executive compensation program. As discussed there, our executive compensation program is designed to:
| • | Link pay with performance | |
| • | Provide an appropriate mix of fixed and at-risk compensation to attract and retain key talent who thrive in a results-driven environment | |
| • | Set competitive pay levels to effectively attract and retain key talent |
Consistent with these goals our executive compensation program emphasizes performance-based pay, with 2022 metrics including stock price performance, Adjusted EBITDA and relative total shareholder return (“TSR”).
Vote Required for Approval
You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the non-binding approval of our fiscal 2022 executive compensation. The affirmative vote of a majority of all votes cast at the Annual Meeting or by proxy is required to approve this non-binding advisory proposal. For purposes of this non-binding advisory vote, any shares not voted (whether by abstention, broker non-vote, or otherwise) will not be counted as a vote cast and will have no impact on the result of the vote, although abstentions will count toward the presence of a quorum.
The vote of the stockholders with respect to this proposal is an advisory vote, and the results will not be binding on our board of directors. However, the board of directors and our Compensation Committee, which is composed entirely of independent directors, will consider the outcome of the vote when making future decisions regarding executive compensation.
Recommendation of our Board of Directors
As an advisory vote, this proposal is not binding upon the Company. However, our Compensation Committee will use stockholder feedback, both as expressed by your “say-on-pay” vote and as provided directly to us, as an important consideration in making future NEO compensation decisions.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” ADOPTION OF THE FOLLOWING RESOLUTION:
RESOLVED, THAT THE STOCKHOLDERS OF THE COMPANY APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS FOR FISCAL 2022, AS DISCLOSED WITHIN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE EXCHANGE ACT (ITEM 402 OF REGULATION S-K), WHICH DISCLOSURE INCLUDES THE COMPENSATION DISCUSSION AND ANALYSIS, SUMMARY EXECUTIVE COMPENSATION TABLES AND RELATED NARRATIVE INFORMATION CONTAINED IN THIS PROXY STATEMENT.
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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board of Directors and Terms of Office of Officers and Directors
Our board of directors is divided into three classes of directors with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the Class I directors, consisting of Messrs. Barasch, Belinfanti and Griggs will expire at this annual meeting of stockholders. The term of office of the Class II directors, consisting of Messrs. Connors, Parnes, Lundberg and Williams, will expire at our 2024 annual meeting of stockholders. The term of office of the Class III directors, consisting of Messrs. Coppens and Wolf and Dr. Weaver, will expire at our 2025 annual meeting of stockholders. Our board regularly considers the advantages of a classified board in light of our overall governance structure and current corporate governance trends. Following consideration of our current governance structure, the Board has determined that it intends to submit for a stockholder vote at the 2024 annual meeting of stockholders a management proposal to amend our certificate of incorporation to eliminate our classified board structure. The amendments would phase out the three-year staggered terms of our directors and transition to the annual election of all of our directors so that by the 2026 annual meeting, the board would be completely declassified and all directors would stand for election annually.
Pursuant to the terms of the Deerfield Subscription Agreement, Deerfield was entitled, at the Business Combination, to designate for nomination by us for election one director to serve on our board of directors. Deerfield designated Dr. Susan Weaver.
Pursuant to the terms of the BlueMountain Board Designee Rights Letter Agreement, the BlueMountain Entities or their permitted transferees holding a majority of the outstanding principal amount under the BM Notes had the right, until August 19, 2021, which was the date on which the BM Notes were repaid in full, to designate and nominate for election one director to our board of directors. BlueMountain’s designee was Dale Wolf.
Pursuant to the terms of the OEP Investment Agreement, for as long as OEP holds beneficial ownership of at least 25% of the shares of capital stock of the Company purchased thereunder, OEP has the right to designate and nominate for election one director to our board of directors. OEP’s initial designee was Brad Coppens. OEP’s sole current designee is Gregory Belinfanti.
Pursuant to the terms of the AeroCare Merger Agreement, for so long as Peloton Equity AeroCare SPV I, L.P. and SkyKnight Aero Holdings, LLC or an affiliate thereof (the “AeroCare Sellers”) hold in the aggregate among them at least 35% of the share consideration issued to them under the AeroCare Merger Agreement, on an as-converted basis, the AeroCare Sellers have the right to nominate one director to our board of directors. The AeroCare Sellers’ designee is Ted Lundberg.
The board held 6 meetings during 2022. During 2022, eight of our ten incumbent directors attended all of the meetings of the board of directors and 2 of our ten incumbent directors attended five of our six meetings of the board of directors. and at least 75% of the meetings of the committees of the board of directors on which that director served (in each case, which were held during the period for which such incumbent director was a director). No directors attended the prior year’s annual meeting. We do not have a policy mandating director attendance at annual meetings of our stockholders, but we strongly encourage directors to attend.
Officers are appointed by our board of directors and serve at the discretion of our board of directors, rather than for specific terms of office.
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Director Independence
Our shares of Common Stock are listed on the Nasdaq Capital Market and trade under the symbol “AHCO”, and we are subject to Nasdaq listing standards. Nasdaq Listing Rule 5605 requires a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq listing standards require that, subject to specified exceptions, each member of a listed company’s Audit, Compensation and Nominating and Governance Committees be independent and that Audit Committee members also satisfy independence criteria set forth in Rule 10A 3 under the Exchange Act. Under Rule 5605(a)(2), a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A 3, a member of an Audit Committee of a listed company may not, other than in his or her capacity as a member of the Audit Committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors has undertaken a review of the composition of our board and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that none of Messrs. Barasch, Williams, Belinfanti, Wolf, Coppens, Lundberg and Connors and Dr. Weaver, representing eight of our ten directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Nasdaq Listing Rule 5605(a)(2).
Our board of directors also determined that Messrs. Wolf, Lundberg, Coppens and Connors, who comprise our Audit Committee, Messrs. Barasch, Wolf, Belinfanti, Williams and Coppens who comprise our Compensation Committee, and Messrs. Connors, Lundberg, Belinfanti and Barasch and Dr. Weaver, who comprise our Nominating and Governance Committee, satisfy the independence standards for such committees established by the Securities and Exchange Commission, or the SEC, and Nasdaq listing standards, as applicable. In making such determination, our board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining independence, including beneficial ownership of our capital stock.
Board Leadership Structure and Role in Risk Oversight
Richard Barasch serves as the Chairman of our board of directors, Stephen Griggs serves as our Chief Executive Officer and Joshua Parnes serves as our President. We believe that the most effective leadership structure at the present time is to have separate Chairman, Chief Executive Officer and President positions because this allows the board of directors to benefit from having multiple strong voices bringing separate views and perspectives to meetings. Our board of directors has established an Executive Committee, consisting of Richard Barasch, Stephen Griggs, Ted Lundberg, Joshua Parnes and Gregory Belinfanti, to which the board has delegated certain decision-making power, including the ability to approve (i) any merger or acquisition transaction or capital expenditure transaction involving an aggregate cash investment or purchase price between $15 million and $40 million and (ii) any merger or acquisition transaction with an equity consideration component up to an aggregate purchase price of $40 million.
Our board of directors is responsible for overseeing the overall risk management process at the Company. Risk management is considered a strategic activity within the Company and, responsibility for managing risk currently rests with executive management while the board participates in the oversight of the process. The oversight responsibility of our board is enabled by management reporting processes designed to provide visibility to the board about the identification, assessment, and management of critical risks. Those areas of focus include strategic, operational, financial and reporting, compliance and other risks. Our Audit Committee enhances the board’s oversight of risk management and discusses with management, the independent auditor and the internal auditor policies with respect to risk assessment and risk management, including significant operating and financial risk exposures and the steps management has taken to monitor, control and report such exposures. Further, our Compensation Committee enhances the board’s oversight of risk management by considering the impact of the Company’s compensation policies and plans, and the incentives created by the Company’s compensation policies and plans, on the Company’s risk profile.
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Board Diversity
The following presents our board of directors diversity statistics in accordance with Nasdaq Rule 5606, as self-disclosed by our directors. As we pursue future board of directors recruitment efforts, our Nominating and Governance Committee will continue to seek out candidates who can contribute to the diversity of views and perspectives of our board of directors.
| Board Diversity Matrix (as of April 28, 2023) | ||||
| Total Number of Directors | 10 | |||
| Female | Male | Non-Binary |
Did Not Disclose Gender | |
|
Part I: Gender Identity Directors |
1 | 8 | - | 1 |
| Part II: Demographic Background | ||||
| African American or Black | - | 2 | - | - |
| Alaskan Native or Native American | - | - | - | - |
| Asian | - | - | - | - |
| Hispanic or Latinx | - | - | - | - |
| Native Hawaiian or Pacific Islander | - | - | - | - |
| White | 1 | 6 | - | - |
| Two or More Races or Ethnicities | - | - | - | - |
| LGBTQ+ | - | |||
| Did Not Disclose Demographic Background | 1 | |||
Committees of the Board of Directors
The standing committees of our board of directors currently consist of an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Compliance Committee. Each committee reports to the board of directors as they deem appropriate and as the board may request. The composition, duties and responsibilities of these committees are set forth below.
Audit Committee
Our Audit Committee consists of Terence Connors, Dale Wolf, Ted Lundberg and Brad Coppens, and Mr. Connors serves as chairman of the Audit Committee. Under Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the Audit Committee, all of whom must be independent. We have determined that each of Messrs. Connors, Wolf, Lundberg and Coppens qualifies as independent under Nasdaq listing standards and applicable SEC rules with respect to Audit Committee membership. We have also determined that Mr. Connors qualifies as an “Audit Committee Financial Expert” as defined in applicable SEC rules. During fiscal year 2022, our Audit Committee met 7 times, including telephonic meetings.
The Audit Committee charter, which is available on our website at https://www.adapthealth.com/investorrelations, details the principal functions of the Audit Committee including:
| • | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us; |
| • | pre approving all audit and non audit services to be provided by the independent registered public accounting firm or any other independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
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| • | reviewing and discussing with the independent registered public accounting firm all relationships the auditors have with us in order to evaluate their continued independence; |
| • | setting clear hiring policies for employees or former employees of the independent registered public accounting firm; |
| • | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; |
| • | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality control procedures and (ii) any material issues raised by the most recent internal quality control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| • | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S K promulgated by the SEC prior to us entering into such transaction; and |
| • | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
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Compensation Committee
Our Compensation Committee consists of Brad Coppens, Richard Barasch, Dale Wolf, David Williams and Gregory Belinfanti, and Mr. Coppens serves as chairman of the Compensation Committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the Compensation Committee, all of whom must be independent. We have determined that each of Messrs. Coppens, Barasch, Wolf, Williams and Belinfanti qualifies as independent under Nasdaq listing standards and applicable SEC rules. Our Compensation Committee held 5 meetings during 2022. The Compensation Committee charter, which is available on our website at https://www.adapthealth.com/investorrelations, details the principal functions of the Compensation Committee including:
| • | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation in executive session at which the Chief Executive Officer is not present; |
| • | reviewing and approving the compensation of all of our other executive officers; |
| • | reviewing our executive compensation policies and plans; |
| • | implementing and administering our equity based remuneration plans; |
| • | assisting management in complying with our SEC filings; |
| • | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| • | producing a report on executive compensation to be included in our annual proxy statement; and |
| • | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
The Compensation Committee is responsible for determining appropriate compensation levels and arrangements for our executive officers and directors, ensuring that our compensation program is consistent with our compensation philosophy and peer company practices. In making these determinations, the Compensation Committee considers each executive officer’s individual performance, the recommendations of our Chief Executive Officer and President and additional factors, such as the executive officer’s responsibilities, experience level and tenure. In 2020, the Company engaged Farient to provide a market assessment of director compensation, which our Compensation Committee also considered in determining the compensation for our directors. The Company engaged Farient again in 2021 to design a long-term incentive plan for the Company’s top executives, which recommendations were considered by our Compensation Committee in determining the equity compensation awards made to our top executives in 2022. In addition, the Company engaged ClearBridge in 2022 to provide executive compensation consulting services as described in the Compensation Discussion and Analysis on page 21 of this proxy statement.
In determining the levels and mix of executive and director compensation, our Compensation Committee does not generally rely on formulaic guidelines, but rather maintains a flexible approach to compensation determinations, which allows it to adapt the various elements of compensation to motivate individual executives and achieve our specific strategic and financial goals. The Compensation Committee then approves, with any modifications it deems appropriate, base salaries, target annual incentive bonuses and grants for our executive officers and directors, as applicable.
Our Chief Executive Officer and President do not have a role in setting their own base salary, annual bonus or the size of their annual equity compensation awards. The Compensation Committee reviews the specific corporate goals and objectives relevant to the compensation of our Chief Executive Officer and President and evaluates their respective performance and pay in light of these goals and objectives. Our Chief Executive Officer and President provide recommendations for each executive officer’s base salary, annual bonus and target annual equity compensation award, as well as recommendations with respect to director compensation, for the Compensation Committee’s review.
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The charter also provides that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC. Other than the engagements of Farient and ClearBridge described above, the Compensation Committee has not retained a compensation consultant to recommend or assist in determining the amount or form of executive or director compensation.
The Compensation Committee may delegate to any one of its members or any subcommittee it may form, the responsibility and authority for any particular matter, as it deems appropriate from time to time under the circumstances.
Nominating and Governance Committee
Our Nominating and Governance Committee is responsible for, among other matters: (i) identifying individuals qualified to become members of our board of directors consistent with criteria approved by our board; (ii) overseeing the organization of our board of directors to discharge the board’s duties and responsibilities properly and efficiently; (iii) identifying best practices and recommending corporate governance principles; and (iv) developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.
Our Nominating and Governance Committee consists of Terence Connors, Dr. Susan Weaver, Ted Lundberg, Gregory Belinfanti and Richard Barasch, with Mr. Barasch serving as the chair of the Nominating and Governance Committee. We have determined that each of Messrs. Connors, Lundberg, Belinfanti and Barasch and Dr. Weaver qualifies as independent under Nasdaq listing standards and applicable SEC rules. Our Nominating and Governance Committee held 2 meeting during 2022. The written charter for the Nominating and Corporate Governance Committee is available on our website at https://www.adapthealth.com/investorrelations.
Subject to the OEP Investment Agreement and the AeroCare Merger Agreement discussed elsewhere in this proxy statement, which provide certain of our stockholders with rights to designate director nominees, the Nominating and Governance Committee uses a variety of methods for identifying and evaluating nominees for director. In recommending director nominees to the board apart from those nominees designated pursuant the OEP Investment Agreement and the AeroCare Merger Agreement, the committee solicits candidate recommendations from its own members, other directors and management. The committee assesses the appropriate size of the board and whether any vacancies on the board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, and the designation provisions of the OEP Investment Agreement and the AeroCare Merger Agreement do not apply, the committee considers whether to fill those vacancies and, if applicable, considers various potential director candidates. The committee evaluates any such candidates at regular or special meetings of the committee, and such candidates may be considered at any point during the year.
The Nominating and Governance Committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a Nominating Committee-recommended nominee. The committee seeks to ensure that the membership of the board and each committee of the board satisfies all relevant Nasdaq listing standard requirements and applicable laws and regulations and all requirements of our organizational documents. The nature of the specific qualifications, qualities, experience or skills (including international versus domestic background, diversity, age, and legal and regulatory requirements) that the committee may look for in any particular director nominee who is not a designee under the OEP Investment Agreement or the AeroCare Merger Agreement depends on the qualifications, qualities and skills of the rest of the directors at the time of any vacancy on the board. The committee does not have a formal policy regarding the consideration of diversity in identifying director nominees beyond being committed to ensuring that no person would be excluded from consideration for service as a director as a result of their sex, race, religion, creed, sexual orientation or disability.
The nominating and governance committee also considers director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting. Our stockholders that wish to nominate a director for election to our board should follow the procedures set forth in our bylaws.
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Compliance Committee
Our Compliance Committee exercises oversight responsibility, reviews regulatory compliance issues and reports to our board of directors with respect to our regulatory compliance programs. Our Compliance Committee consists of Dr. Weaver and Messrs. Barasch, Williams and Wolf, with Dr. Weaver serving as the chair of the Compliance Committee. Our Compliance Committee held 4 meetings during 2022.
Code of Ethics and Committee Charters
We have adopted a Code of Ethics applicable to our directors, officers and employees. We have previously filed a copy of our Code of Ethics, our Audit Committee charter and our Compensation Committee charter as exhibits to our registration statement. You will be able to review these documents by accessing our public filings at the SEC’s web site at https://www.sec.gov. Our Code of Ethics, Audit Committee charter, Compensation Committee charter, Nominating and Governance Committee charter and Compliance Committee charter are also available free of charge on our corporate website at https://www.adapthealth.com/investorrelations. The information on our website does not constitute part of this proxy statement. In addition, a copy of our Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
REPORT OF THE AUDIT COMMITTEE
Our management has primary responsibility for establishing and maintaining effective internal control over financial reporting and preparing our consolidated financial statements and disclosures. KPMG LLP, our independent registered public accounting firm for 2022, was responsible for performing an independent audit of our consolidated financial statements and expressing opinions on the conformity of our consolidated financial statements with generally accepted accounting principles in the United States and on the effectiveness of our internal control over financial reporting. Our Audit Committee oversaw the performance of these responsibilities by KPMG LLP and management including the processes by which these responsibilities are fulfilled.
Our Audit Committee has reviewed our audited consolidated financial statements for the fiscal year ended December 31, 2022 and discussed them with our management and KPMG LLP.
Our Audit Committee has also received from, and discussed with, KPMG LLP various communications that KPMG LLP is required to provide to our Audit Committee, including the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.
In addition, our Audit Committee has received the written disclosures and a letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with our Audit Committee concerning independence, and has discussed with KPMG LLP their independence.
Based on the review and discussions referred to above, our Audit Committee has recommended to the board of directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2022, filed by us with the SEC.
| Respectfully submitted, | |
| The Audit Committee of the Board of Directors | |
|
Terence Connors, Chair Dale Wolf | |
| Ted Lundberg | |
| Brad Coppens |
The material in this report is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not to be incorporated by reference in any filing of AdaptHealth Corp. under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
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EXECUTIVE AND DIRECTOR COMPENSATION
Identification of Executive Officers
The following table sets forth the name, age and position of each of our executive officers as of April 28, 2023:
| Name | Age | Position | ||
| Christine Archbold | 48 | Chief Accounting Officer | ||
| Jason Clemens | 45 | Chief Financial Officer | ||
| Stephen Griggs | 65 | Chief Executive Officer, Director | ||
| Christopher Joyce | 59 | General Counsel | ||
| Joshua Parnes | 45 | President, Director | ||
| Albert Prast | 62 | Chief Technology Officer | ||
| Shaw Rietkerk | 48 | Chief Operating Officer |
The following is biographical information as of April 28, 2023 for our executive officers other than Messrs. Griggs and Parnes, whose biographical information appears above in Proposal 1 — Election of Directors.
Christine Archbold joined AdaptHealth in 2022 as AdaptHealth’s Senior Vice President of Corporate Accounting. Ms. Archbold was promoted to Chief Accounting Officer and principal accounting officer in March 2023. Ms. Archbold previously has held a variety of senior financial management positions, including Chief Accounting Officer and Corporate Controller at Clarivate from 2017 to 2022, Global Controller (from 2014 to 2017) and Director of Financial Reporting (from 2011 to 2014) at Houghton International. In these roles, Ms. Archbold had overall responsibility for the controllership, financial reporting, and systems of internal controls. Prior to joining Houghton International in 2011, Ms. Archbold was an auditor with the accounting firm of Ernst & Young LLP. Ms. Archbold holds a B.S. in Accounting from Saint Joseph’s University.
Jason Clemens joined AdaptHealth in 2020 from MEDNAX, Inc, a national provider of health solutions to hospitals, health systems, and healthcare facilities, where he served as Senior Vice President and Operations Chief Financial Officer. Over a nine-year career at MEDNAX, Mr. Clemens held positions of increasing responsibility in operations management and finance. Prior to joining MEDNAX, Mr. Clemens served in progressive roles within operations management and finance at Accenture, Lennar, and Ryder. Mr. Clemens holds a B.S. in Industrial Engineering from Lehigh University, and an M.S. in Finance and M.B.A. from the Indiana University Kelley School of Business. He is also a Chartered Financial Analyst (CFA) and a Certified Six Sigma Blackbelt.
Christopher Joyce joined AdaptHealth Holdings in 2018 as its General Counsel. Mr. Joyce has over 27 years of experience as chief legal officer and business development executive for publicly traded and privately held provider based and managed care companies. Mr. Joyce most recently served as General Counsel of InnovaCare, Inc., a $2.0 billion managed care insurance company with 450,000 Medicare and Medicaid beneficiaries. Mr. Joyce holds a bachelor’s degree in Economics from the State University of New York at Albany and a JD from the University of Chicago.
Albert Prast joined AdaptHealth in February 2021. Mr. Prast has worked in management roles in the information technology industry for 26 years, specifically as the executive leader of technology vision, strategy, and execution for a number of healthcare companies. Currently, Mr. Prast serves as the Chief Technology Officer of AdaptHealth. Previously, Mr. Prast served as the chief information and chief technology officer for AeroCare. At AeroCare, Mr. Prast focused on implementing technology solutions to enhance efficiency and create a competitive advantage in an industry that has historically relied on paper-based operations. Mr. Prast is also an active investor and advisor to healthcare technology companies and serves on a number of boards, including DataLink Software, ClinOne, RxREvu, ClearSense, and Rancho Family Medical Group.
Shaw Rietkerk joined AdaptHealth Holdings in 2018, serving as Chief Revenue Officer from November 2019 until August 2020, Chief Operating Officer from August 2020 until February 2021 and Chief Operating Officer – Centralized Operations from February 2021 until March 2023. Mr. Rietkerk was promoted to Chief Operating Officer in March 2023. Mr. Rietkerk most recently served as Executive Vice President of Revenue Cycle Management at Brightree. Mr. Rietkerk has over two decades of healthcare service leadership experience, with an extensive background in revenue cycle management, operations, business process outsourcing, account management and process. Prior to joining Brightree in 2015, Mr. Rietkerk was Senior Vice President, Worldwide Operations at M*Modal, a leading healthcare technology provider of advanced clinical documentation solutions.
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STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in cumulative total stockholder return of our common stock during the period from our first day of trading following our business combination to 2022 with (i) the cumulative total return of the S&P 600 index and (ii) the cumulative total return of the S&P Healthcare Services Select Industry Index. The comparison assumes $100 was invested on November 11th , 2019 (the first trading day following our business combination) in our common stock and in each of the foregoing indices and the reinvestment of dividends through December 30, 2022 (last trading day of the year). The stock price performance on the following graph is not necessarily indicative of future stock price performance.
This graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy into any filing under the Securities Act or under the Exchange Act, except to the extent that AdaptHealth specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act.
Indexed Returns
| Years Ending | ||||||||||||||||||||
| Company/Index | 11/11/2019 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/30/2022 | |||||||||||||||
| AdaptHealth Corp. | $ | 100.00 | $ | 114.38 | $ | 391.25 | $ | 254.79 | $ | 200.21 | ||||||||||
| S&P 600 | $ | 100.00 | $ | 103.61 | $ | 113.53 | $ | 142.22 | $ | 117.44 | ||||||||||
| S&P Health Care Services Select Industry Index | $ | 100.00 | $ | 109.06 | $ | 145.05 | $ | 158.75 | $ | 126.89 | ||||||||||
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| COMPENSATION DISCUSSION & ANALYSIS |
This Compensation Discussion & Analysis section of our Proxy Statement provides a detailed description of our executive compensation programs, decisions, and associated governance for our Named Executive Officers (“NEOs”) in 2022. In this section of our Proxy Statement, “Committee” is a reference to the Compensation Committee.
Table of Contents
|
Named
Executive Officers
Stephen
Griggs
Jason Clemens Chief Financial Officer
Joshua Parnes Director and President
Christopher Joyce General Counsel
Albert Prast Chief Technology Officer |
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| EXECUTIVE SUMMARY |
Year in Review and Alignment with Pay
2022 was another year of substantial progress for AdaptHealth. Our scale and impact is unmatched in the market, with nearly 11,000 employees touching approximately 3.9 million lives across the United States. Our performance achievements for 2022 include the following:
| • | Net revenue of $2.97 billion increased 21% over full-year 2021 and was less than 1% below our year-end guided midpoint |
| • | Adjusted EBITDA of $593.8 million increased 5% over full-year 2021 which was between the challenging threshold and target goals established under our annual bonus plan. Adjusted EBITDA is defined as EBITDA, plus loss on extinguishment of debt, equity-based compensation expense, transaction costs, severance, change in fair value of the contingent consideration common shares liability, change in fair value of the warrant liability, and other non-recurring items of expense or income. |
| • | We completed eight acquisitions for an aggregate consideration of approximately $17.6 million, and completed the integration of 23 transactions completed in 2021, including our merger with AeroCare. |
| • | We also continued to stabilize and optimize our internal processes and invested in technology, tools, and talent to deliver on our long-term targets. |
These achievements were reflected in the executive pay outcomes for 2022, aligning with our focus on paying for performance:
| • | Annual cash bonuses were primarily based on Adjusted EBITDA performance which was 7.3% below the guided midpoint for 2022. This resulted in bonuses being earned at 63.83% of target for our eligible NEOs. |
| • | November 2019 performance-vested restricted stock awards held by Messrs. Parnes and Joyce were earned at 87.27% based on compound annual growth in Adapthealth’s stock price of 25% during the three-year performance period that concluded on December 31, 2022. |
| • | Our first award of performance-vested restricted stock units (“PSUs”) based on relative TSR were granted in the first quarter of 2022 and will vest subject to performance in the first quarter of 2025. |
Compensation at a Glance
The Committee reviewed our executive compensation framework in 2021 and 2022, with the 2022 program emphasizing at-risk, results-driven pay with performance measures focused on key measures of our success in growing profitably and building sustainable value for our stockholders. The high support our 2022 say-on-pay received, with over 98% of shares voted cast in favor of the proposal, was a strong indication that our stockholders were supportive of the changes we made.
The 2022 target direct compensation mix for both the Chief Executive Officer and the President is illustrated below. The majority (86%) of each of their compensation is at-risk variable pay, with 72% consisting of equity incentive awards. For all other NEOs in 2023, at-risk variable pay represents an average of 78% of the target compensation mix, with an average of 55% consisting of equity incentive awards. The key design features are consistent across all NEOs.
| 86% at-risk, results-driven pay |
| 100% Cash | 50% PSUs | 50% RSUs |
| Annual bonus based on Adjusted EBITDA performance (75%) and individual performance (25%) |
• PSUs vest based on three-year relative TSR performance • Restricted stock units (“RSUs”) vest in three equal annual installments over a three-year period • Awards are subject to continuing employment | |
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| COMPENSATION DESIGN |
Compensation Philosophy and Strategic Alignment
AdaptHealth is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment, medical supplies, and related services. To be successful in a competitive marketplace, we need to attract and retain talented employees who are aligned to our mission, vision and values, as well as effective leaders in the fast-paced and high-growth environment in which we operate. Our compensation philosophy is to have a program that fully supports the Company’s attraction, retention, and stockholder alignment objectives, with an appropriate balance between achieving short-term results and creating long-term sustainable value for stockholders that reinforces and strengthens the linkage between pay and performance.
| Principle | How we achieve this |
| Link pay with performance |
✓ Deliver the majority of an NEO’s pay in the form of at-risk, variable compensation ✓ Provide incentive opportunities that can be earned based on robust, simple, transparent, and holistic measures of enterprise-wide performance (currently Adjusted EBITDA and relative TSR) |
| Provide an appropriate mix of fixed and at-risk compensation to attract and retain key talent who thrive in a results-driven environment(1) |
✓ Deliver the majority of pay as at-risk and results-driven,(2) accounting for 86% of the CEO’s and the President’s pay mix, and an average of 78% for all other NEOs ✓ Deliver 50% of each NEO’s pay in performance-based pay, defined as annual bonus and PSUs ✓ Use a combination of PSUs and RSUs to balance performance-based pay and retention objectives, while collectively aligning with stockholders’ interests |
| Set competitive pay levels to effectively attract and retain key talent |
✓ Use an appropriate peer group to provide external context that informs pay decisions ✓ Reference the market 50th percentile when setting total direct compensation opportunities (the sum of base salary, target bonus and annual equity awards), with positioning against market informed by a range of factors consistent with the Company’s compensation philosophy (3) |
| (1) | Pay mix and equity mix percentages based on target compensation packages effective in 2022. |
| (2) | Results-driven considered as performance-based and/or equity-based compensation, the value of which moves in accordance with our stock price performance. |
| (3) | The range of factors that the Committee might consider is detailed in the “Use of Market Data” section. |
To ensure our executive compensation program appropriately balances pay-for-performance objectives, the Committee has elected to align incentive compensation with the following key metrics:
| Performance Metric |
How this aligns with our strategic priorities |
| Adjusted EBITDA (1) |
✓ Measures our ability to grow profitability ✓ Incentivizes top line growth, prudent investment and cost management that translates to bottom-line value creation for our stockholders |
| Individual
performance |
✓ Measures the impact of individual achievements across areas of strategic significance ✓ Aligns outcomes with achievements in areas that contribute to overall company performance |
| Relative TSR |
✓ Aligns with stockholders’ interests ✓ Assesses holistic company performance across all strategic priorities through the eyes of stockholders ✓ Neutralizes impact of macroeconomic events and therefore measures AdaptHealth’s ability to create superior long-term value relative to peers |
| (1) | Adjusted EBITDA is a non-GAAP financial measure. See our Annual Report on Form 10-K for the year ended December 31, 2022 for a reconciliation showing how this metric is calculated from our consolidated audited financial statements. |
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Compensation Policies and Practices
In furtherance of good governance, there are a number of policies and practices applicable to NEOs that we embrace.
| Practices we follow | Practices we avoid |
|
✓ Align pay outcomes with individual and company performance ✓ Deliver the majority of executive compensation in at-risk pay ✓ Reference 50th percentile of an appropriately sized Peer Group when making compensation decisions ✓ Double-trigger vesting on a change in control ✓ Operate robust share ownership guidelines and share retention requirements ✓ Engage an independent compensation consultant |
û No tax gross-ups û No discounting or repricing of equity awards û No excessive perquisites or benefits û No dividends or dividend equivalents are paid on unearned PSUs or RSUs |
| COMPENSATION GOVERNANCE |
Role of the Committee
The Committee, chaired by Brad Coppens, consists of five directors who are independent under Nasdaq listing standards and applicable SEC rules. The Committee is responsible for determining appropriate compensation levels and arrangements for our executive officers and directors, ensuring that our compensation program is consistent with our compensation philosophy and peer company practices. In making these determinations, the Committee considers each executive officer’s individual performance, the recommendations of our Chief Executive Officer and our President, and additional factors, such as the executive officer’s responsibilities, experience level and tenure.
The core duties of the Committee include, but are not limited to:
| • | Reviewing and approving annually the Company’s compensation philosophy |
| • | Reviewing and approving annually the compensation of our Chief Executive Officer and other executive officers, in particular the applicable corporate goals and objectives, evaluating performance in light of such goals and objectives, and determining the resulting compensation; |
| • | Reviewing our executive compensation policies and plans; |
| • | Implementing and administering our equity-based compensation plans; |
| • | Assisting management in complying with our SEC filings; |
| • | Approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| • | Producing a report on executive compensation to be included in our annual proxy statement; and |
| • | Reviewing, evaluating, and recommending changes, if appropriate, to the compensation for our directors. |
Our Chief Executive Officer and our President are invited to attend meetings, although are not present when matters regarding their own compensation are discussed. The Committee considers the input of our Chief Executive Officer and our President as it relates to the compensation for other executive officers. The full Committee Charter can be found on the Investor Relations page of our website.
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Stockholder Engagement
We are pleased to say that 98.6% of votes were cast in favor of our say-on-pay resolution at our 2022 Annual Meeting of Stockholders. In addition, 99.9% of stockholders were in favor of conducting an annual “say-on-pay” vote going forward. This annual vote will provide the Committee regular insight into the views of our aggregate stockholder base, complementing feedback received during targeted outreach and informing future discussions on executive compensation program design.
Use of Consultants and Advisors
The Committee has the authority in its charter to retain or obtain the advice of a compensation consultant and other outside advisors. During 2022 the Committee retained ClearBridge as an independent consultant to assist in a holistic review of the Company’s compensation policies and practices, and to serve as the Committee’s ongoing advisor. In 2022 the Committee assessed ClearBridge’s independence in accordance with SEC requirements. The Committee concluded that ClearBridge met the criteria for independence.
During 2022 and into early 2023, ClearBridge was invited to provide advice on the compensation philosophy, a compensation peer group and incentive design; provide competitive compensation data for executive officer roles; review compensation recommendations from management; update the Committee on market trends; review director compensation and attend Committee meetings. ClearBridge reports directly to the Committee and with its permission works with management to gain input and insight.
Use of Market Data
The Committee conducts an annual review of the compensation peer group with ClearBridge, which is subsequently used to inform various decisions related to executive compensation.
| How Peer Group companies were selected | How the Peer Group is used |
|
• US-listed companies in the healthcare services industry, focused on those providing at-home healthcare equipment, services, and medical supplies • Comparable size based on revenue (~1/3x - 3x of $2.5 billion) and market capitalization (~1/5x – 5x of $3.8 billion), with AdaptHealth positioned around median • Competitors for talent • Broader factors such as enterprise value, EBITDA, stock price performance, headcount, and peer of peer analysis, were also considered in approving the final Peer Group, but were not primary selection criteria |
• Inform decisions on base salaries, target incentive opportunities and the total target direct compensation opportunity • Determine the level of payout in respect of the relative TSR performance condition • Provide perspective on compensation policies and practices observed in relevant companies such as equity vehicles, equity mix, incentive metrics and stock ownership guidelines |
In 2022, the Committee worked with ClearBridge to review the compensation peer group established in 2021 for use in 2023. Two companies were removed due to transaction activity (i.e., Apria, Inc. and LHC Group, Inc.) and were replaced with two additional companies (i.e., Agiliti, Inc. and RadNet, Inc.) in order to maintain a robust group of comparably sized peers.
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| 2022/2023 Peer Group (1) | |||
| Former Peers (2022 only) | Consistent Peers (2022 and 2023) | New Peers (2023 only) | |
|
• Apria, Inc. • LHC Group, Inc. |
• Addus HomeCare Corporation • Amedisys, Inc. • AMN Healthcare Services, Inc. • Chemed Corporation • Encompass Health Corporation • The Ensign Group, Inc. • Henry Schein, Inc. |
• ModivCare Inc. • Option Care Health, Inc. • Owens & Minor, Inc. • Patterson Companies, Inc. • The Pennant Group, Inc. • Select Medical Holdings Corporation |
• Agiliti, Inc. • RadNet, Inc. |
| 2021/2022 Peer Group (2) | |||
| (1) | Established in 2022 to inform 2023 compensation decisions and to be used as the peer group for the relative TSR conditions applicable to 2023 PSU awards |
| (2) | Established in 2021 to inform 2022 compensation decisions and to be used as the peer group for the relative TSR conditions applicable to 2022 PSU awards. |
When insufficient data is available for the Peer Group, the independent consultant provides the Committee with survey data for relevant companies as an alternative and relevant point of reference.
As noted above, one of the primary uses of market data is to inform decisions that the Committee makes as it relates to executive officer compensation levels. In setting individual target direct compensation opportunities, the Committee references the 50th percentile market data for relevant roles in the Peer Group. However, the positioning of an individual’s target compensation relative to market will vary, taking account of a range of factors including: role scope and responsibilities; criticality; performance and potential; the prior experience and pay of the incumbent; internal equity; and company performance.
Compensation and Risk
The Committee has determined that AdaptHealth’s compensation policies and practices do not encourage executives to take excessive risks that are reasonably likely to have a material adverse effect on the Company. The Company maintains several policies that mitigate potential risks related to compensation, which are summarized below.
Stock Ownership Guidelines
AdaptHealth operates stock ownership guidelines to further align the interests of our NEOs, and other individuals to whom the guidelines apply, with those of our stockholders. The key features of the guidelines applicable to our NEOs are summarized below.
| Required Ownership |
• Chief Executive Officer and President: 6x base salary • Other NEOs: 3x base salary |
| Period to Comply | • Five years from becoming a covered person under the policy |
| Qualifying Equity Interests |
• Stock owned by the officer, or in which the officer has an interest (e.g., shares that are jointly held with their spouse, or shares held in a trust in which the officer or a family member has an interest) • Unvested time-based restricted stock or RSUs |
| Retention Requirement | • Retention of 50% of the after-tax shares on vesting of any company-issued equity awards, if the applicable guideline is not met within five years |
All NEOs are expected to be compliant within the required timeframe.
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Compensation Recovery Policy
The 2019 Stock Incentive Plan, which is used to grant equity awards to our NEOs, states that all awards are subject to any incentive compensation clawback or recoupment policy currently in effect, or as may be adopted. The Committee will adopt a clawback policy in compliance with the SEC and Nasdaq rules and guidelines during 2023.
Insider Trading Policy
Our Insider Trading Policy prohibits those covered by the policy, which includes all of our executive officers,from engaging in short-term trading, short sales, options trading, trading on margin, pledging or hedging transactions. We provide training and distribute periodic reminders to our team members regarding this policy. Any exemption from this requires advance approval from the General Counsel. No exemptions have previously been granted to any executive officer.
| 2022 COMPENSATION DECISIONS AND OUTCOMES |
Base Salary
Base salary is fixed cash compensation provided to our NEOs to reflect their day-to-day responsibilities taking into account, among other things, role scope and performance. No changes were made to base salaries in 2022.
| Executive | 2022 Base Salary | |||
| Stephen Griggs | $ | 625,000 | ||
| Joshua Parnes | $ | 625,000 | ||
| Jason Clemens | $ | 520,000 | ||
| Christopher Joyce | $ | 475,000 | ||
| Albert Prast | $ | 450,000 | ||
Annual Incentives
The annual bonus plan enables the Committee to incentivize and reward NEOs for the achievement of financial and individual performance that drives AdaptHealth’s overall results. The plan emphasizes adjusted EBITDA performance, which accounts for 75% of the total payout and serves as a threshold requirement for any payout to be earned in respect of the remaining 25% which is based on an assessment of individual performance. Payout opportunities range from 50% of target for threshold performance to 200% of target for maximum performance. Individual NEO opportunities are expressed as a percentage of base salary, with any earned bonus paid in cash. Adjusted EBITDA has pre-established threshold, target and maximum goals and pre-approved guidelines for adjustments. For any payout to be earned in respect of the individual performance, the threshold Adjusted EBITDA performance goal must be achieved. This approach ensures that executives’ annual incentive compensation is aligned with our success in growing profitability and reflects our broader achievements that should contribute to our future success.
In the first quarter of 2023, the Committee completed its assessment of company performance with reference to goals established in the first quarter of 2022. Provided below are the adjusted EBITDA goals for FY2022.
| Weighting | Below Threshold |
Threshold | Target | Maximum | Actual | |||||||
| FY2022 Adjusted EBITDA | 75% | < $576M | $576M | $640M | $704M | $593.8M | ||||||
| Payout (% of target) (1) | - | 0% | 50% | 100% | 200% | 63.83% |
| (1) | For performance between goals straight-line interpolation will be applied. |
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In assessing performance in respect of the remaining 25% of the opportunity, which is based on individual performance, the Compensation Committee conducted a holistic assessment of financial performance inclusive of the adjusted EBITDA results summarized above as well as certain strategic objectives. Based on this assessment the Committee determined that the individual performance element for the NEOs would be scored at the same level as the adjusted EBITDA goal. As a result, the following outcomes were approved for 2022 at 63.83% of target.
| Executive | Target
Bonus (% of salary) |
Target Bonus | 2022 Actual Bonus | |||||||||
| Stephen Griggs | 100 | % | $ | 625,000 | $ | 398,938 | ||||||
| Joshua Parnes | 100 | % | $ | 625,000 | $ | 398,938 | ||||||
| Jason Clemens | 100 | % | $ | 520,000 | $ | 331,916 | ||||||
| Christopher Joyce | 100 | % | $ | 475,000 | $ | 303,193 | ||||||
| Albert Prast | 100 | % | $ | 450,000 | $ | 287,235 | ||||||
Long-Term Incentives
Annual equity awards to our NEOs are made in an equal combination of PSUs and RSUs. PSUs can be earned based on three-year relative TSR performance versus our Peer Group, and RSUs vest ratably in equal installments on the first, second and third anniversary of the date of grant. Awards of PSUs and RSUs are subject to the recipient’s continuing employment through each vesting date. Our relative TSR goals for PSU are shown below.
| Threshold | Target | Maximum | ||||
| Relative TSR Rank | ≥25th Percentile | 50th Percentile | ≥75th Percentile | |||
| Payout (% target) (1) | 50% | 100% | 200% |
| (1) | For performance between goals straight-line interpolation will be applied. For performance below threshold (i.e., ranking below the 25th percentile relative to peers), no vesting will occur. |
| Equity Mix | ||||||||||||
| Executive | Target Equity Grant | PSUs | RSUs | |||||||||
| Stephen Griggs | $ | 3,250,000 | 50 | % | 50 | % | ||||||
| Joshua Parnes | $ | 3,250,000 | 50 | % | 50 | % | ||||||
| Jason Clemens | $ | 1,500,000 | 50 | % | 50 | % | ||||||
| Christopher Joyce | $ | 1,150,000 | 50 | % | 50 | % | ||||||
| Albert Prast | $ | 1,000,000 | 50 | % | 50 | % | ||||||
During 2022 the final tranche of the performance-vested restricted stock awards made in November 2019 to Messrs. Parnes and Joyce completed their performance period. Awards were eligible to vest based on stock price growth through December 31, 2022, as shown below. Based on a compound annual growth rate in stock price of 25% over the three-year performance period. 87.27% of the awards vested with the balance of the awards forfeited.
| Below Threshold | Threshold | Mid-Point | Maximum | Actual | ||||||||||||||||
| Compound Annual Growth in Stock Price from $10.00 | <0 | % | 0 | % | 15 | % | 30 | % | 25 | % | ||||||||||
| Payout (% of award) (1) | 0 | % | 33.3 | % | 66.7 | % | 100 | % | 87.27 | % | ||||||||||
| (1) | For performance between goals, straight-line interpolation applied. |
Our first award of PSUs based on relative TSR were granted in the first quarter of 2022 and will vest subject to performance in the first quarter of 2025.
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Benefits and Perquisites
Our NEOs are eligible to participate in employee benefit programs available to our employees generally, subject to the terms and conditions of such plans as may be in place from time to time.
| Benefit | Key Features |
| Health & Welfare Plans |
✓ Medical, dental, vision, life, disability, health and dependent care flexible spending accounts ✓ Accidental death and dismemberment benefit plans |
| Retirement Benefits |
✓ Employer sponsored 401(k) plan through one of our subsidiaries ✓ Company match is 100% on the first 1% of an employee’s contribution, and 50% on the next 2% with maximum employee contributions and employer matches subject to annual federal limits ✓ Employees are 100% vested on pre-tax deferrals when contributed and participants age 50 or older may contribute additional catch-up contributions based on statutory limits |
In addition, Messrs. Parnes, Clemens and Joyce are entitled to reimbursement of automobile expenses of up to $1,500 per month for Mr. Parnes, and $1,000 per month for Messrs. Clemens and Joyce as required by their employment agreements.
| ADDITIONAL INFORMATION |
Tax and Accounting Considerations
Under Code Section 162(m), a publicly held corporation cannot take a federal income tax deduction for compensation exceeding $1 million per person in any taxable year for its chief executive officer, chief financial officer and other three most highly compensated executive officers (each, a “Covered Person”). In addition, once an individual becomes a Covered Person for any taxable year, that individual will remain a Covered Person for all future years, including following any termination of employment.
While our Board considers the anticipated tax treatment to AdaptHealth and our executive officers as one factor when reviewing our executive compensation and other compensation programs, our Board also looks at other factors in making its decisions, as noted above, and retains full authority to approve compensation arrangements for our executive officers that are not fully deductible under Section 162(m) when it believes that other considerations outweigh the tax deductibility of the compensation.
Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K with management. Based on this review and discussions, the Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this Proxy Statement.
Brad Coppens – Chairperson
Richard Barasch
Greg Belinfanti
David Williams
Dale Wolf
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EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation awarded to, earned by, or paid to our named executive officers during the fiscal years ended December 31, 2022, 2021 and 2020.
Summary Compensation Table
| Name and Principal Position | Year | Salary
(1) ($) |
Bonus ($) |
Stock Awards (2) ($) |
Option Awards ($) |
Non-equity
Incentive Plan Compensation (3) ($) |
All
Other Compensation (4) ($) |
Total ($) | ||||||||
| Stephen Griggs (5) | 2022 | 625,000 | — | 3,698,882 | — | 398,938 | 1,524 | 4,724,344 | ||||||||
| Chief Executive Officer | 2021 | 490,385 | — | 496,036 | 2,299,462 | 650,000 | — | 3,935,883 | ||||||||
| Jason Clemens | 2022 | 520,000 | — | 1,707,204 | — | 331,916 | 18,280 | 2,577,400 | ||||||||
| Chief Financial Officer | 2021 | 446,111 | — | 1,872,734 | — | 483,250 | 18,612 | 2,820,707 | ||||||||
| 2020 | 179,808 | 150,000 | 1,107,552 | — | 159,375 | 6,883 | 1,603,618 | |||||||||
| Joshua Parnes | 2022 | 625,000 | — | 3,698,882 | 398,938 | 18,120 | 4,740,940 | |||||||||
| President | 2021 | 527,778 | — | 496,036 | 2,299,462 | 650,000 | 4,654 | 3,977,930 | ||||||||
| 2020 | 500,000 | — | — | — | 500,000 | 489 | 1,000,489 | |||||||||
| Christopher Joyce (6) | 2022 | 475,000 | — | 1,308,842 | — | 303,193 | 12,516 | 2,099,551 | ||||||||
| General Counsel | ||||||||||||||||
| Albert Prast (5) | 2022 | 450,000 | — | 1,138,121 | — | 287,235 | 792 | 1,876,148 | ||||||||
| Chief Technology Officer | 2021 | 380,769 | — | 2,727,129 | — | 375,750 | — | 3,483,648 | ||||||||
| (1) | The amounts reported in this column reflect the annual base salaries of each named executive officer effective October 8, 2021. For additional information, please see “—Narrative to Summary Compensation Table—Executive Employment Agreements” below. | |
| (2) | The amounts reported in this column for 2022 represents the aggregate grant-date fair value of the restricted stock units granted during the fiscal year ended December 31, 2022, which was determined in accordance with FASB ASC 718. These amounts reflect the grant-date fair value of the restricted stock units for accounting purposes and do not represent the actual economic value that may be realized by each named executive officer. There can be no assurance that these amounts will ever be realized. See note 11, Stockholders’ Equity, to our consolidated financial statements for the fiscal year ended December 31, 2022 to our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the assumptions used to calculate these values. | |
| (3) | The amounts reported in this column for 2022 represents the annual performance-based incentive compensation earned with respect to 2022 by each named executive officer. The annual performance-based incentive compensation was paid in the first quarter of 2023. For additional information, please see “Compensation Discussion & Analysis—2022 Compensation Decisions and Outcomes—Annual Incentives” above. | |
| (4) | The amounts reported as earned by each named executive officer in this column for 2022 represent the following: (i) for Mr. Griggs, $1,524 in life insurance premiums, (ii) for Mr. Clemens, $180 in life insurance premiums, $12,000 in automobile expenses and an employer matching contribution to the Company’s 401(k) plan equal to $6,100; (iii) for Mr. Parnes, $120 in life insurance premiums and $18,000 in automobile expenses; (iv) for Mr. Joyce, $516 in life insurance premiums and $12,000 in automobile expenses, and (v) for Mr. Prast, $792 in life insurance premiums. | |
| (5) | Messrs. Griggs and Prast were not employed by the Company in the years ended December 31, 2020 and therefore were not named executive officers in that year. | |
| (6) | Mr. Joyce was not a named executive officer of the Company in the years ended December 31, 2021 and 2020. |
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Grants of Plan-Based Awards Table
The following table sets forth grants of plan-based awards to our named executive officers as of December 31, 2022.
| Estimated
Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated
Future Payouts Under Equity Incentive Plan Awards |
Number (#) (3) |
Number (#) |
Exercise ($/sh) |
Grant Date and Option ($) (4) | |||||||
| Name | Grant Date (1) |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) (2) |
Maximum (#) | |||||
| Stephen Griggs | October 11, 2021 | 312,500 | 625,000 | 1,250,000 | — | — | — | — | — | — | — | |
| February 1, 2022 | — | — | — | 40,808 | 81,617 | 163,234 | — | — | — | 2,232,225 | ||
| February 1, 2022 | — | — | — | — | — | — | 81,617 | — | — | 1,466,657 | ||
| Jason Clemens | October 11, 2021 | 260,00 | 520,000 | 1,040,000 | — | — | — | — | — | — | — | |
| February 1, 2022 | — | — | — | 18,835 | 37,670 | 75,340 | — | — | — | 1,030,275 | ||
| February 1, 2022 | — | — | — | — | — | — | 37,670 | — | — | 676,930 | ||
| Joshua Parnes | October 11, 2021 | 312,500 | 625,000 | 1,250,000 | — | — | — | — | — | — | — | |
| February 1, 2022 | — | — | — | 40,808 | 81,617 | 163,234 | — | — | — | 2,232,225 | ||
| February 1, 2022 | — | — | — | — | — | — | 81,617 | — | — | 1,466,657 | ||
| Christopher Joyce | October 11, 2021 | 237,500 | 475,000 | 950,000 | — | — | — | — | — | — | — | |
| February 1, 2022 | — | — | — | 14,440 | 28,880 | 57,760 | — | — | — | 789,868 | ||
| February 1, 2022 | — | — | — | — | — | — | 28,880 | — | — | 518,974 | ||
| Albert Prast | October 11, 2021 | 225,000 | 450,000 | 900,000 | — | — | — | — | — | — | — | |
| February 1, 2022 | — | — | — | 12,556 | 25,113 | 50,226 | — | — | — | 686,841 | ||
| February 1, 2022 | — | — | — | — | — | — | 25,113 | — | — | 451,281 | ||
| (1) | Equity awards granted February 1, 2022 were made pursuant to the 2019 Stock Incentive Plan. October 11, 2021 awards represent annual cash bonus opportunities. | ||
| (2) | Shares of restricted stock units reported in this column are earned based upon the achievement of certain relative total shareholder return goals as defined, and, if earned, vest at the end of three years from the grant date. | ||
| (3) | Shares of restricted stock units reported in this column are eligible to vest 1/3rd on each of the first, second and third anniversaries of the grant date. | ||
| (4) | The amounts reported in this column represents the aggregate grant-date fair value of the shares of restricted stock units granted during the fiscal year ended December 31, 2022, which was determined in accordance with FASB ASC 718. These amounts reflect the grant-date fair value of the shares of restricted stock units for accounting purposes and do not represent the actual economic value that may be realized by each named executive officer. There can be no assurance that these amounts will ever be realized. See note 11, Stockholders’ Equity, to our consolidated financial statements for the fiscal year ended December 31, 2022 to our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of the assumptions used to calculate these values. |
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
Executive Employment Agreements
Certain of the compensation paid to our named executive officers reflected in the summary compensation table was provided pursuant to employment agreements with the Company or one of its subsidiaries, which are summarized below. For a discussion of the severance pay and other benefits to be provided to our named executive officers in connection with a termination of employment and/or a change in control, please see “—Potential Payments Upon Termination or Change In Control” below. Please see also see “Compensation Discussion & Analysis—Compensation at a Glance” above for an explanation of the amount of salary and bonus in proportion to total compensation for our named executive officers.
Stephen Griggs. Mr. Griggs is party to an employment agreement with the Company, dated February 2, 2021, pursuant to which Mr. Griggs is entitled to receive an annual base salary, currently $625,000 (which amount is subject to increase from time to time), and is eligible to receive a target annual incentive bonus equal to 100% of his base salary based on the achievement of annual Company and individual performance objectives for the applicable fiscal year, subject to continued employment through the applicable payment date. Mr. Griggs is also eligible to participate in the Company’s employee benefit programs offered to similarly situated employees. In connection with his employment agreement, Mr. Griggs entered into a restrictive covenant agreement, which includes a 24 month post-termination non-compete, a 24 month post-termination non-solicit of the employees, consultants, clients, customers and other business relationships of the Company and its affiliates, and an indefinite covenant against making any disparaging or defamatory comments regarding the Company or any of its affiliates.
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Jason Clemens. Mr. Clemens is party to an employment agreement with the Company, dated May 1, 2020, pursuant to which Mr. Clemens is entitled to receive an annual base salary, currently $520,000 (which amount is subject to increase from time to time) and is eligible to receive a target annual incentive bonus equal to 100% of his base salary based on the achievement of annual Company and individual performance objectives for the applicable fiscal year, subject to continued employment through the applicable payment date. Mr. Clemens is also eligible to participate in the Company’s employee benefit programs offered to similarly situated employees, to receive annual equity incentive grants with a target grant date value of $600,000, subject to the approval of, and terms and conditions established by, the Committee, and to receive a monthly automobile allowance in the amount of $1,000. In connection with his employment agreement, Mr. Clemens entered into a restrictive covenant agreement, which includes a 12 month post-termination non-compete, a 12 month post-termination non-solicit of the employees, consultants, clients, customers and other business relationships of the Company and its affiliates.
Joshua Parnes. Mr. Parnes is party to an employment agreement with the Company, dated March 20, 2019, pursuant to which Mr. Parnes is entitled to receive an annual base salary, currently $625,000 (which amount is subject to increase from time to time) and is eligible to receive a target annual incentive bonus, currently equal to 100% of his base salary, based on the achievement of annual Company and individual performance objectives for the applicable fiscal year, subject to continued employment through the applicable payment date. Mr. Parnes is also eligible to participate in the Company’s employee benefit programs offered to similarly situated employees. In connection with his employment agreement, Mr. Parnes entered into a restrictive covenant agreement, which includes a 24 month post-termination non-compete, a 24 month post-termination non-solicit of the employees, consultants, clients, customers and other business relationships of the Company and its affiliates, and an indefinite covenant against making any disparaging or defamatory comments regarding the Company or any of its affiliates. In addition, the Company also provides Mr. Parnes with a monthly automobile allowance in the amount of $1,500.
Christopher Joyce. Mr. Joyce is party to a letter agreement dated January 15, 2018, pursuant to which Mr. Joyce is entitled to receive a base salary, currently $475,000, and is eligible to receive a target annual incentive bonus, currently equal to 100% of base salary, based on company performance as determined by the Company at its sole discretion, subject to continued employment through the applicable payment date. Mr. Joyce is also entitled to a monthly automobile allowance in the amount of $1,000.
Albert Prast. Mr. Prast is party to an employment agreement with AeroCare Holdings, Inc., dated April 21, 2014, pursuant to which Mr. Prast is entitled to receive an annual base salary, currently $450,000 (which amount is subject to increase from time to time), and is eligible to participate in the annual bonus plan subject to such terms as may be established by the Board from time to time. Mr. Prast is also eligible to participate in the Company’s employee benefit programs offered to similarly situated employees, provided that the Company must make available to Mr. Prast disability insurance benefits that provide for income replacement payments equal to at least 60% of $200,000 in the event of his disability. Pursuant to his employment agreement, Mr. Prast is subject to certain restrictive covenants, including a 36 month post-termination non-compete and a 36 month post-termination non-solicit of the employees, consultants, and customers.
Stock Incentive Plan
The Company maintains the Amended and Restated 2019 Stock Incentive Plan (the “2019 Stock Incentive Plan” or “Plan”), which was originally adopted by the Board on October 14, 2019 and approved by our stockholders on November 7, 2019, and subsequently amended and restated in its current form as adopted by the Board on June 21, 2021 and approved by our stockholders on July 27, 2021. Pursuant to the Plan, the Committee may award a broad variety of incentive equity, including options to purchase shares of the Company, shares of restricted stock, and restricted stock units. Awards are subject to the terms and conditions of the applicable award agreement entered into with a recipient at the time of grant and the terms and conditions of the Plan.
February 2022 Awards. On January 19, 2022, the Committee approved the grants of restricted stock units (“RSUs”) to the named executive officers pursuant to the Plan and the applicable form of award agreement, effective February 1, 2022. One-half of the RSUs are subject to time-based vesting criteria and are eligible to vest 1/3rd on each of the first three anniversaries of February 1, 2022, subject to the executive’s continued employment through each applicable vesting date. The other half of the RSUs are subject to performance-based vesting criteria and are eligible to vest in the first quarter of 2025 subject to the achievement of relative total shareholder return metrics compared to peer companies over the performance period ending on February 1, 2025, with the percentage of RSUs that vest equal to (i) 50% for performance at the 25th percentile, (ii) 100% for performance at the 50th percentile, and (iii) 200% for performance at the 75th percentile, with linear interpolation between performance threshold. No portion of the RSUs that are subject to performance-based vesting criteria will vest in the event that performance is below the 25th percentile.
32
Health and Welfare Plan
Our named executive officers are generally eligible to participate in the employee benefit plans, including medical, dental, vision, life, disability, health and dependent care flexible spending accounts and accidental death and dismemberment benefit plans maintained by the Company or one of our subsidiaries, in each case on the same basis as all of our other employees.
Retirement Plan
One of our subsidiaries sponsors a retirement plan intended to qualify for favorable tax treatment under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), containing a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the Code, for the benefit of our employees, including our named executive officers. Participants may make pre-tax contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit on pre-tax contributions under the Code. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. All employee contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions. Pre-tax contributions by participants to the plan and the income earned on those contributions are generally not taxable to participants until withdrawn, and, participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. An employee is 100% vested in his or her pre-tax deferrals when contributed. We currently make an employer matching contribution of 100% on the first 1% of an employee’s contribution and 50% on the next 2% of an employee’s contribution.
33
Outstanding Equity Awards at Fiscal Year End Table
The following table sets forth outstanding equity awards held by each of our named executive officers as of December 31, 2022.
| Option Awards | Stock Awards | |||||||||||||
| Name | Grant Date | Number
of Securities Underlying Unexercised Options (#) Exercisable |
Number
of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option
Expiration Date |
Number
of Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($) (10) | |||||||
| Stephen Griggs | January 28, 2021 (1) | 22,200 | 44,400 | 42.61 | January 28, 2026 | — | — | |||||||
| January 28, 2021 (1) | 25,900 | 51,800 | 48.17 | January 28, 2026 | — | — | ||||||||
| January 28, 2021 (1) | 30,030 | 60,060 | 53.72 | January 28, 2026 | — | — | ||||||||
| February 1, 2021 (2) | 782,699 | — | 8.50 | March 1, 2030 | — | — | ||||||||
| February 1, 2021 (2) | 559,071 | — | 4.38 | August 1, 2026 | — | — | ||||||||
| May 20, 2021 (3) | — | — | — | — | 5,100 | 98,022 | ||||||||
| October 11, 2021 (4) | — | — | — | — | 8,839 | 169,886 | ||||||||
| February 1, 2022 (8) | — | — | — | — | 81,617 | 1,568,679 | ||||||||
| February 1, 2022 (9) | — | — | — | — | 81,617 | 1,568,679 | ||||||||
| Jason Clemens | July 13, 2020 (5) | — | — | — | — | 19,806 | 380,671 | |||||||
| January 28, 2021 (6) | — | — | — | — | 13,861 | 266,408 | ||||||||
| May 20, 2021 (3) | — | — | — | — | 4,336 | 83,338 | ||||||||
| October 11, 2021 (4) | — | — | — | — | 26,906 | 517,133 | ||||||||
| February 1, 2022 (8) | — | — | — | — | 37,670 | 724,017 | ||||||||
| February 1, 2022 (9) | — | — | — | — | 37,670 | 724,017 | ||||||||
| Joshua Parnes | November 21, 2019 | 833,334 | — | 11.50 | November 21, 2029 | — | — | |||||||
| January 28, 2021 (1) | 22,200 | 44,400 | 42.61 | January 28, 2026 | — | — | ||||||||
| January 28, 2021 (1) | 25,900 | 51,800 | 48.17 | January 28, 2026 | — | — | ||||||||
| January 28, 2021(1) | 30,030 | 60,060 | 53.72 | January 28, 2026 | — | — | ||||||||
| May 20, 2021 (3) | — | — | — | — | 5,100 | 98,022 | ||||||||
| October 11, 2021 (4) | — | — | — | — | 8,839 | 169,886 | ||||||||
| February 1, 2022 (8) | — | — | — | — | 81,617 | 1,568,679 | ||||||||
| February 1, 2022 (9) | — | — | — | — | 81,617 | 1,568,679 | ||||||||
| Christopher Joyce | November 21, 2019 | 500,000 | — | 11.50 | November 21, 2029 | — | — | |||||||
| January 28, 2021(6) | — | — | — | — | 10,731 | 206,250 | ||||||||
| May 20, 2021 (3) | — | — | — | — | 4,080 | 78,418 | ||||||||
| October 11, 2021 (4) | — | — | — | — | 3,890 | 74,766 | ||||||||
| February 1, 2022 (8) | — | — | — | — | 28,880 | 555,074 | ||||||||
| February 1, 2022 (9) | — | — | — | — | 28,880 | 555,074 | ||||||||
| Albert Prast | January 28, 2021(7) | — | — | — | — | 37,500 | $720,750 | |||||||
| January 28, 2021 (6) | — | — | — | — | 7,154 | $137,500 | ||||||||
| February 1, 2021(2) | 335,443 | — | 2.69 | April 20, 2024 | — | — | ||||||||
| February 1, 2021(2) | 180,021 | — | 8.50 | March 1, 2030 | — | — | ||||||||
| February 1, 2021(2) | 89,451 | — | 4.38 | August 1, 2026 | — | — | ||||||||
| May 20, 2021 (3) | — | — | — | — | 3,826 | 73,536 | ||||||||
| October 11, 2021 (4) | — | — | — | — | 4,243 | 81,550 | ||||||||
| February 1, 2022 (8) | — | — | — | — | 25,113 | 482,672 | ||||||||
| February 1, 2022 (9) | — | — | — | — | 25,113 | 482,672 | ||||||||
| (1) | The amounts in the Unexercisable column represent grants of stock options eligible to vest 50% on each of January 28, 2023 and January 28, 2024. |
| (2) | Represents Company options substituted for previously granted AeroCare options in connection with the AeroCare transaction. |
| (3) | Represents grants of restricted stock eligible to vest 50% on each of February 28, 2023 and February 29, 2024. |
| (4) | Represents grants of restricted stock eligible to 50% on each of October 11, 2023 and October 11, 2024. |
| (5) | Represents a grant of restricted stock eligible to vest on July 13, 2023. |
| (6) | Represents a grant of restricted stock eligible to vest 50% on each of January 1, 2023 and January 1, 2024. |
| (7) | Represents grants of restricted stock eligible to vest 1/3rd on each of February 1, 2023, February 1, 2024 and February 1, 2025. |
| (8) | Represents grants of restricted stock units eligible to vest 1/3rd on each of the first, second and third anniversaries of February 1, 2022. For additional information, see “—Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table—Long-Term Incentives—2019 Stock Incentive Plan” above. |
| (9) | Represents grants of restricted stock units eligible to vest based upon the achievement of certain relative total shareholder return goals during the performance period ending on February 1, 2025. For additional information, see “—Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table—Long-Term Incentives—2019 Stock Incentive Plan” above. |
| (10) | As of December 31, 2022, the fair market value of a share of our Common Stock was $19.22. |
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Option Exercises and Stock Vested Table
The following table sets forth information concerning the vesting of stock awards held by our named executive officers during the fiscal year ended December 31, 2022. There were no stock option exercises by our named executive officers during the fiscal year ended December 31, 2022.
| Stock Awards | ||||||||
| Name. | Number
of Shares Acquired on Vesting (#) |
Value
Realized on Vesting ($) |
||||||
| Stephen Griggs (1) | 5,893 | 109,368 | ||||||
| Jason Clemens (2) | 42,356 | 853,565 | ||||||
| Joshua Parnes (3) | 28,403 | 541,906 | ||||||
| Christopher Joyce (4) | 14,903 | 296,774 | ||||||
| Albert Prast (5) | 15,493 | 297,039 | ||||||
| (1) | Represents shares of restricted stock that vested on February 28, 2022 and October 11, 2022, on which dates the fair market value of a share of our Common Stock was $17.43 and $19.42, respectively. | |
| (2) | Represents shares of restricted stock that vested on January 1, 2022, February 28, 2022, July 13, 2022 and October 11, 2022, on which dates the fair market value of a share of our Common Stock was $24.46, $17.43, $19.44 and $19.42, respectively. | |
| (3) | Represents shares of restricted stock that vested on February 28, 2022, October 11, 2022 and December 31, 2022, on which dates the fair market value of a share of our Common Stock was $17.43, $19.42 and $19.22, respectively. | |
| (4) | Represents shares of restricted stock that vested on January 1, 2022, February 28, 2022, October 11, 2022 and December 31, 2022, on which dates the fair market value of a share of our Common Stock was $24.46, $17.43, $19.42 and $19.22, respectively. | |
| (5) | Represents shares of restricted stock that vested on January 1, 2022, February 1, 2022, February 28, 2022, and October 11, 2022, on which dates the fair market value of a share of our Common Stock was $24.46, $17.97, $17.43 and $19.42, respectively. |
Pension Benefits
We do not currently sponsor or maintain any defined benefit pension plans or other benefit plans providing specified retirement payments and benefits.
Non-Qualified Deferred Compensation
We do not currently sponsor or maintain any non-qualified defined contribution or other non-qualified deferred compensation plans.
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Potential Payments Upon Termination or Change in Control
The following summaries describe the potential payments and benefits that we would provide to our named executive officers in connection with certain terminations of employment and/or change in control of the Company.
Severance Pay & Benefits
Other than as set forth below, and specifically excluding any benefits under employee benefit plans generally available to our employees, we did not offer or have in place for our named executive officers any formal retirement, severance or similar compensation programs providing for additional benefits or payments in connection with a termination of employment, change in job responsibility or change in control as of December 31, 2022.
Stephen Griggs. Pursuant to his employment agreement, if Mr. Griggs’ employment is terminated by the Company without “cause” or by Mr. Griggs for “good reason” (as such terms are defined in his employment agreement), subject to his execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Mr. Griggs is entitled to entitled to receive (i) any unpaid annual bonus in respect of any completed fiscal year that has ended prior to the date of such termination, (ii) continued payment of base salary for a period of 24 months following such date of termination, and (iii) an amount equal to two times his then-current target annual bonus, payable in substantially equal installments during the 24-month period following such date of termination in accordance with regular payroll practices.
Jason Clemens. Pursuant to his employment agreement, if Mr. Clemens’ employment is terminated by the Company without “cause” or by Mr. Clemens for “good reason” (as such terms are defined in his employment agreement), subject to his execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Mr. Clemens is entitled to entitled to receive (i) any unpaid annual bonus in respect of any completed fiscal year that has ended prior to the date of such termination and any accrued but unused vacation or other paid time off, (ii) continued payment of base salary for a period of 12 months following such date of termination, (iii) an amount equal to his then-current target annual bonus, prorated for the number of days Mr. Clemens was employed during the year of termination, payable on the regular payment date for annual bonuses earned by the Company’s senior management, and, in the event of his resignation for “good reason,” (iv) continued employee benefits and automobile allowance for the period of salary continuation.
Joshua Parnes. Pursuant to his employment agreement, if Mr. Parnes’ employment is terminated by the Company without “cause” or by Mr. Parnes for “good reason” (as such terms are defined in his employment agreement), subject to his execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Mr. Parnes is entitled to entitled to receive (i) any unpaid annual bonus in respect of any completed fiscal year that has ended prior to the date of such termination, (ii) continued payment of base salary for a period of 24 months following such date of termination, and (iii) an amount equal to two times his then-current target annual bonus, payable in substantially equal installments during the 24-month period following such date of termination in accordance with regular payroll practices.
Christopher Joyce. Pursuant to his letter agreement, if Mr. Joyce’s employment is terminated by us without cause, subject to his execution and non-revocation of a general release of claims in favor of the Company and its affiliates, Mr. Joyce is entitled to an amount equal to his annual base salary and his target annual incentive bonus, payable in accordance with normal payroll practices until the earlier of (x) the 12-month anniversary of such date of termination and (y) such date Mr. Joyce accepts another position as an employee, consultant or independent contractor.
Albert Prast. Pursuant to his employment agreement, if Mr. Prast’s employment is terminated by the Company without “cause” or by Mr. Prast for “good reason” (as such terms are defined in his employment agreement), Mr. Prast is entitled to entitled to (i) continued payment of base salary for a period of 9 months following such date of termination, (ii) any annual bonus definitely granted to Mr. Prast by the Company but not yet paid, and (iii) continued coverage, at the Company’s cost, under the Company’s medial dental, life, and disability insurance plans for a period of 9 months following such date of termination. In addition, upon the termination of Mr. Prast’s employment by reason of his disability or death, Mr. Prast (or his surviving spouse or estate, as the case may be) is entitled to (A) continued payment of his base salary for 9 months (payable in lump sum in the instance of his death) and (B) any unpaid annual bonus in respect of any completed fiscal year that has ended prior to the date of such termination.
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Stock Incentive Plan
Shares of restricted stock granted to certain named executive officers on January 28, 2021, May 20, 2021 and October 11, 2021 provide that in the event of a termination of the named executive officer’s employment by the Company without cause (other than due to death or disability), and provided that the named executive officer executes a customary general release of claims in favor of the Company and its affiliates, all then-unvested shares of restricted stock that would have vested during the post-termination severance period provided for under the respective named executive officer’s employment agreement will vest as of the date of such termination of employment.
The 2019 Stock Incentive Plan provides that in the event of a significant “corporate event,” as defined therein, each outstanding award will be treated in a manner as determined by the administrator. The Plan further provides for “double-trigger” vesting, such that any award that is assumed or substituted in connection with a “change in control,” as defined therein, will immediately vest as of the date the participant holding the award experiences an involuntary termination by the Company other than for cause in connection with, or within two years, following such change in control.
The information in the table below describes and quantifies certain estimated compensation that would have become payable to our named executive officers following a change in control of the Company and/or certain terminations of employment of our named executive officers assuming that the change in control and/or termination of employment occurred as of December 31, 2022.
| Name | Cash
Severance Payment ($) |
Continued
Benefits ($) |
Value
of Accelerated Equity Awards(1) ($) |
Total ($) |
|||||
| Stephen Griggs | |||||||||
| Termination by the Company without cause | 2,500,000 | — | 267,908 | 2,767,908 | |||||
| Termination by the Executive for good reason | 2,500,000 | — | — | 2,500,000 | |||||
| Termination by the Company without cause following a change in control | 2,500,000 | — | 3,405,265 | 5,905,265 | |||||
| Jason Clemens | |||||||||
| Termination by the Company without cause | 1,040,000 | 15,839 | 433,430 | 1,489,269 | |||||
| Termination by the Executive for good reason | 1,040,000 | 15,839 | — | 1,055,839 | |||||
| Termination by the Company without cause following a change in control | 1,040,000 | 15,839 | 2,695,586 | 3,751,425 | |||||
| Joshua Parnes | |||||||||
| Termination by the Company without cause | 2,500,000 | — | 267,908 | 2,767,908 | |||||
| Termination by the Executive for good reason | 2,500,000 | — | — | 2,500,000 | |||||
| Termination by the Company without cause in connection with a change in control | 2,500,000 | — | 3,405,265 | 5,905,265 | |||||
| Christopher Joyce | |||||||||
| Termination by the Company without cause | 950,000 | — | 179,707 | 1,129,707 | |||||
| Termination by the Company without cause in connection with a change in control | 950,000 | — | 1,469,580 | 2,419,580 | |||||
| Albert Prast | |||||||||
| Termination by the Company without cause | 337,500 | 8,612 | 345,768 | 691,880 | |||||
| Termination by the Executive for good reason | 337,500 | 8,612 | — | 346,112 | |||||
| Termination for disability or upon death | 337,500 | — | — | 337,500 | |||||
| Termination by the Company without cause in connection with a change in control | 337,500 | 8,612 | 1,978,680 | 2,324,792 |
| (1) | For the purposes of calculating the value of accelerated equity awards under the 2019 Stock Incentive Plan in connection with a termination of employment by the Company without cause in connection with a change in control, we have assumed that any equity awards subject to performance-based vesting criteria were assumed or substituted based on performance at 100% of target. |
37
Director Compensation
The following table sets forth the material terms of the compensation received by each of our non-employee directors for the year ended December 31, 2022.
| Name | Fees
Earned or Paid in Cash ($) (1) |
Stock
Awards ($) (2) |
Total ($) |
|||||||||
| Richard Barasch | 102,500 | 268,262 | 370,762 | |||||||||
| Terence Connors | 137,500 | 167,032 | 304,532 | |||||||||
| Susan Weaver, M.D. | 116,250 | 167,032 | 283,282 | |||||||||
| Bradley Coppens | 110,000 | 187,282 | 297,282 | |||||||||
| Dale Wolf | 117,500 | 167,032 | 284,532 | |||||||||
| David S. Williams III | 102,500 | 167,032 | 269,532 | |||||||||
| Ted Lundberg | 110,000 | 167,032 | 277,032 | |||||||||
| Greg Belinfanti | 102,500 | 167,032 | 269,532 | |||||||||
| (1) | For the year ended December 31, 2022, each of our non-employee directors received cash payments totaling $87,500, representing their annual retainer fees for their service during 2022. The amounts reported for each of Dr. Weaver and Mr. Connors include additional cash payments totaling $21,250 and $42,500, respectively, representing their annual retainer fees for their service as chairs of our compliance committee and audit committee, respectively. The amounts reported for each of Mr. Barasch, Mr. Connors, Dr. Weaver, Mr. Coppens, Mr. Wolf, Mr. Williams, Mr. Lundberg, and Mr. Belinfanti include additional cash payments totaling $15,000, $7,500, $7,500, $22,500, $30,000, $15,000, $22,500, and $15,000, respectively, representing fees for their service on certain committees. |
| (2) | Represents the aggregate grant-date fair value for accounting purposes, in accordance with FASB ASC 718, of (i) 9,321 shares of restricted stock to each of our non-employee directors, and (ii) with respect to Messrs. Barasch and Coppens, an additional 5,649 and 1,130, respectively, shares of restricted stock for their service as our Chairman and the chair of our compensation committee, respectively, granted pursuant to the Plan and approved by our compensation committee on June 22, 2022 and will vest 100% on the occurrence of our 2023 annual meeting of stockholders. |
Narrative to Director Compensation
In general, during each fiscal year, our non-employee directors are eligible to receive (i) an annual cash retainer of $100,000 and (ii) a grant of shares of restricted stock in the amount of $165,000, determined based on the volume-weighted average price of a share of Common Stock as reported by NASDAQ for the 20 days immediately prior to the annual meeting of stockholders of the Company. Our Chairman and the chairs of certain of our board committees are eligible to receive an additional annual retainer (in cash or as a grant of restricted shares (determined based on the volume-weighted average price of a share of Common Stock as reported by NASDAQ for the 20 days immediately prior to the annual meeting of stockholders of the Company), at the non-employee director’s election) in the following amounts:
| • | $100,000 for our Chairman; | |
| • |
$40,000 for the chair of our Audit Committee;
$20,000 for each member of the Audit Committee; | |
| • |
$20,000 for the chairs of each of the Compensation Committee and Compliance Committee; and
$10,000 for each member of the Compensation Committee, Nomination and Governance Committee and Compliance Committee |
Our Chairman also serves as the chair of our nominating and governance committee, for which he does not receive any additional retainer fees.
38
Pay Ratio Disclosure
The compensation of our Chief Executive Officer in 2022 was approximately 142 times the median pay of our full-time and part-time employees.
We identified the median employee by including all W-2 employees as of December 31, 2022 who had received W-2 wages (or W-2 equivalents) during the calendar year. We then used the W-2 data to identify the median employee. We did not make any adjustments to the employee population or pay data in determining the median employee (e.g., no cost-of-living adjustments). For computing the ratio, we calculated such employee’s total annual compensation in the same manner in which we calculate total annual compensation for the CEO in the Summary Compensation Table. The total compensation of the median employee was calculated to be $33,175.
We calculated the pay ratio by comparing our Chief Executive Officer’s compensation pursuant to Item 402(c)(2)(x), as detailed in the Summary Compensation Table. We divided this by the median employee’s total annual compensation. The ratio is $4,724,344 divided by $33,175, or 142 to 1.
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Pay Versus Performance
The following table provides information for the fiscal years 2022, 2021 and 2020 with respect to the compensation of our principal executive officers (“PEO”), which includes both our current and former CEOs, the average compensation of our other NEOs, and the performance measures set forth in the table.
| Principal Executive Officers (“PEO”)(1) | Average Other Non-PEO NEOs(2) | Company | |||||||||||||||||||||||||||||||||||
| Summary Comp Table Total | Comp Actually Paid Total(3) | Summary | Comp | Value of Initial Fixed $100 | Selected | ||||||||||||||||||||||||||||||||
| Current: | Former: | Current: | Former: | Comp | Actually | Investment Based on: | Net | Measure: | |||||||||||||||||||||||||||||
| Fiscal | Stephen | Luke | Stephen | Luke | Table | Paid | Company | Peer Group | Income(5) | ||||||||||||||||||||||||||||
| Year | Griggs | McGee | Griggs | McGee | Total | Total(3) | TSR(4) | TSR(4) | ($MM) | ($MM) | |||||||||||||||||||||||||||
| 2022 | $ | n/a | $ | n/a | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| 2021 | $ | $ | | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||
| 2020 | n/a | $ | | n/a | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| (1) | For 2022, our PEO was our current CEO, |
| (2) | For 2022, our non-PEO NEOs were Messrs. Parnes, Clemens, Joyce, and Prast. For 2021, our non-PEO NEOs were Messrs. Parnes, Clemens, Prast, and Bunting. For 2020, our non-PEO NEOs were Messrs. Clemens and Reitkerk. |
| (3) | In calculating the “compensation actually paid” amounts reflected in these columns, the fair value or change in fair value, as applicable, of the equity award adjustments included in such calculations were computed in accordance with FASB ASC Topic 718. Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of date of grant. Adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions as of the measurement date. Time-vested restricted stock/unit grant date fair values are calculated using the stock price as of date of grant. Adjustments have been made using the stock price as of year-end and as of each vesting date. Performance-vested restricted stock unit fair values are calculated based on the Monte-Carlo valuation model as of the date of grant. Adjustments have been made using performance-vested restricted stock unit fair values as of each measurement date using the stock price as of the measurement date and updated Monte-Carlo assumptions. The assumptions used to calculate the fair value for purposes of determining the “Compensation Actually Paid” are consistent with the methodology used for calculating the grant date fair value for financial reporting purposes. |
| (4) | The Company Total Shareholder Return (“TSR”) and the Company’s Peer Group TSR reflected in these columns for each applicable fiscal year is calculated based on a fixed investment of $100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of Regulation S-K. The peer group used to determine the Company’s Peer Group TSR for each applicable fiscal year is the S&P Healthcare Services Select Industry Index, which is included in the Company’s TSR performance graph in this Proxy Statement. |
| (5) | Represents the amount of net income (loss), reflected in the Company’s audited financial statements for the year indicated. |
| (6) | We have selected Adjusted EBITDA as our most important financial measure (that is not otherwise required to be disclosed in the table) used to link compensation actually paid to our NEOs to Company performance for fiscal year 2022. Our Compensation Committee also determines the annual bonus plan for the NEOs for 2022 primarily based on achievement of this measure. See page 27 of this Proxy Statement for additional information. |
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In the calculation of compensation actually paid and presented in the table, the following amounts (as presented on the following page) were deducted and added:
Reconciliation of Summary Compensation Table (“SCT”) total to Compensation Actually Paid (“CAP”)
| FY2022 | FY2021 | FY2020 | |||||||||||||||||||||||||||
| Current PEO | Average | Current PEO | Former PEO | Average | Former PEO | Average | |||||||||||||||||||||||
| Description of Elements Added / Subtracted to SCT Total to Calculate CAP | Griggs | Other NEOs | Griggs | McGee | Other NEOs | McGee | Other NEOs | ||||||||||||||||||||||
| Summary Compensation Table (“SCT”) Total | $ | $ | $ | $ | | $ | $ | | $ | ||||||||||||||||||||
| - | Pension and equity amounts reported in SCT | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| + | Fair value of equity compensation granted in current year (valued at year-end) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| + | Fair value of equity compensation that vested during the year | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| + / - | Change in fair value of outstanding equity at year-end (valued at year-end); reflects Current Year Outstanding Value - Prior Year Outstanding Value | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||
| Compensation Actually Paid ("CAP") | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | | $ | |||||||||||||||||
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Pay-versus-Performance Comparative Disclosure
The following reflect the relationships between (i) compensation actually paid (“CAP” in the graphics below) to our current and former PEOs, and the average of compensation actually paid to our non-PEO NEOs, to (ii) our cumulative TSR and our peer group TSR for the same period, our net income, and Adjusted EBITDA for the fiscal years 2020, 2021 and 2022.
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Note: For all charts above, both PEOs are shown separately for the fiscal years in which the executive served in the PEO role (2020 and 2021 for our Former PEO, McGee; 2021 and 2022 for our Current PEO, Griggs). Compensation data is not shown for fiscal years in which the executives were not employed by the Company.
Pay-versus-Performance Tabular List
The following table lists our most important performance measures used by us to link compensation actually paid to our NEOs to company performance for fiscal year 2022.
Most Important Performance Measures
Adjusted EBITDA
Relative Total Shareholder Return
Individual Performance
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Equity Compensation Plan Information
The following table sets forth information regarding the shares of our Common Stock to be issued and remaining available for issuance under our stock-based incentive plans as of December 31, 2022.
| Plan Category | Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
|||||||||
| (a) | (b) | (c) | ||||||||||
| Equity Compensation Plans Approved by Security Holders | 3,145,072 | (1) | 19.36 | (2) | 3,072,907 | (3) | ||||||
| Equity Compensation Plans Not Approved By Security Holders(4) | — | — | — | |||||||||
| Total | 3,145,072 | $ | 19.36 | 3,072,907 | ||||||||
| (1) | Represents shares of our Common Stock underlying outstanding options and restricted stock units under our 2019 Stock Incentive Plan. |
| (2) | The weighted-average exercise price reflected in this column does not take into account outstanding restricted stock units under our 2019 Stock Incentive Plan. |
| (3) | Represents (i) 2,191,908 shares of our Common Stock that remain available for issuance under our 2019 Stock Incentive Plan, and (ii) 880,999 shares of our Common Stock that remain available for issuance under our 2019 Employee Stock Purchase Plan. |
| (4) | As of December 31, 2022, there were 2,742,800 outstanding options assumed and converted in connection with the acquisition of AeroCare Holdings, Inc. on February 1, 2021 with a weighted-average exercise price of $6.38 per share of Common Stock. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures for Related Party Transactions
Our board of directors has adopted a written related party transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related party transactions.
A “Related Party Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. A “Related Person” means:
| • | any person who is, or at any time during the applicable period was, one of our officers or directors; |
| • | any person who is known by us to be the beneficial owner of more than 5% of our voting stock; |
| • | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother in law, father in law, son in law, daughter in law, brother in law or sister in law of a director, an officer or a beneficial owner of more than 5% of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, officer or beneficial owner of more than 5% of our voting stock; and |
| • | any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest. |
We have policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its charter, the Audit Committee has the responsibility to review related party transactions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us regarding the beneficial ownership of our Common Stock as of April 25, 2023:
| • | each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock; |
| • | each of our named executive officers and directors; and |
| • | all of our current officers and directors, as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire securities within 60 days, including options and warrants that are currently exercisable or exercisable within 60 days.
The beneficial ownership of our Common Stock as of April 25, 2023 is based on 138,149,338 shares of Common Stock issued and outstanding in the aggregate as of April 25, 2023 assuming the issuance of restricted shares of Common Stock pursuant to approved grants.
Unless otherwise indicated, the Company believes that all persons named in the table below have sole voting and investment power with respect to all shares of voting stock beneficially owned by them.
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Beneficial Ownership Table
| Common Stock | ||||||||
| Name and Address of Beneficial Owner(1) | # of Shares | % of Total | ||||||
| Directors and Named Executive Officers | ||||||||
| Richard Barasch (2) | 881,221 | * | ||||||
| Dr. Susan Weaver | 41,894 | * | ||||||
| Gregory Belinfanti | 13,830 | * | ||||||
| Terence Connors | 23,339 | * | ||||||
| Dale Wolf (3) | 54,839 | * | ||||||
| Brad Coppens (4) | 20,595 | * | ||||||
| David Williams III (5) | 16,085 | * | ||||||
| Stephen Griggs (6) | 5,208,687 | 3.73 | % | |||||
| Theodore Lundberg (7) | 9,471,173 | 6.86 | % | |||||
| Joshua Parnes (8) | 1,677,144 | 1.21 | % | |||||
| Jason Clemens | 175,958 | * | ||||||
| Albert Prast (9) | 699,883 | * | ||||||
| Christopher Joyce (10) | 718,693 | * | ||||||
| Stockholders beneficially owning 5% or more of our Common Stock | ||||||||
| OEP AHCO Investment Holdings, LLC(11) | 13,818,180 | 10.00 | % | |||||
| Everest Trust (12) | 13,512,109 | 9.73 | % | |||||
| BlackRock, Inc. (13) | 11,872,150 | 8.59 | % | |||||
| FMR LLC (14) | 9,474,711 | 6.86 | % | |||||
| Peloton Equity GP, LLC (15) | 9,471,173 | 6.86 | % | |||||
| Matthew Ebbel (16) | 8,906,070 | 6.45 | % | |||||
| The Vanguard Group (17) | 8,211,817 | 5.94 | % | |||||
| Still Water Nevada Trust (18) | 7,766,937 | 5.61 | % | |||||
| Deerfield Management Company, L.P. (19) | 7,629,914 | 5.52 | % | |||||
| All directors and executive officers as a group (15 individuals) | 19,379,958 | 13.60 | % | |||||
| * | Represents beneficial ownership of less than 1% of our Common Stock. |
| (1) | Unless otherwise noted, the business address of each of the listed entities or individuals is c/o AdaptHealth LLC, 220 West Germantown Pike, Suite 250, Plymouth Meeting, PA 19462. |
| (2) | The business address of Mr. Barasch is 780 Third Avenue, New York, NY 10017. Includes 527,314 shares of Common Stock underlying warrants that are currently exercisable. |
| (3) | The business address of Mr. Wolf is c/o Molina Healthcare, Inc., 200 Oceangate, Suite 100, Long Beach, CA 90802. |
| (4) | The business address of Mr. Coppens is c/o InTandem Capital Partners, One Vanderbilt Avenue, Suite 2400, New York, NY 10017. |
| (5) | The business address of Mr. Williams is 6272 Condon Ave., Los Angeles, CA 90056. |
| (6) | Includes 1,498,030 shares of Common Stock underlying options that are currently exercisable. |
| (7) | The business address of Mr. Lundberg is 10 Glenville Street, Greenwich, CT 06831. Includes shares beneficially owned by Peloton Equity GP, LLC. |
| (8) | Includes 989,594 shares of Common Stock underlying options that are currently exercisable. |
| (9) | Includes 604,915 shares of Common Stock underlying options that are currently exercisable. |
| (10) | Includes 500,000 shares of Common Stock underlying options that are currently exercisable and 12,903 shares of Common Stock underlying warrants that are currently exercisable. |
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| (11) | Based upon information reported on the Schedule 13D/A filed with the SEC on August 31, 2020. OEP AHCO Investment Holdings, LLC reported that, as of August 27, 2020, it had sole voting and dispositive power for 0 shares of Common Stock, and shared voting and dispositive power for 13,818,180 shares of Common Stock. The business address of OEP AHCO Investment Holdings, LLC is c/o One Equity Partners, 510 Madison Avenue, 19th Floor, New York, NY 10022. |
| (12) | Based upon information reported on the Schedule 13D/A filed with the SEC on November 7, 2022, Section 16 reports filed with the SEC and other information provided to the Company. Includes 707,101 shares of Common Stock underlying warrants that are currently exercisable. Includes shares and warrants held directly by Clifton Bay Offshore Investments L.P. (“Clifton Bay Investments”) and Quadrant Management, Inc. (“QMI”). The general partner of Clifton Bay Investments is Clifton Bay Management Ltd. (“Clifton Bay Management”), which is indirectly owned by the Trustee of the Everest Trust (“Everest”), a trust settled by Mr. Wayne Quasha. Q Management Services (PTC) Ltd., as Trustee of Everest Trust, owns all of the shares of Everest Hill Group Inc., which indirectly controls Clifton Bay Management. Vicali Services (BVI) Inc., a British Virgin Islands company (“Vicali”), is the sole director of Everest Hill Group Inc. and Q Management, and Susan V. Demers, a United States citizen, and Andrea J. Douglas, a citizen of New Zealand, are the directors of Vicali and each of them has voting power over Vicali and thus power over investment and voting determinations made by Clifton Bay Management. QMI is owned by Everest Hill Group Inc. Mr. Wayne Quasha ultimately beneficially owns all of the shares of Everest Hill Group Inc., and as such, is in a position, indirectly, to determine the investment and voting decisions made by Everest Hill Group Inc. and Clifton Bay Management. The business address of Clifton Bay Investments and Clifton Bay Management is Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110. The business address of Mr. Wayne Quasha is c/o PFD Corporate Services (BVI) Limited, Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110. The business address of Everest Hill Group Inc. is Tropic Isle Building, P.O. Box 3331, Road Town, Tortola, British Virgin Islands VG 1110. |
| (13) | Based upon information reported on the Schedule 13G/A filed with the SEC on January 25, 2023. BlackRock, Inc. reported that, as of December 31, 2022, it had sole voting and dispositive power for 11,872,150 shares of Common Stock, and shared voting and dispositive power for 0 shares of Common Stock. The business address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
| (14) | Based upon information reported on the Schedule 13G filed with the SEC on February 9, 2023. FMR LLC reported that it had sole voting and dispositive power for 9,474,711 shares of Common Stock, and shared voting and dispositive power for 0 shares of Common Stock. Abigail P. Johnson reported shared beneficial ownership over the shares beneficially owned by FMR LLC. The business address of FMR LLC is 245 Summer Street, Boston, MA 02210. |
| (15) | Based upon information reported on the Schedule 13D filed with the SEC on March 15, 2021. Includes 6,680,833 shares of Common Stock held directly by Peloton Equity AeroCare SPV I, L.P., 634,347 shares of Common Stock held directly by Peloton Equity AeroCare SPV II, L.P. and 2,142,163 shares of Common Stock held directly by Peloton Equity I, L.P. (collectively, with Peloton Equity AeroCare SPV I, L.P. and Peloton Equity AeroCare SPV II, L.P., the “Peloton Funds”). Theodore Lundberg and Carlos Ferrer, as the managing members of Peloton Equity GP, LLC, may be deemed to beneficially own the shares held directly by Peloton Funds. The business address of Mr. Lundberg and the Peloton Funds is c/o Peloton Equity, LLC, 10 Glenville Street, Greenwich, CT 06831. |
| (16) | Based upon information reported on the Form 4 filed with the SEC on March 15, 2022. Includes 5,662,814 shares of Common Stock held directly by SkyKnight Aero Holdings, LLC (“SkyKnight Aero Holdings”), and 2,482,757 shares of Common Stock held directly by SkyKnight Capital Fund II, L.P. (“SkyKnight Fund II”). SkyKnight Capital, L.P. (“SkyKnight Capital”), as manager of SkyKnight Aero Holdings, and SkyKnight Capital Management, LLC (“SkyKnight Capital Management”), as the general partner of SkyKnight Capital, may be deemed to beneficially own the shares held directly by SkyKnight Aero Holdings. SkyKnight Capital II GP, LLC (“SkyKnight II GP”), as the general partner of SkyKnight Fund II, may be deemed to beneficially own the shares held directly by SkyKnight Fund II. Mr. Ebbel, as the managing member of each of SkyKnight Capital Management and SkyKnight II GP, may be deemed to beneficially own the shares held directly by SkyKnight Aero Holdings and SkyKnight Fund II. The business address of Mr. Ebbel and SkyKnight Capital is One Letterman Drive, Building C, Suite 3-950, San Francisco, CA 94129. |
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| (17) | Based upon information reported on the Schedule 13G/A filed with the SEC on February 9, 2023. The Vanguard Group reported that, as of December 31, 2022, it had sole voting power for 0 shares of Common Stock, shared voting power for 49,704 shares of Common Stock, sole dispositive power for 8,093,988 shares of Common Stock and shared dispositive power for 8,211,817 shares of Common Stock. The business address of the Vanguard Group is 100 Vanguard Blvd. Malvern, PA 19355. |
| (18) | Includes shares and warrants held directly by Blue River NJ LLC (“Blue River”) and Quad Cap LLC (“Quad Cap”). Blue River holds 6,213,085 shares of Common Stock (including 274,768 shares of Common Stock underlying warrants that are currently exercisable). Quad Cap holds 1,123,472 shares of Common Stock (including 129,221 shares of Common Stock underlying warrants that are currently exercisable). The trustee of the trust is Peak Trust Company — NV, with a principal business address of 1840 East Warm Springs Road, Suite 105, Las Vegas, NV 89119. |
| (19) | Based upon information reported on the Schedule 13G/A filed with the SEC on February 10, 2023. Comprised of 7,629,914 shares of Common Stock held by Deerfield Private Design Fund IV, L.P. and Deerfield Partners, L.P., of which Deerfield Management Company, L.P. is the investment manager. James E. Flynn reported shared beneficial ownership over the shares beneficially owned by Deerfield Management Company, L.P. The business address of Deerfield Management Company, L.P. is 345 Park Avenue South, 12th Floor, New York, NY 10010. |
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SOLICITATION OF PROXIES
We will bear the cost of soliciting proxies for the Annual Meeting. In addition to solicitations by mail, we may, through our directors and officers, solicit proxies in person, by telephone or by electronic means. Such directors and officers will not receive any special remuneration for these efforts.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own, or are part of a group that owns, more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Based solely on our review of such reports filed with the SEC, and written representations from directors and executive officers that all Section 16(a) reports required to be filed for such persons had been filed, we believe that no director, officer or beneficial owners of more than 10% of our total outstanding shares of Common Stock failed to file the reports required by Section 16(a) of the Exchange Act on a timely basis during the fiscal year ended December 31, 2022, with the following exceptions: SkyKnight Aero Holdings, LLC (late on one Form 4 representing four transactions), Everest Hill Group Inc. (late on two Forms 4, representing three transactions and four transactions, respectively), Dale Wolf (late on one Form 4, representing one transaction) and Christopher Joyce (late on one Form 4, representing one transaction).
HOUSEHOLDING INFORMATION
Unless we have received contrary instructions, we may send a single copy of the Notice, this proxy statement or our Annual Report on Form 10-K to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of proxy materials at the same address this year or in future years, the stockholders should follow the instructions described below. We will promptly deliver such additional sets of proxy materials to stockholders who so request. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of proxy materials, the stockholders should follow these instructions:
| • | If the shares are registered in the name of the stockholder, the stockholder should contact us at (i) (610) 424-4515 or (ii) at AdaptHealth LLC, 220 West Germantown Pike, Suite 250, Plymouth Meeting, PA 19462, Attention: Secretary, to inform us of his or her request; or |
| • | If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly. |
STOCKHOLDER PROPOSALS AND NOMINATIONS
Stockholder proposals may be included in our proxy statement for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. For a stockholder proposal to be considered for inclusion in our proxy statement for our annual meeting of stockholders to be held in 2024, we must receive the proposal at our principal executive offices at AdaptHealth LLC, 220 West Germantown Pike, Suite 250, Plymouth Meeting, PA 19462, Attention: Secretary, not later than March 24, 2024. In addition, a director nomination or a stockholder proposal of other business for consideration at our 2024 annual meeting that is not intended for inclusion in our proxy statement under Rule 14a-8 may be brought before our 2024 annual meeting so long as we receive information and notice of the nomination or proposal in compliance with the requirements set forth in our bylaws at our principal executive offices not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the date of the 2024 annual meeting is more than 30 days before or more than 70 days after such anniversary date, such nomination proposal must be received at our principal executive offices not earlier than the close of business on the 120th day before the 2024 annual meeting and not later than (x) the close of business on the 90th day before the 2024 annual meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the 2024 annual meeting is first made by the Company. In addition, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 23, 2024.
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COMMUNICATIONS WITH THE BOARD
Stockholders and other interested parties wishing to communicate with the board of directors or with an individual board member concerning the Company may do so by writing to the board or to the particular board member and mailing the correspondence to our principal executive offices to the attention of our Secretary. If from a stockholder, the envelope should indicate that it contains a stockholder communication. All such communication will be forwarded to the director or directors to whom the communications are addressed.
AVAILABLE INFORMATION
We will provide to any stockholder entitled to vote at our Annual Meeting, at no charge, a copy of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023, including the financial statements and the financial statement schedules contained in the Form 10-K. Our Annual Report on Form 10-K and our other filings with the SEC are available to the public through the SEC’s website at https://www.sec.gov and are also available through our website at https://www.adapthealth.com/investorrelations. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information on our website does not constitute part of this proxy statement. You may request a copy of the Annual Report on Form 10-K or additional copies of this proxy statement at no cost in writing or by telephone at the following address and phone number:
AdaptHealth LLC
220 West Germantown Pike, Suite 250
Plymouth Meeting, PA 19462
Attention: Secretary Telephone: (610) 424-4515
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. V16429-P93285 ! ! ! For All Withhold All For All Except ! ! ! ! ! ! ADAPTHEALTH CORP. To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ADAPTHEALTH CORP. 220 WEST GERMANTOWN PIKE, SUITE 250 PLYMOUTH MEETING, PA 19462 UNITED STATES 01) Richard Barasch 02) Stephen Griggs 03) Gregory Belinfanti Nominees: THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE CLASS I DIRECTOR NOMINEES AND “FOR” PROPOSALS 2 AND 3. 1. Election of Directors – To elect three directors to our board of directors, each to serve as a Class I director for a term of three years expiring at the 2026 annual meeting of stockholders and until his successor is duly elected and qualified. The following persons have been nominated as Class I directors: When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by an authorized person. The Shares represented by this proxy when properly executed will be voted in the manner directed herein by the above signed stockholder(s). If no direction is made, this proxy will be voted FOR the election of each of the Class I director nominees and FOR Proposals 2 and 3. If any other matters properly come before the meeting, unless such authority is withheld on this proxy card, the Proxies will vote on such matters in their discretion. 2. Ratification of Appointment of KPMG LLP – To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. 3. Say-on-Pay – Non-binding advisory vote to approve the compensation paid to AdaptHealth’s named executive officers. For Against Abstain VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/AHCO2023 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTEw |
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V16430-P93285 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy Statement and Form 10-K are available at www.proxyvote.com. FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS OF ADAPTHEALTH CORP. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Stephen Griggs and Christopher Joyce (together, the “Proxies”), and each of them independently, with full power of substitution, as proxies to vote the shares that the undersigned is entitled to vote (the “Shares”) at the 2023 annual meeting (the “annual meeting”) of stockholders of AdaptHealth Corp. (the “Company”) to be held virtually at 10:30 a.m. Eastern time on June 21, 2023, and at any adjournments and/or postponements thereof. The Shares shall be voted as indicated with respect to the proposals listed below hereof and in the Proxies’ discretion on such other matters as may properly come before the annual meeting or any adjournment or postponement thereof. The undersigned acknowledges receipt of the accompanying proxy statement and revokes all prior proxies for said meeting. THE SHARES REPRESENTED BY THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SPECIFIC DIRECTION IS GIVEN AS TO THE PROPOSALS, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF EACH OF THE CLASS I DIRECTOR NOMINEES AND “FOR” PROPOSALS 2 AND 3. The proxy statement is available at http://www.adapthealth.com/investorrelations. The proxy statement contains important information regarding each of the proposals listed below. You are encouraged to read the proxy statement carefully. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY. P R O X Y |