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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, DC 20549

 

SCHEDULE 14A 

(Rule 14a-101)

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities 

Exchange Act of 1934 (Amendment No.            )

 

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Filed by a Party other than the Registrant     ☐

 

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Preliminary Proxy Statement

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

ACADIA HEALTHCARE COMPANY, INC.

(Name of Registrant as Specified in its Charter)

___________________________________________ 

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

 

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Fee paid previously with preliminary materials.

 

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6100 Tower Circle, Suite 1000 

Franklin, Tennessee 37067

 

April 7, 2023

 

TO OUR STOCKHOLDERS:

 

Acadia Healthcare delivered strong operating results in 2022, reflecting robust demand for our high-quality behavioral healthcare services. Through the Company’s financial performance, commitment to clinical excellence and integration across the continuum of care, Acadia has created a solid foundation to build upon during a time of unprecedented demand for behavioral healthcare services.

 

In 2022, revenue increased 12.8 percent for the year to reach $2.61 billion. Our results reflect our ability to effectively operate our 250 facilities across Acadia’s network and serve our patients with safe, quality care. We are fortunate to have an experienced and dedicated team of approximately 23,000 employees and clinicians who work tirelessly to support the 75,000 patients that we treat on a daily basis across our operations.

 

Acadia hosted its first Investor Day on December 7, 2022 in New York City where members of our management team provided an overview of the Company’s service lines, growth strategy and financial outlook. We were grateful for the opportunity to present on the Company’s financial progress, and we remain committed to creating long-term value for our stockholders.

 

Enhancing the continuum of care

 

We see significant opportunities to expand our service lines and continue to make the necessary investments in our operations to support sustained long-term growth. In 2022, we executed across each of the five key pathways of our growth strategy, extending our market reach and solidifying Acadia’s industry leadership position. These pathways are as follows:

 

●

expanding facilities through bed additions;

●

identifying and entering underserved markets by opening de novo facilities to help meet the critical community need for behavioral healthcare services;

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forming strategic partnerships with leading healthcare systems to develop new facilities;

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pursuing attractive M&A opportunities; and

●

strengthening integration of our service lines to facilitate treatment of patients across the continuum of care.

 

Board of Directors additions enhance skills and diversity

 

The Company’s Board of Directors is focused on maintaining the right skillsets to support Acadia’s continued growth and success. One-third of our directors have joined the Board since 2020, and one-third of our directors are diverse by gender or race. We most recently welcomed David Kelly who brings extensive experience in financial advisory services, government service and real estate development, which will be invaluable as we continue to extend our market reach across the country.

 

Committed to our patients, employees and communities

 

Our success rests on continuing to achieve superior patient outcomes through robust quality, safety and treatment programs. We will work to further enhance the delivery of care we provide and strengthen our capabilities through our investments in people, processes and technology. Acadia's operational excellence is a reflection of strong collaboration and teamwork, and we are profoundly grateful to Acadia’s committed facility leaders, clinicians and 23,000 employees who make this possible. Highlighting our commitment to operating responsibly, we recently published our inaugural Sustainability Report that provides more detail on our initiatives.

 

On behalf of the entire Board of Directors, I thank you for your investment in Acadia and your voting support for the proposals set forth in this proxy. 

 

	Sincerely,
	Christopher H. Hunter
	Chief Executive Officer and Director

 

 

 

6100 Tower Circle, Suite 1000 

Franklin, Tennessee 37067

 

April 7, 2023

 

TO OUR STOCKHOLDERS:

 

You are cordially invited to attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Acadia Healthcare Company, Inc., to be held on Thursday, May 18, 2023, at 8:00 a.m. (Central Time), at our executive offices located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067. The matters to be acted upon at the Annual Meeting are more fully described in the accompanying Proxy Statement and related materials.

 

In accordance with rules adopted by the Securities and Exchange Commission, we are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials instead of a paper copy of the Proxy Statement and our 2022 Annual Report to Stockholders. The Notice of Internet Availability of Proxy Materials contains instructions on how stockholders can access the proxy documents over the internet as well as how stockholders can receive a paper copy of our proxy materials, including the Proxy Statement, the 2022 Annual Report to Stockholders and a form of proxy card.

 

It is important that your shares be represented at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, please vote by proxy as soon as possible by following the instructions located in the Notice of Internet Availability of Proxy Materials sent to you or in the Proxy Statement. If you attend the Annual Meeting, you may withdraw your proxy and vote your shares personally.

 

We look forward to your attendance at the Annual Meeting.

 

	Sincerely,
	Christopher H. Hunter
	Chief Executive Officer and Director

 

YOUR VOTE IS IMPORTANT.

 

PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD 

AS PROMPTLY AS POSSIBLE.

 

 

 

6100 Tower Circle, Suite 1000 

Franklin, Tennessee 37067

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS 

To Be Held May 18, 2023

 

TO OUR STOCKHOLDERS:

 

The 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Acadia Healthcare Company, Inc. will be held on Thursday, May 18, 2023, at 8:00 a.m. (Central Time), at our executive offices located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067.

 

The Annual Meeting is being convened for the following purposes:

 

(1)

To elect two nominees as Class III directors;

 

(2)

To approve an amendment and restatement of the Acadia Healthcare Company, Inc. Incentive Compensation Plan;

 

(3)

To approve, on a non-binding advisory basis, the compensation of our named executive officers;

 

(4)

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023; and

 

(5)

To transact any other business that properly comes before the Annual Meeting or any adjournments or postponements thereof.

 

The matters to be acted upon at the Annual Meeting are more fully described in the Proxy Statement and related materials. Please read the materials carefully.

 

The Board of Directors has fixed the close of business on March 23, 2023 as the record date for determining stockholders entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof.

 

Dated: April 7, 2023	By order of the Board of Directors,
	Christopher H. Hunter
	Chief Executive Officer and Director

 

IMPORTANT

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, TO ASSURE THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.

TABLE OF CONTENTS

 

PROXY STATEMENT	1
INFORMATION CONCERNING SOLICITATION AND VOTING	1
PROPOSAL 1: ELECTION OF DIRECTORS	3
PROPOSAL 2: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE ACADIA HEALTHCARE COMPANY, INC. INCENTIVE COMPENSATION PLAN	8
PROPOSAL 3: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION	13
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	14
CORPORATE GOVERNANCE	15
MANAGEMENT	22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	23
COMPENSATION DISCUSSION AND ANALYSIS	26
COMPENSATION COMMITTEE REPORT	43
EXECUTIVE COMPENSATION	44
DIRECTOR COMPENSATION	62
AUDIT AND RISK COMMITTEE REPORT	64
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS	65
GENERAL INFORMATION	65

 

 

6100 Tower Circle, Suite 1000 

Franklin, Tennessee 37067

PROXY STATEMENT

 

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the “Board” or “Board of Directors”) of Acadia Healthcare Company, Inc. (the “Company”) of proxies to be voted at the 2023 Annual Meeting of Stockholders (the “Annual Meeting”), to be held at our executive offices located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, on Thursday, May 18, 2023, at 8:00 a.m. (Central Time), for the purposes set forth in the accompanying notice, and at any adjournments or postponements thereof. This Proxy Statement and the accompanying proxy are first being mailed or made available to stockholders on or about April 7, 2023.

 

INFORMATION CONCERNING SOLICITATION AND VOTING

 

Record Date

 

The close of business on March 23, 2023 has been fixed as the record date for the determination of stockholders entitled to vote at the Annual Meeting. As of such date, we had 180,000,000 authorized shares of common stock, $0.01 par value per share (“Common Stock”), of which 92,054,749 shares were outstanding and entitled to vote, and 10,000,000 authorized shares of preferred stock, $0.01 par value per share, of which no shares were outstanding. Common Stock is our only outstanding class of voting stock. Each share of Common Stock will have one vote on each matter to be voted upon at the Annual Meeting.

 

Quorum Requirements

 

A majority of the shares of Common Stock entitled to vote, represented in person or by proxy, is required to constitute a quorum. Abstentions and broker non-votes will be counted for purposes of determining the presence of a quorum at the Annual Meeting. If a quorum is not present at the time of the Annual Meeting, the stockholders entitled to vote, present in person or represented by proxy, shall have the power to adjourn the Annual Meeting until a quorum shall be present or represented by proxy. The Annual Meeting may be adjourned from time to time, whether or not a quorum is present, by the affirmative vote of a majority of the votes present and entitled to be cast at the Annual Meeting.

 

Voting Procedures

 

Whether you hold shares directly as the stockholder of record or through a broker, trustee or other nominee, as the beneficial owner, you may direct how your shares are voted without attending the Annual Meeting. If you hold shares in street name, you must vote by giving instructions to your broker or nominee. You should follow the voting instructions on any form that you receive from your broker or nominee. The availability of telephone and Internet voting for shares held in street name will depend on your broker’s or nominee’s voting process. Please refer to the instructions in the materials provided in the Notice of Internet Availability of Proxy Materials or proxy card provided to you for information on the available voting methods.

 

If a proxy is properly given prior to or at the Annual Meeting and not properly revoked, it will be voted in accordance with the instructions, if any, given by the stockholder. Subject to the requirements described below, if no instructions are given, each proxy will be voted:

 

●

FOR the election as directors of the nominees described in this Proxy Statement;

●

FOR the approval of an amendment and restatement of the Acadia Healthcare Company, Inc. Incentive Compensation Plan;

 

●

FOR the approval, on a non-binding advisory basis, of the compensation of our executive officers named in the section below entitled “EXECUTIVE COMPENSATION - Summary Compensation Table” (the “Named Executive Officers”);

 

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FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023; and

 

●

In accordance with the recommendation of the Board on any other proposal that may properly come before the Annual Meeting or any adjournment thereof.

 

The persons named as proxies were selected by our Board of Directors.

 

Without your instructions, your broker or nominee is permitted to use its own discretion and vote your shares on certain routine matters (such as Proposal 4), but is not permitted to use its discretion and vote your shares on non-routine matters (such as Proposals 1, 2 and 3). We urge you to give voting instructions to your broker or nominee on all proposals. Shares that are not permitted to be voted by your broker or nominee are called “broker non-votes.” Broker non-votes are not considered votes for or against a proposal and, therefore, will have no direct impact on any proposal. If you abstain from voting on Proposal 1, your abstention will have no effect on the outcome of the election. If you abstain from voting on Proposals 2, 3 or 4, your abstention will have the same legal effect as a vote against these proposals.

 

Stockholders who give proxies have the right to revoke them at any time before they are voted by delivering a written request to Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, prior to the Annual Meeting or by submitting another proxy at a later date. The giving of the proxy will not affect the right of a stockholder to attend the Annual Meeting and vote in person.

 

Miscellaneous

 

We will bear the cost of printing, mailing and other expenses in connection with this solicitation of proxies and will also reimburse brokers and other persons holding shares of Common Stock in their names or in the names of nominees for their expenses in forwarding the proxy materials to the beneficial owners of such shares. Certain of our directors, officers and employees may, without any additional compensation, solicit proxies in person or by telephone.

 

Our management is not aware of any matters other than those described in this Proxy Statement that may be presented for action at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is intended that the proxies will be voted with respect thereto in accordance with the judgment of the person or persons voting such proxies subject to the direction of our Board of Directors.

 

PROPOSAL 1: ELECTION OF DIRECTORS

 

Introduction

 

Our Amended and Restated Certificate of Incorporation, as amended (“Certificate of Incorporation”), provides that our Board of Directors shall be divided into three classes. All classes of directors have three-year terms. The terms of our Class III directors expire at the Annual Meeting.

 

We are committed to strong corporate governance, and our Board of Directors regularly reviews our governance structure, including our classified board. Our Board of Directors believes that a classified board structure promotes continuity and stability, encourages and enables directors to focus on the long-term success of the Company, and helps preserve the long-term value of the Company by protecting against unfair or hostile takeover practices. Directors who understand the Company and its business, history, culture, strategy and goals are a valuable resource and are well-positioned to make decisions in the best interests of the Company and its stockholders. With a classified structure, the Board is able to balance an appropriate level of institutional knowledge regarding operations, competition, trends, challenges, risks and long-term strategy with the fresh perspectives of newer directors.

 

Furthermore, our Board of Directors believes that the ability to prioritize long-term strategic planning afforded by the classified board structure has contributed to the Company’s stock growth and positive financial performance in recent years. Notwithstanding a global pandemic, the Company has delivered strong long-term total stockholder return (“TSR”) in recent years. As described in the “Compensation Discussion and Analysis – Summary of 2022 Company Performance” section of this proxy statement, the Company’s TSR was approximately 36% in 2022 and approximately 157% in the three-year period, 2020 through 2022, evidencing the effectiveness of the Company’s board leadership and structure.

 

Our Board of Directors has nominated the individuals named below under the caption “Class III Nominees” for election as directors to serve until the annual meeting of stockholders in 2026 and their successors have been elected and take office or until their earlier death, resignation or removal. Each nominee has consented to be a candidate and to serve if elected. Proxies cannot be voted for a greater number of persons than the nominees named.

 

Qualification of Directors

 

As described below, our Board of Directors is composed of individuals from differing backgrounds and experiences. We believe that each of our directors possesses unique qualifications, skills and attributes that complement the performance of the full Board. The experience that each has obtained from his or her professional background, as set forth below, has qualified him or her to serve on our Board of Directors.

 

Class III Nominees

 

The following table shows the names, ages and principal occupations of each of the nominees designated by our Board of Directors to become directors and the year in which each nominee was first appointed or elected to the Board of Directors:

 

Name		Age		Principal Occupation/Other Directorships		Director  Since
Michael J. Fucci		64		Prior to his retirement in September 2020, Mr. Fucci served as Chairman Emeritus of Deloitte U.S. He previously served as Executive Chairman of Deloitte U.S. from 2015 to 2019, Chief Operating Officer of Deloitte Consulting from 2009 to 2015 and held various management positions since 2003. Mr. Fucci also served as a member on both the Deloitte U.S. and Deloitte Global Boards of Directors. While at Deloitte U.S., he established and co-chaired the Board Leadership Forum, a coalition of Fortune 500 board chairs and lead directors. Our Board believes that Mr. Fucci is qualified to serve as a director because of, among other things, his extensive corporate finance background and his general business and financial acumen.		2020

 

Name		Age		Principal Occupation/Other Directorships		Director  Since
Wade D. Miquelon		58		Mr. Miquelon is the President, Chief Executive Officer and a member of the board of directors of JOANN Inc. (Nasdaq: JOAN) (“Jo-Ann”), the nation’s leading fabric and craft specialty retailer. Prior to that, he served as the Chief Financial Officer and Executive Vice President of Jo-Ann. Prior to joining Jo-Ann, he served as Chief Financial Officer, Executive Vice President and President International for Walgreen Co. from June 2008 to August of 2014. From 2006 to 2008, he was Executive Vice President and Chief Financial Officer at Tyson Foods, Inc. Prior to that, Mr. Miquelon served Procter and Gamble in several positions of increasing responsibility in the U.S., Asia and Europe. Mr. Miquelon serves on the board of directors of Jo-Ann, and serves on the board of directors and as treasurer for the National 4-H Council. He has served on various for profit and non-profit boards including Alliance Boots, the Chicago Lyric Opera and the John G. Shedd Aquarium. Our Board believes that Mr. Miquelon is qualified to serve as a director because of, among other things, his extensive knowledge and background in public accounting and finance.		2012

 

Although William M. Petrie, M.D. is currently a Class III director, he has not been nominated for reappointment and his term as a member of the Board will expire at the Annual Meeting. As a result, the number of directors serving on the Board will decrease from eleven to ten.

 

Required Vote

 

Our Certificate of Incorporation provides that, in an uncontested election, a nominee is elected if a majority of the votes cast by the holders of the shares of Common Stock entitled to vote in the election at a meeting at which a quorum is present are cast in favor of such nominee’s election. In contested elections, directors are elected by a plurality of the votes cast. Our Certificate of Incorporation does not provide for cumulative voting, and, accordingly, the stockholders do not have cumulative voting rights with respect to the election of directors. Consequently, each stockholder may cast one vote per share of Common Stock held of record for each nominee. Abstentions and broker non-votes will have no effect on the outcome of the election. If a nominee becomes unavailable for election, shares covered by a proxy will be voted for a substitute nominee selected by our Board of Directors.

 

The Board of Directors recommends that the stockholders vote FOR each of the Class III nominees.

 

Continuing Directors

 

Each of the persons named below will continue to serve as a director until the annual meeting of stockholders in the year indicated and a successor is elected and takes office or until his or her earlier death, resignation or removal. Stockholders are not voting on the election of the Class I directors or Class II directors. The following table shows the names, ages, principal occupations and other directorships of each continuing director and the year in which each was first appointed or elected to our Board or that of our predecessor, Acadia Healthcare Company, LLC:

 

Name		Age		Principal Occupation/Other Directorships		Director  Since
Class I  Term Expiring in 2024
E. Perot Bissell		63		Since 2016, Mr. Bissell has been a Managing Partner of Egis Capital Partners, LLC, a private equity firm that invests in the security and protection industries. Mr. Bissell served as the Chairman and Chief Executive Officer of Next Generation Energy Logistics, LLC, an energy logistics development company, from 2013 to 2015. Before that, Mr. Bissell served as the Vice Chairman of Pilot Logistics Services, a provider of drilling and exploration support services, from September 2012 until July 2013. From 2006 to 2012, he served as Chief Executive Officer for Maxum Petroleum, Inc., an independent energy logistics company.  Prior to that, Mr. Bissell was a Partner of Northwest Capital Appreciation, Inc., a merchant banking and private equity firm, and before that, the Co-Managing Partner and Chief Financial Officer of SLP Capital, a specialty finance company. Mr. Bissell also serves on the board of directors of First Reserve Sustainable Growth Corp. (Nasdaq: FRSG), Mission Critical Partners, LLC and ClearObject, Inc. and has served on a number of charitable boards. Our Board believes that Mr. Bissell is qualified to serve as a director because of, among other things, his extensive corporate finance background and his general business and financial acumen.		2013
Vicky B. Gregg		68		Since November 2014, Ms. Gregg has served as Co-Founder and Partner of Guidon Partners, an investor and consultant for an array of privately held healthcare companies. She served as Chief Executive Officer of BlueCross BlueShield of Tennessee from January 2003 through the end of 2012. Ms. Gregg currently serves on the board of directors of Quest Diagnostics Incorporated (NYSE: DGX), Erlanger Health Systems, Elara Caring, LLC and Capital Vision Services, LLC d/b/a MyEyeDr. Our Board believes that Ms. Gregg is qualified to serve as a director because of, among other things, her extensive healthcare background and her general business and financial acumen.		2016
Debra K. Osteen		67		From December 16, 2018 to March 31, 2022, Ms. Osteen served as our Chief Executive Officer. Ms. Osteen has extensive experience in the behavioral health industry. Prior to joining the Company in 2018, she served as Executive Vice President of Universal Health Services, Inc. (NYSE: UHS) (“UHS”) since 2005 and President, Behavioral Health Division since 1999. Our Board believes that Ms. Osteen is qualified to serve as a director because of, among other things, her 38 years of experience in the healthcare industry and her general business and financial acumen.		2018

Name		Age		Principal Occupation/Other Directorships		Director Since
Christopher H. Hunter		54		Since April 11, 2022, Mr. Hunter has served as our Chief Executive Officer. From January 2014 through August 2021, Mr. Hunter served in senior leadership positions at Humana, most recently as President of Humana’s Group, Military & Specialty and previously as Humana’s Chief Strategy Officer.  Mr. Hunter served as President, Provider Markets, for TriZetto Corporation prior to joining Humana.  Mr. Hunter serves on the board of directors of AfterNext HealthTech (NYSE: AFTR) and the UNC-Chapel Hill Honors Program. Our Board believes that Mr. Hunter is qualified to serve as a director because of, among other things, his extensive healthcare background and his general business and financial acumen.		2022
Class II  Term Expiring in 2025
Jason R. Bernhard		57		Mr. Bernhard is the Chief Operating Officer, Financial Advisory North America; Managing Director, Head of North America Healthcare Investment Banking; and a Vice Chairman of Investment Banking at Lazard Ltd, where he has served for more than 20 years. Our Board believes that Mr. Bernhard is qualified to serve as a director because of, among other things, his extensive corporate finance background and his general business and financial acumen.		2019
William F. Grieco		69		Since March 2018, Mr. Grieco has served as Vice President and Chief Compliance Officer of NX Development Corporation, the U.S. life sciences affiliate of Tokyo-based SBI Holdings, Inc., and since May 2021, also as General Counsel. Also, since 2008, Mr. Grieco has served as the Managing Director of Arcadia Strategies, LLC, a legal and business consulting organization servicing healthcare, science and technology companies. From 2003 to 2008, he served as Senior Vice President and General Counsel of American Science and Engineering, Inc., an x-ray inspection technology company. From 2001 to 2002, he served as Senior Vice President and General Counsel of IDX Systems Corporation, a healthcare information technology company. Previously, from 1995 to 1999, he was Senior Vice President and General Counsel for Fresenius Medical Care North America, a dialysis service and products company. Prior to that, Mr. Grieco was a partner in the Healthcare Department at Choate, Hall & Stewart, a general service law firm. Mr. Grieco previously served on the board of directors of PHC, Inc. (“PHC”). Our Board believes that Mr. Grieco is qualified to serve as a director because of, among other things, his extensive knowledge of and experience in the healthcare industry and his general business and financial acumen.		2011

 

Name		Age		Principal Occupation/Other Directorships		Director  Since
R. David Kelly		59		Since 2011, Mr. Kelly has served as the founder and managing partner of StraightLine Realty Partners, an alternative investment platform based in Dallas, Texas. Mr. Kelly also serves as founder, chairman, and Chief Executive Officer of Croesus and Company, and as managing director and co-founder of Serra Real Estate Capital, LLC. He previously served as a founding partner of Carleton Residential Properties from 1996 to 2011. Our Board believes that Mr. Kelly is qualified to serve as a director because of, among other things, his extensive corporate finance and real estate background and his general business and financial acumen.		2022
Reeve B. Waud		59		Mr. Waud founded the Company in 2005 and, most recently, has served as the Chairman of the Board since December 2018. Mr. Waud previously served as the Lead Director of the Board from April 2012 to December 2018. Mr. Waud formed Waud Capital Partners, L.L.C. (“WCP”) in 1993 and has served as the Managing Partner of WCP since that time. Prior to founding WCP, Mr. Waud was an investment professional at Golder, Thoma, Cressey, Rauner, Inc. (“GTCR”), a private equity investment group based in Chicago, Illinois. Before joining GTCR, Mr. Waud was in the Corporate Finance Group of Salomon Brothers Inc and was a founding member of its Venture Capital Group. He is a member of the Northwestern Memorial HealthCare finance committee and serves on the board of directors of the Northwestern Memorial HealthCare Foundation. In addition, he is a trustee and member of the finance committee of the Art Institute of Chicago. Mr. Waud has served on various for profit and non-profit boards, including the John G. Shedd Aquarium, the Economic Club of Chicago, the Illinois State Police Merit Board, and St. Paul’s School in Concord, New Hampshire. Our Board believes that Mr. Waud is qualified to serve as a director because of, among other things, his extensive knowledge of and experience in the healthcare industry and his general business and financial acumen. Mr. Waud was originally designated as a director by WCP.		2005

PROPOSAL 2: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE ACADIA HEALTHCARE COMPANY, INC. INCENTIVE COMPENSATION PLAN

 

Background

 

The Acadia Healthcare Company, Inc. Incentive Compensation Plan, last restated in 2013 and as amended and currently in effect (the “Incentive Plan”) provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock and other stock-based and cash-based awards. The Incentive Plan provides for grants to directors, officers and other employees of the Company and its subsidiaries and affiliates, as well as other persons performing consulting or advisory services for the Company. The purpose of the Incentive Plan is to provide incentives that will attract, retain and motivate high performing officers, directors, employees and consultants by providing them with a proprietary interest in our long-term success or compensation based on their performance in fulfilling their responsibilities to the Company.

 

In March 2023, the Compensation Committee and the Board of Directors approved and adopted an amendment and restatement of the Incentive Plan (the “Restated Incentive Plan”), subject to stockholder approval, in order to renew the term of the Incentive Plan for ten years until March 2033. The Restated Incentive Plan incorporates prior amendments to the Incentive Plan and does not increase the aggregate number of shares of Common Stock which may be issued or used for reference purposes for awards granted under the Incentive Plan. The Restated Incentive Plan continues to provide the same business criteria that our Compensation Committee can use for setting performance goals for awards and includes the same limits on individual awards. The material features of the Restated Incentive Plan are discussed below, but the description is subject to, and is qualified in its entirety by, the full text of the Restated Incentive Plan, which is attached to this Proxy Statement as Appendix A.

 

As of March 23, 2023, there were outstanding under the Incentive Plan:

 

	Total Stock Options Outstanding	1,176,666
	Total Unvested Restricted Stock Outstanding	1,157,411
	Total Unvested Restricted Stock Units Outstanding	220,615
	Total Common Stock Outstanding	92,054,749
	Weighted-Average Exercise Price of Stock Options Outstanding	$53.95
	Weighted-Average Remaining Duration of Stock Options Outstanding	7.78
	Total Shares Available for Grant under Incentive Plan	2,819,454

 

The closing price of a share of our Common Stock on The NASDAQ Global Select Market on March 23, 2023 was $69.44. The Incentive Plan is the Company’s only equity compensation plan.

 

Proposal

 

Stockholders are being asked to approve the Restated Incentive Plan at the Annual Meeting. The full text of the Restated Incentive Plan is included in Appendix A to this Proxy Statement.

 

Description of the Restated Incentive Plan

 

Set forth below is a summary of the material terms of the Restated Incentive Plan, which are substantially similar to current Incentive Plan terms. The summary is qualified in its entirety by reference to the full text of the Restated Incentive Plan, which is included in Appendix A to this Proxy Statement.

 

Administration. The Restated Incentive Plan is administered by the Compensation Committee. Under the Restated Incentive Plan, the Compensation Committee has the power to:

 

●

Grant awards under the Restated Incentive Plan and determine the recipients, type of awards, form, amount and other terms and conditions of awards, including the number of shares of Common Stock in each award;

 

●

Construe and interpret the terms and provisions of the Restated Incentive Plan or any award agreement;

 

●

Amend the terms of outstanding awards;

 

●

Administer the Restated Incentive Plan and adopt such rules, forms, instruments and guidelines for administering the Restated Incentive Plan as it deems necessary or proper;

 

●

Make all other determinations in connection with the Restated Incentive Plan and the awards; and

 

●

Delegate authority under the Restated Incentive Plan.

 

Available Shares. The aggregate number of shares of our Common Stock which may be issued or used for reference purposes under the Restated Incentive Plan or with respect to which awards may be granted may not exceed 12,700,000 shares. This total, however, includes awards that were made prior to this amendment and restatement. Currently 2,819,454 shares remain available for future grants. The number of shares available for issuance under the Restated Incentive Plan may be subject to adjustment in the event of a reorganization, stock split, merger or similar change in the corporate structure or the number of outstanding shares of our Common Stock. In the event of any of these occurrences, we may make any appropriate adjustments to, among other things, the number and kind of shares, options or other property available for issuance under the Restated Incentive Plan or covered by outstanding awards. The shares available for issuance under the Restated Incentive Plan may be either authorized and unissued shares of our Common Stock or shares of Common Stock held in or acquired for our treasury. In general, if awards under the Restated Incentive Plan are for any reason cancelled, or expire or terminate unexercised, the shares covered by such awards may again be available for the grant of awards under the Restated Incentive Plan.

 

Maximum Awards. The maximum number of shares of our Common Stock subject to any performance award granted to any one participant during any fiscal year is 750,000 shares, and the maximum number of shares of our Common Stock for all performance awards granted to any one participant during any fiscal year is 1,500,000 shares. The maximum value of a cash payment made under a performance award with respect to any fiscal year is $10,000,000.

 

Eligibility for Participation. Members of our Board of Directors, as well as employees of, and consultants to, us or any of our subsidiaries and affiliates are eligible to receive awards under the Restated Incentive Plan.

 

Award Agreement. Awards granted under the Restated Incentive Plan will generally be evidenced by award agreements, which need not be identical, that provide additional terms, conditions, restrictions or limitations covering the grant of the award, including additional terms providing for the acceleration of exercisability or vesting of awards in the event of a change of control or conditions regarding the participant’s employment, as determined by the Compensation Committee.

 

Stock Options. The Compensation Committee may grant nonqualified options to purchase shares of our Common Stock to eligible employees and eligible non-employees, and incentive options to purchase shares of our Common Stock only to eligible employees. The Compensation Committee will determine the number of shares of our Common Stock subject to each option, the term of each option, which may not exceed ten years (or five years in the case of an incentive stock option granted to a 10% or greater stockholder), the exercise price, the vesting schedule (if any) and the other material terms of each option. No incentive stock option or nonqualified stock option may have an exercise price less than the fair market value of a share of our Common Stock at the time of grant or, in the case of an incentive stock option granted to a 10% or greater stockholder, 110% of such fair market value. Options will be exercisable at such time or times and subject to such terms and conditions as determined by the Compensation Committee at grant and the exercisability of such options may be accelerated by the Compensation Committee.

 

Stock Appreciation Rights. The Compensation Committee may grant SARs either with a stock option, which may be exercised only at such times and to the extent the related option is exercisable (a “Tandem SAR”), or independent of a stock option (a “Non-Tandem SAR”). A SAR is a right to receive a payment in shares of our Common Stock or cash, as determined by the Compensation Committee, equal in value to the excess of the fair market value of one share of our Common Stock on the date of exercise over the exercise price per share established in connection with the grant of the SAR. The term of each SAR may not exceed ten years. The exercise price per share covered by an SAR will be the exercise price per share of the related option in the case of a Tandem SAR and will be the fair market value of our Common Stock on the date of grant in the case of a Non-Tandem SAR. The Compensation Committee may also grant limited SARs, either as Tandem SARs or Non-Tandem SARs, which may become exercisable only upon the occurrence of a change in control, as defined in the Restated Incentive Plan, or such other event as the Compensation Committee may designate at the time of grant or thereafter.

 

Restricted Stock. The Compensation Committee may award shares of restricted stock. Except with respect to dividends or as otherwise provided by the Compensation Committee upon the award of restricted stock, the recipient generally will have the rights of a stockholder with respect to the shares, including the right to vote the shares of restricted stock and, conditioned upon full vesting of shares of restricted stock, the right to tender such shares, subject to the conditions and restrictions generally applicable to restricted stock or specifically set forth in the recipient’s restricted stock agreement. In no event will dividends or dividend equivalents be granted with respect to unvested shares of restricted stock, except that the Compensation Committee may provide in the applicable award agreement at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, vesting of the shares of restricted stock. Recipients of restricted stock will generally be required to enter into a restricted stock agreement with us that states the restrictions to which the shares are subject, which may include satisfaction of pre-established performance goals, and the criteria or date or dates on which such restrictions will lapse. If the grant of restricted stock or the lapse of the relevant restrictions is based on the attainment of performance goals, the Compensation Committee will establish for each recipient the applicable performance goals, formulae or standards and the applicable vesting percentages with reference to the attainment of such goals or satisfaction of such formulae or standards while the outcome of the performance goals are substantially uncertain. Such performance goals may incorporate provisions for disregarding, or adjusting for, changes in accounting methods, corporate transactions, including dispositions and acquisitions, and other similar events or circumstances.

 

Other Stock-Based Awards. The Compensation Committee may, subject to limitations under applicable law, make a grant of such other stock-based awards, including nonmanagement director compensation paid at the election of a director in shares of our Common Stock in lieu of cash, stock equivalent units and restricted stock units that are payable in cash or denominated or payable in or valued by shares of our Common Stock or factors that influence the value of such shares. The Compensation Committee may determine the terms and conditions of any such other awards, which may include the achievement of certain minimum performance goals and a minimum vesting period.

 

Other Cash-Based Awards. The Compensation Committee may grant awards payable in cash. Cash-based awards shall be in such form, and dependent on such conditions, as the Compensation Committee shall determine, including being subject to the satisfaction of vesting conditions or awarded purely as a bonus and not subject to restrictions or conditions. If a cash-based award is subject to vesting conditions, the Compensation Committee may accelerate the vesting of such award in its discretion.

 

Performance Awards. The Compensation Committee may grant a performance award to a participant payable upon the attainment of specific performance goals. If the performance award is payable in cash, it may be paid upon the attainment of the relevant performance goals either in cash or in shares of restricted stock, based on the then current fair market value of such shares, as determined by the Compensation Committee. Based on service, performance or other factors or criteria, the Compensation Committee may, at or after grant, accelerate the vesting of all or any part of any performance award.

 

Change in Control. In connection with a change in control, as defined in the Restated Incentive Plan, the Compensation Committee may accelerate vesting of outstanding awards under the Restated Incentive Plan. In addition, such awards may be, in the discretion of the Compensation Committee:

 

●

Assumed and continued or substituted in accordance with applicable law; or

 

●

Purchased by us for an amount equal to the excess of the price of a share of our Common Stock paid in a change in control over the exercise price of the awards.

 

The Compensation Committee may also provide for accelerated vesting or lapse of restrictions of an award at any time.

 

Stockholder Rights. Except as otherwise provided in the applicable award agreement and with respect to an award of restricted stock, a participant will have no rights as a stockholder with respect to shares of our Common Stock covered by any award until the participant becomes the record holder of such shares. In no event will dividends or dividend equivalents be granted with respect to unvested awards, except that the Compensation Committee may provide in the applicable award agreement at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, vesting of the award.

 

Amendment and Termination. Notwithstanding any other provision of the Restated Incentive Plan, generally our Board of Directors may at any time amend any or all of the provisions of the Restated Incentive Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided in the Restated Incentive Plan, the rights of a participant with respect to awards granted prior to such amendment, suspension or termination may not be adversely affected without the consent of such participant. Repricing of options and SARs (including the cash buyout of underwater options and SARs) without stockholder approval is prohibited.

 

Transferability. Awards granted under the Restated Incentive Plan generally are nontransferable, other than by will or the laws of descent and distribution, except that the Compensation Committee may provide for the transferability of nonqualified stock options at the time of grant or thereafter to certain family members.

 

Recoupment of Awards. The Restated Incentive Plan provides that awards granted under the Restated Incentive Plan are subject to any right that we might have (i) under any recoupment policy or (ii) regarding the clawback of “incentive-based compensation” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and under any applicable rules and regulations promulgated by the Securities and Exchange Commission (the “SEC”).

 

Federal Income Tax Consequences

 

Under present federal income tax law, participants will generally realize ordinary income equal to the amount of a cash award under the Restated Incentive Plan in the year of receipt. With respect to equity awards (other than options) under the Restated Incentive Plan, participants will generally recognize ordinary income based on the market value of our Common Stock at the time it becomes vested or earned under an award; however, with respect to an award of restricted stock, participants can make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), to be taxed on the value of the Common Stock at the time the award is granted. In either case, the individual is also subject to capital gains treatment on the subsequent sale of the Common Stock acquired through an award. For this purpose, the individual’s basis in the Common Stock is its fair market value at the time the Common Stock subject to the award becomes vested. If an election under Section 83(b) is made, basis is determined at the time the Common Stock was transferred. With respect to nonqualified stock options, a participant will recognize ordinary income when the option is exercised, equal to the difference between the exercise price and the fair market value of our Common Stock at the time of exercise. A participant who exercises an incentive stock option generally will not recognize any ordinary income, provided the participant holds the Common Stock for at least two years from the time of grant of the option and one year from the time of exercise.

 

We will generally be entitled to a corresponding federal income tax deduction at the time the participant recognizes ordinary income. However, Section 162(m) of the Code generally limits federal income tax deductions for compensation paid to a “covered employee” in any taxable year to $1 million. A person is a covered employee if such person was either the Company’s Chief Executive Officer or Chief Financial Officer or was one of the Company’s three other most highly compensated officers for the fiscal year. For taxable years ending December 31, 2017 and earlier, compensation that qualifies as “performance-based compensation” is excluded from the $1 million deductibility cap, and therefore fully deductible by the company that pays it. Due to changes in Section 162(m) of the Code this exclusion is not available for grants after November 2, 2017.

 

The Restated Incentive Plan is intended to comply with Section 409A of the Code to the extent that such section would apply to any award under the Restated Incentive Plan. Section 409A of the Code governs the taxation of deferred compensation. Any participant that is granted an award that is deemed to be deferred compensation, such as a grant of restricted stock units that does not qualify for an exemption from Section 409A of the Code, and does not comply with Section 409A of the Code, could be subject to taxation on the award as soon as the award is no longer subject to a substantial risk of forfeiture and an additional 20% tax (and a further additional tax based upon an amount of interest determined under Section 409A of the Code) on the value of the award.

 

Required Vote

 

The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter is needed to approve the Restated Incentive Plan. Under Delaware law, an abstention will have the same legal effect as a vote against approval of the Restated Incentive Plan, and broker non-votes will have no effect on the outcome of the approval of the Restated Incentive Plan.

 

The Board of Directors recommends that the stockholders vote FOR  

approval of the Restated Incentive Plan.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

The following table provides information as of December 31, 2022 with respect to compensation plans (including individual compensation arrangements) under which shares of Common Stock are authorized for issuance:

 

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(1)
Equity Compensation Plans Approved by Stockholders(2)			3,298,279	(3)		$	46.27				3,133,811
Equity Compensation Plans Not Approved by Stockholders			—				—				—
Total			3,298,279								3,133,811

__________

 

(1)

Excludes shares to be issued upon exercise of outstanding options and vesting of outstanding restricted stock units.

 

(2)

Represents securities issued or available for issuance under the Incentive Plan.

 

(3)

Includes 1,273,800 shares that may be issued upon vesting of outstanding restricted stock units that vest over three years, assuming that maximum performance goals are attained in all three years.

 

PROPOSAL 3: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables our stockholders to vote to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as described below in the sections entitled “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE COMPENSATION.” Because your vote is advisory, it will not be binding on the Board of Directors or the Compensation Committee, override any decision made by the Board of Directors or the Compensation Committee or create or imply any additional fiduciary duty of the Board of Directors or the Compensation Committee. The Compensation Committee will, however, review the voting results and take them into consideration when making future decisions regarding executive compensation.

 

Our executive compensation program is vital to our ability to attract, motivate and retain a highly experienced team of executives. We believe that the program is structured in a manner that supports our company and our business objectives.

 

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, we are asking our stockholders to indicate their support for the compensation of our Named Executive Officers disclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote FOR the following resolution at the Annual Meeting:

 

RESOLVED, that the Company’s stockholders approve, on a non-binding advisory basis, the compensation of the Named Executive Officers as disclosed in the Company’s Proxy Statement for the 2023 annual meeting of stockholders pursuant to Item 402 of Regulation S-K, including the sections entitled “COMPENSATION DISCUSSION AND ANALYSIS” and “EXECUTIVE COMPENSATION.”

 

Although the results of this advisory vote are not binding on the Board of Directors or the Compensation Committee, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.

 

The Board of Directors recommends that stockholders vote FOR the resolution to approve, on a 

non-binding advisory basis, the compensation of our Named Executive Officers.

 

PROPOSAL 4: RATIFICATION OF APPOINTMENT OF 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit and Risk Committee of the Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions. Although ratification is not required by our Amended and Restated Bylaws, as amended (“Bylaws”), or otherwise, our Board of Directors is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice.

 

Fees

 

The following table presents fees for professional services rendered by Ernst & Young LLP for the audit of our annual financial statements for the years ended December 31, 2022 and 2021, and fees incurred for other services rendered by Ernst & Young LLP for such years:

 

		2022				2021
Audit Fees(1)		$	3,510,836			$	3,392,000
Audit-Related Fees			—				—
Tax Fees(2)			1,024,396				876,957
All Other Fees(3)			—				3,000
Total Fees		$	4,535,232			$	4,271,957

 

(1)

Primarily for the audit of our annual financial statements and the review of our quarterly financial statements, and services provided in connection with acquisition due diligence. For 2022, also includes travel and lodging costs incurred in connection with the rendering of audit services.

 

(2)

Primarily for tax compliance services and other tax planning and tax advice services.

 

(3)

Primarily for debt transaction advisory services.

 

Pre-approval of Auditor Services

 

The charter of the Audit and Risk Committee provides that the Audit and Risk Committee must pre-approve all auditing and non-auditing services to be provided by our auditor. In addition, the Audit and Risk Committee shall have the sole authority to approve any compensation to our auditor for any approved audit or non-audit services. For 2022, all services provided by Ernst & Young LLP were pre-approved by the Audit and Risk Committee. All non-audit services were reviewed by the Audit and Risk Committee, and the Audit and Risk Committee concluded that the provision of such services by Ernst & Young LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

 

Required Vote

 

The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter is needed to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. Under Delaware law, an abstention will have the same legal effect as a vote against the ratification of Ernst & Young LLP, and broker non-votes will have no effect on the outcome of the ratification of the independent registered public accounting firm. If the appointment is not ratified, the matter will be referred to the Audit and Risk Committee for further review.

 

The Audit and Risk Committee and the Board of Directors recommend that the stockholders vote FOR ratification of the appointment of Ernst & Young LLP as our independent registered public 

accounting firm for the fiscal year ending December 31, 2023.

 

CORPORATE GOVERNANCE

 

Independence of the Board of Directors

 

Our Board annually reviews the independence of all of our directors and affirmatively makes a determination as to the independence of each director based on whether such director satisfies the definition of “independent director” as set forth in the applicable rules of The NASDAQ Stock Market. Our Board has determined that all of our directors are independent directors other than Mr. Hunter and Ms. Osteen.

 

Code of Conduct and Code of Ethics for Senior Financial Officers

 

Our Board of Directors has adopted a Code of Conduct which is applicable to all of our officers, employees and directors, including our Chief Executive Officer, Chief Financial Officer, the principal accounting officer or controller and all persons performing similar functions (together, the “Senior Financial Officers”). In addition, our Board has adopted a Code of Ethics that applies to the Senior Financial Officers. Both the Code of Conduct and the Code of Ethics are available on our website at www.acadiahealthcare.com under the webpage “Investors - Corporate Governance.”

 

Committees of the Board of Directors

 

Our Board of Directors has established five standing committees - a Compensation Committee, an Audit and Risk Committee, a Nominating and Governance Committee, a Compliance Committee and a Finance Committee, each of which is described below.

 

Compensation Committee

 

Our Board of Directors has appointed a Compensation Committee to assist it with executive compensation matters. The primary responsibilities and duties of the Compensation Committee are:

 

●

Reviewing and approving for the Chief Executive Officer and other executive officers (a) the annual base salary level, (b) bonus and other annual incentives, (c) equity compensation, (d) employment agreements, severance arrangements and change in control arrangements, and (e) any other benefits, compensation, compensation policies or arrangements;

 

●

Reviewing and making recommendations to the Board regarding the compensation policy for such other officers as directed by the Board;

 

●

Preparing a report to be included in the annual report or proxy statement that describes: (a) the criteria on which compensation paid to the Chief Executive Officer for the last completed fiscal year is based; (b) the relationship of such compensation to our performance; and (c) the Compensation Committee’s executive compensation policies applicable to executive officers; and

 

●

Overseeing the administration and approval of our current equity-based compensation plans and making recommendations to our Board of Directors with respect to amendments to the plans, changes in the number of shares reserved for issuance thereunder and other equity-based compensation plans proposed for adoption.

 

During 2022, the Compensation Committee was composed of Ms. Gregg, Mr. Fucci, Mr. Miquelon and Dr. Petrie, with Mr. Miquelon serving as Chairman. During 2022, the Compensation Committee held five meetings and took action by written consent two times. The Compensation Committee has a written charter that is available on our website at www.acadiahealthcare.com under the webpage “Investors - Corporate Governance.”

 

Audit and Risk Committee

 

Our Board of Directors has appointed an Audit and Risk Committee to assist it in fulfilling its oversight responsibilities for our financial reports, systems of internal control over financial reporting and accounting policies, procedures and practices. The primary responsibilities and duties of the Audit and Risk Committee are:

 

●

Appointing, retaining, evaluating and, when appropriate, replacing our independent registered public accounting firm, whose duty it is to audit our financial statements and our internal control over financial reporting for the fiscal year in which it is appointed;

 

●

Determining the compensation to be paid to our independent registered public accounting firm (subject to ratification by our stockholders) and, in its sole discretion, approving all audit and engagement fees and terms and pre-approve all auditing and non-auditing services of our independent registered public accounting firm;

 

●

Reviewing and discussing our system of internal control over financial reporting, audit procedures, the adequacy and effectiveness of our disclosure controls and procedures and our enterprise risk assessment and risk management system with management, our independent registered public accounting firm and our internal auditors;

 

●

Reviewing the internal audit function of the Company, including the independence of its reporting obligations and the adequacy of the internal audit budget and staffing;

 

●

Reviewing and discussing with management and our independent registered public accounting firm the audited financial statements to be included in our Annual Report on Form 10-K, the quarterly financial statements to be included in our Quarterly Reports on Form 10-Q, our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the selection, application and disclosure of critical accounting policies used in our financial statements;

 

●

Reviewing and discussing with management the Company’s major financial and enterprise risk exposures including the Company’s accounting and financial reporting policies, risk management protocols, compliance programs and the measures management has taken to mitigate risk;

 

●

Reviewing and discussing with management the Company’s process to identify, monitor and mitigate enterprise risk exposures;

 

●

Reviewing and discussing with management all existing related-party transactions and approving any proposed related-party transactions to ensure that they are in our best interest;

 

●

Reviewing and discussing with management the quarterly earnings press releases and financial information and earnings guidance provided to analysts and rating agencies;

 

●

Establishing and overseeing procedures for receiving, retaining and treating complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and

 

●

Reviewing and reassessing the performance of the Audit and Risk Committee and the adequacy of the Audit and Risk Committee charter adopted by our Board of Directors and recommending proposed changes to the Board.

 

During 2022, the Audit and Risk Committee was composed of Messrs. Bissell, Fucci and Grieco, with Mr. Grieco serving as Chairman. Mr. Waud served on the committee until May 18, 2022. Our Board of Directors has determined that each of Messrs. Bissell, Fucci and Grieco is an “audit committee financial expert” as defined in rules promulgated by the SEC under the Exchange Act, and that each member of the Audit and Risk Committee meets the financial literacy requirements under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and rules and regulations of NASDAQ and the SEC. Our Board has determined that each of Messrs. Bissell, Fucci and Grieco satisfies the independence requirements for audit committee members set forth in the applicable rules of The NASDAQ Stock Market. The Audit and Risk Committee held four meetings during 2022. The Audit and Risk Committee has a written charter available on our website, www.acadiahealthcare.com under the webpage “Investors - Corporate Governance.”

 

Nominating and Governance Committee

 

Our Board of Directors has appointed a Nominating and Governance Committee (the “Nominating Committee”) to assist it with director nominations matters. The primary responsibilities and duties of the Nominating Committee are:

 

●

Identifying, recruiting and recommending individuals qualified to serve on the Board;

 

●

Reviewing the qualifications and performance of incumbent directors to determine whether to recommend them as nominees for re-election;

 

●

Reviewing and considering candidates who may be properly suggested by any director or executive office of the Company, or by any stockholder of the Company;

 

●

Periodically reviewing the composition of the Board, including size of the Board and the minimum qualifications for director nominees;

 

●

Seeking to have qualified director candidates with a diversity of experience, professions, skills and backgrounds included by the Company in each pool of candidates from which Board nominees are chosen;

 

●

Establishing procedures to evaluate the performance of the Board, its committees and its members;

 

●

Reviewing succession planning for the Company’s senior executive officers; and

●

Carrying out such other responsibilities delegated by the Board relating to the director nominations process and procedures.

 

During 2022, the Nominating Committee was composed of Ms. Gregg, Messrs. Bissell, Grieco and Kelly, with Mr. Bissell serving as Chairman. Mr. Waud served on the committee until May 18, 2022. Mr. Kelly was appointed to the Nominating Committee on October 27, 2022. During 2022, the Nominating Committee held two meetings and took action by written consent one time. The Nominating Committee has a written charter available on our website, www.acadiahealthcare.com under the webpage “Investors - Corporate Governance.”

 

Compliance Committee

 

Our Board of Directors has appointed a Compliance Committee (the “Compliance Committee”) to oversee regulatory compliance risks, including risks associated with healthcare related requirements. The primary responsibilities and duties of the Compliance Committee are:

 

●

Reviewing and providing oversight of matters relating to compliance with Federal health care program requirements, obligations under the Company’s corporate integrity agreement and other legal and regulatory requirements;

 

●

Periodically meeting with and reviewing reports regarding compliance matters from the Company’s Chief Compliance Officer;

 

●

Reviewing and overseeing the performance of the Company’s Chief Compliance Officer and the compliance department;

 

●

Reviewing significant areas of healthcare compliance risk, including (i) coding, billing, documentation, claims submission and reimbursement, (ii) licensure and accreditation requirements, (iii) clinical quality of care, (iv) physician recruitment and contracting, and (v) privacy and security of health information;

 

●

Overseeing procedures for the receipt, retention and treatment of complaints regarding compliance with applicable legal and regulatory requirements and the Company’s compliance policies;

 

●

Reviewing significant licensure, certification, accreditation and quality standards matters; and

 

●

Carrying out such other responsibilities delegated by the Board relating to regulatory compliance.

 

During 2022, the Compliance Committee was composed of Mses. Gregg and Osteen, Mr. Grieco and Dr. Petrie, with Ms. Gregg serving as Chairman. Ms. Osteen was appointed to the Compliance Committee on June 27, 2022. During 2022, the Compliance Committee held four meetings. The Compliance Committee has a written charter available on our website, www.acadiahealthcare.com under the webpage “Investors - Corporate Governance.”

 

Finance Committee

 

Our Board of Directors has appointed a Finance Committee (the “Finance Committee”) to oversee and review the Company’s significant strategic transactions and financing matters. The primary responsibilities and duties of the Finance Committee are:

 

●

Overseeing our strategic transactions;

 

●

Reviewing and evaluating our (i) capital structure and proposed changes thereto, including significant new issuances, purchases, or redemptions of our securities, (ii) plans for allocation and disbursement of capital expenditures, (iii) credit rating, activities with credit rating agencies, and key financial ratios, (iv) long-term financial strategy and financial needs, (v) major activities with respect to mergers, acquisition and divestitures, and (vi) plans to manage insurance and asset risk;

 

●

Reviewing and approving certain capital expenditures, contractual obligations and financial commitments per delegated authority from our Board; and

 

●

Carrying out such other responsibilities delegated by the Board relating to long-term finance and strategic transaction matters.

 

During 2022, the Finance Committee was composed of Messrs. Bernhard, Bissell, Fucci, Miquelon and Waud, with Mr. Waud serving as Chairman. During 2022, the Finance Committee did not meet.

 

Meetings of our Board of Directors and Committees

 

During 2022, our Board of Directors held a total of four meetings and took action by written consent two times. Each director attended 75% or more of the meetings of our Board and the committees of our Board of Directors on which such director served.

 

Nomination of Directors

 

Nominations By the Nominating Committee

 

Directors may be nominated by our Nominating Committee, Board, executive officers or by our stockholders in accordance with our Bylaws, Certificate of Incorporation, applicable laws and any guidelines developed by the Nominating Committee or the Board. The Nominating Committee is responsible for identifying individuals qualified to become members of the Board and its committees, and recommending candidates for the Board’s selection as director nominees for election at the annual or other properly convened meeting of the stockholders in accordance with our Bylaws and applicable laws and regulations. The Nominating Committee meets to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board. The Nominating Committee considers each identified candidate’s qualifications, which include the nominee’s experience, business acumen, education, integrity, character, commitment, diligence, conflicts of interest and ability to exercise sound business judgment. While we have not established diversity standards for nominees, as a matter of practice, we generally seek nominees with a broad diversity of experience, professions, skills and backgrounds. We do not currently pay a fee to any third party to identify or assist in identifying or evaluating potential nominees.

 

Nominations By Our Stockholders

 

Our Bylaws govern stockholder nominations of directors. To make a director nomination at the 2024 annual meeting, a stockholder of record entitled to vote at the annual meeting must deliver a written notice (containing certain information specified in our Bylaws as discussed below) to Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, at Acadia Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067 between the close of business on January 19, 2024 and the close of business on February 18, 2024. If the date of the 2024 annual meeting is more than 30 days before or more than 70 days after May 18, 2024, the stockholder’s notice must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Company. To make a director nomination to be voted on at a special meeting of stockholders called for the purpose of electing directors, a stockholder of record entitled to vote in such election must deliver written notice to our secretary at the address above no earlier than the close of business on the 120th day prior to such special meeting and no later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which we first publicly announce the date of the special meeting and the nominees proposed by the Board to be elected at such meeting.

 

For a stockholder nomination to be deemed proper, the notice must contain certain information specified in our Bylaws, including information as to the director nominee(s) proposed by the stockholder, the name and address of the stockholder, the class and number of shares of our capital stock beneficially owned by the stockholder, a description of all arrangements or understandings between the stockholder and any other persons (including each proposed nominee(s) if applicable) in connection with the proposed nominations, and a representation that such stockholder intends to appear in person or by proxy at the meeting to bring such business or nominate the person(s) named in the notice.

 

In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than our director nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 19, 2024.

 

Majority Voting for Uncontested Director Elections; Director Resignation Policy

 

In May 2017, amendments to our Certificate of Incorporation and Bylaws became effective that adopted a majority voting standard for uncontested director elections. In contested elections, directors will continue to be elected by a plurality of the votes cast. The Board also adopted a Director Resignation Policy requiring a nominee for director to submit a written offer of resignation to the Board in the event such nominee does not receive a majority of the votes cast in an uncontested election of directors. The Director Resignation Policy addresses the continuation in office of a “holdover” director, so that an incumbent director who does not receive the requisite affirmative majority of the votes cast for his or her re-election must tender his or her resignation to the Board. In the event a nominee submits a written officer of resignation to the Board, the Nominating and Governance Committee will promptly consider the director’s offer of resignation and recommend to the Board whether to accept the resignation or reject it. The Board will act on such recommendation within 90 days following receipt of the recommendation.

 

Communicating with the Board

 

All stockholder communications with our Board of Directors should be directed to Christopher L. Howard, Esq., Executive Vice President, General Counsel and Secretary, at Acadia Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, and should prominently indicate on the outside of the envelope that it is intended for our Board of Directors or for an individual director. Each communication intended for our Board of Directors and received by Mr. Howard will not be opened but will be promptly forwarded unopened to the Chairman of the Audit and Risk Committee following its clearance through normal security procedures.

 

Attendance by Members of the Board of Directors at the Annual Meeting of Stockholders

 

We encourage each member of our Board of Directors to attend the annual meeting of stockholders. Each director other than Mr. Fucci attended the 2022 annual meeting of stockholders in person. Mr. Fucci participated in the meeting via videoconference.

 

Board Leadership Structure

 

The Board of Directors does not have a formal policy on whether the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate. While these roles were combined until December 2018, the Company currently has separate individuals serve in those positions. Reeve B. Waud serves as the Chairman of the Board and Christopher H. Hunter is our Chief Executive Officer. Debra K. Osteen had served as our Chief Executive Officer prior to Mr. Hunter’s appointment effective April 11, 2022. Ms. Osteen and Mr. Hunter are also members of the Board. The Board of Directors has carefully considered its leadership structure and believes at this time that the Company and its stockholders are best served by having the positions of Chairman of the Board and Chief Executive Officer filled by different individuals. This allows the Chief Executive Officer to, among other things, focus on the Company’s day-to-day business, while allowing the Chairman to lead the Board of Directors in its fundamental role of providing advice and oversight of management. In addition, our independent directors bring experience, oversight and expertise from outside our Company and industry, while the Chief Executive Officer brings Company-specific experience and expertise. The Board of Directors recognizes that depending on future circumstances, other leadership models may become more appropriate. Accordingly, the Board of Directors will continue to periodically review its leadership structure.

 

Board Diversity Matrix

 

Based upon voluntary self-identification by each member of our Board of Directors, the table below sets forth the diversity composition of our Board of Directors as of March 23, 2023. Each of the categories listed in the table below has the meaning set forth in Nasdaq Rule 5605(f).

 

	Board Diversity Matrix (as of March 23, 2023)*
	Total Number of Directors	11
		Female	Male
	Part I: Gender Identity
	Directors	2	9
	Part II: Demographic Background
	White	2	8
	African American or Black	-	1
	* Inapplicable categories omitted.

 

Risk Oversight

 

Our Board is responsible for overseeing our risk management process. The Board fulfills its responsibility by delegating many of these functions to its committees. Under its charter, the Audit and Risk Committee is responsible for meeting periodically with management to review our major financial risks and the steps management has taken to monitor and control such risks. The Audit and Risk Committee also oversees our financial reporting and internal controls and compliance programs.

 

The Board receives reports on risk management from our senior officers, the Compliance Committee and the Chairman of the Audit and Risk Committee. Also, our Executive Vice President, General Counsel and Secretary provides a summary of our outstanding material litigation and governmental investigations to our Board at each Board meeting. Additionally, our Board regularly engages in discussions of the most significant risks that we are facing and how these risks are being managed. Our Board of Directors believes that the work undertaken by the Audit and Risk Committee and Compliance Committee, together with the oversight provided by the full Board of Directors, enables the Board to oversee our risk management function effectively.

 

Corporate Social Responsibility and Sustainability

Our Board and its committees oversee our enterprise-wide commitment to environmental, social and governance (“ESG”) matters. In fulfilling its oversight responsibilities, the Board and its committees collaborate with management on the Company’s ESG strategy, policies, programs and reporting.

Non-Management Executive Sessions

 

We had nine independent directors in 2022. During 2022, there were four executive sessions of the independent directors.

 

Compensation Committee Interlocks and Insider Participation

 

During 2022, the Compensation Committee consisted of Ms. Gregg, Messrs. Fucci and Miquelon, and Dr. Petrie, none of whom has at any time been one of our officers or employees. None of our executive officers serves, or in the past year served, as a member of the board of directors or compensation committee of any entity that has or had one or more of its executive officers serving on our Board or Compensation Committee.

 

Policy on Reporting of Concerns Regarding Accounting Matters

 

The Audit and Risk Committee has adopted a policy on the reporting of concerns regarding accounting, internal accounting controls or auditing matters. We have established a compliance hotline called ValuesLine (800-500-0333), which is administered by a third party, as a hotline for the receipt, retention and treatment of complaints from employees or others regarding accounting, internal accounting controls and auditing matters. Information received through the hotline is conveyed directly to our Chief Compliance Officer. Complaints relating to accounting, internal accounting controls or auditing matters will then be directed to the Chairman of the Audit and Risk Committee. Any complaint may be made anonymously if the claimant so desires, and all claimants will be provided confidentiality in the handling of the complaint.

 

Procedure for Approval of Transactions with Related Persons

 

We have established policies and other procedures regarding approval of transactions between the Company and any employee, officer, director, and certain of their family members and other related persons, including those required to be reported under Item 404 of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”). These policies and procedures are generally not in writing, but are evidenced by principles set forth in our Code of Conduct or adhered to by our Board. As set forth in the Audit and Risk Committee Charter, the Audit and Risk Committee reviews and approves all related person transactions after reviewing such transaction for potential conflicts of interests and improprieties. Accordingly, all such related person transactions are submitted to the Audit and Risk Committee for ongoing review and oversight. Generally speaking, we enter into related person transactions only on terms that we believe are at least as favorable to the Company as those that we could obtain from an unrelated third party.

 

MANAGEMENT

 

Executive Officers

 

Below are the names and ages (as of March 31, 2023) of our executive officers and a brief account of the business experience of the executive officers who are not members of our Board.  

 

Name		Age		Title
Christopher H. Hunter		54		Chief Executive Officer
David M. Duckworth		43		Chief Financial Officer
Christopher L. Howard		56		Executive Vice President, General Counsel and Secretary
John S. Hollinsworth		59		Executive Vice President of Operations
Laurence L. Harrod		67		Executive Vice President of Finance

 

The term of each executive officer runs until his successor is appointed and qualified, or until his earlier death, resignation or removal.

 

David M. Duckworth joined the Company as our Controller in April 2011 and became Chief Accounting Officer in January 2012 and Chief Financial Officer in July 2012. From May 2010 to April 2011, Mr. Duckworth served as Director of Finance at Emdeon Inc., a leading provider of revenue and payment cycle management and clinical information exchange solutions. Prior to joining Emdeon, Mr. Duckworth was a Manager with Ernst & Young LLP, which he joined in 2002.

 

Christopher L. Howard joined the Company in February 2011 and has served as our Executive Vice President, General Counsel and Secretary since that time. Before joining the Company, Mr. Howard served as PSI’s Executive Vice President, General Counsel and Secretary from September 2005 to November 2010. Prior to joining PSI, Mr. Howard was a partner at Waller Lansden Dortch & Davis, LLP, a law firm based in Nashville, Tennessee.

 

John S. Hollinsworth joined the Company as the Eastern Group President in January 2019 and became Executive Vice President of Operations in July 2019. From November 2010 to January 2019, Mr. Hollinsworth served as a Senior Vice President and Division Vice President at UHS. Previously, Mr. Hollinsworth was a Division President with PSI from 2008 until October 2010.

 

Laurence L. Harrod joined the Company in August 2019 and has served as our Executive Vice President of Finance since that time. Prior to that, Mr. Harrod served as Senior Vice President of Finance, Behavioral Health, at UHS, having joined UHS in September 1996.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The table below sets forth information with respect to ownership of our Common Stock as of March 23, 2023, by:

 

●

Each person who we know to be the beneficial owner of more than 5% of the outstanding shares of Common Stock;

 

●

Each of our directors and nominees;

 

●

Each of our Named Executive Officers; and

 

●

All of our directors and executive officers as a group.

 

To our knowledge, unless otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares beneficially owned. All computations are based on 92,054,749 shares of Common Stock outstanding on March 23, 2023, unless otherwise indicated.

 

Name of Beneficial Owner(1)		Amount and Nature of Beneficial Ownership(2)				Percent of Class
The Vanguard Group(3)			8,962,462				9.7	%
BlackRock, Inc.(4)			8,208,758				8.9	%
T. Rowe Price Associates, Inc.(5)			8,079,336				8.8	%
Wellington Management Group LLC(6)			4,776,790				5.2	%
Dimensional Fund Advisors LP(7)			4,551,479				4.9	%
Christopher H. Hunter(8)			34,447				*
David M. Duckworth(9)			228,381				*
Christopher L. Howard(10)			369,301				*
John S. Hollinsworth(11)			214,249				*
Laurence L. Harrod(12)			219,608				*
Reeve B. Waud(13)			537,462				*
Jason R. Bernhard(14)			16,207				*
E. Perot Bissell(14)			33,980				*
Vicky B. Gregg(14)			27,122				*
William F. Grieco(14)			73,811				*
R. David Kelly(15)			2,078				*
Wade D. Miquelon(14)			46,048				*
William M. Petrie, M.D.(14)			31,769				*
Debra K. Osteen(16)			731,604				*
Michael J. Fucci(17)			10,146				*
All directors and executive officers as a group (15 persons)(18)			2,576,213				2.8	%

 

*

Less than 1%

 

(1)

Unless otherwise indicated, the address of each beneficial owner is c/o Acadia Healthcare Company, Inc., 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067.

 

(2)

Under SEC rules, the number of shares shown as beneficially owned includes shares of Common Stock subject to options that currently are exercisable or will be exercisable within 60 days of March 23, 2023. Such shares are deemed to be outstanding for the purpose of computing the “percent of class” for that individual, but are not deemed outstanding for the purpose of computing the percentage of any other person.

 

(3)

Information is based solely on the Schedule 13G/A filed by The Vanguard Group (“Vanguard”) with the SEC on February 9, 2023. Vanguard reported that it possessed (i) sole dispositive power with respect to 8,840,847 shares and (ii) shared dispositive power with respect to 121,615 shares. The address for Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(4)

Information is based solely on the Schedule 13G filed by BlackRock, Inc. (“BlackRock”) with the SEC on January 25, 2023. BlackRock reported that it possessed (i) sole voting power with respect to 8,007,125 shares and (ii) sole dispositive power with respect to all of the shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055.

 

(5)

Information is based solely on the Schedule 13G/A filed by T. Rowe Price Associates, Inc. (“Price Associates”) with the SEC on February 14, 2023. Price Associates reported that it possesses (i) sole voting power with respect to 3,266,500 shares, and (ii) sole dispositive power with respect to all of the shares. These securities are owned by various individual and institutional investors for which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. The address for Price Associates is 100 E. Pratt Street, Baltimore, Maryland 21202.

 

(6)

Information is based solely on the Schedule 13G/A filed by Wellington Management Group LLP (“Wellington”) with the SEC on February 6, 2023. Wellington reported that it possessed shared dispositive power with respect to all of the shares. The address for Wellington is 280 Congress Street, Boston, Massachusetts 02210.

 

(7)

Information is based solely on the Schedule 13G/A filed by Dimensional Fund Advisors LP (“Dimensional”) with the SEC on February 10, 2023. Dimensional reported that it possessed (i) sole voting power with respect to 4,473,758 shares and (ii) sole dispositive power with respect to all of the shares. The address for Dimensional is Building One, 6300 Bee Cave Road, Austin, Texas 78746.

 

(8)

Includes 13,521 shares of time-vesting restricted stock and 20,926 earned shares of performance-vesting restricted stock.

 

(9)

Includes 25,013 shares of time-vesting restricted stock, 6,803 earned shares of performance-vesting restricted stock and options to purchase 3,897 shares of Common Stock.

 

(10)

Includes 18,511 shares held by the Christopher L. Howard Family Trust, 18,511 shares held by the Angie Parrott Howard Family Trust, 41,489 shares held by Mr. Howard’s wife, 27,548 shares of time-vesting restricted stock, 6,224 earned shares of performance-vesting restricted stock and options to purchase 6,137 shares of Common Stock.

 

(11)

Includes 26,342 shares of time-vesting restricted stock, 6,689 earned shares of performance-vesting restricted stock and options to purchase 5,000 shares of Common Stock.

 

(12)

Includes 24,225 shares of time-vesting restricted stock and 5,925 earned shares of performance-vesting restricted stock.

 

(13)

Includes 6,206 shares of time-vesting restricted stock. The 537,462 shares of Common Stock are owned of record as follows: (i) 157,491 shares by the Halcyon Exempt Family Trust (the “Halcyon Trust”); (ii) 37,493 shares by Waud Capital Partners, L.L.C.; (iii) 155,930 shares by the Reeve B. Waud Jr. 2012 Family Trust (the “2012 RBW Jr Family Trust”); (iv) 155,930 shares by the Cecily R.M. Waud 2012 Family Trust (the “2012 CRMW Family Trust”) and (v) 30,618 shares directly held by Mr. Waud.

 

Mr. Waud may be deemed to beneficially own the shares of Common Stock reported herein by virtue of (A) his being the investment advisor of the Halcyon Trust of which Mr. Waud’s children are beneficiaries, (B) his being the sole manager of WCP LLC, and (C) his being the investment advisor of the 2012 RBW Jr Family Trust and the 2012 CRMW Family Trust of which Mr. Waud’s grandchildren are beneficiaries.

 

(14)

Includes 6,206 shares of time-vesting restricted stock.

 

(15)

Includes 2,078 shares of time-vesting restricted stock.

 

(16)

Includes 2,303 shares of time-vesting restricted stock.

 

(17)

Includes 5,768 shares of time-vesting restricted stock.

 

(18)

Includes 191,166 shares of time-vesting restricted stock, 46,567 earned shares of performance-vesting restricted stock and options to purchase 15,034 shares of Common Stock.

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock. These officers, directors and greater than 10% stockholders are required by SEC rules to furnish us with copies of all Section 16(a) reports they file. There are specific due dates for these reports and we are required to report in this Proxy Statement any failure to file reports in a timely manner as required during 2022. Based upon a review of these filings and written representations from our directors and executive officers, we believe that all reports required to be filed with the SEC pursuant to Section 16(a) during 2022 were filed in a timely manner.

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, the compensation arrangements that we have with our Named Executive Officers, and the alignment of our executive compensation programs with Company performance.

 

Table of Contents

 

Named Executive Officers	26
Executive Summary	26
Compensation Process and Philosophy	28
Components of Executive Compensation	31
Compensation Clawback Policy	40
Deferred Compensation Plan	40
Risk Assessment	40
Internal Revenue Code Section 162(m)	41
Stock Ownership Guidelines, Insider Trading Policy, Hedging and Pledging	41
Termination and Change-in-Control Arrangements	42

 

Named Executive Officers

 

Our Named Executive Officers for 2022 were:

 

Name		Title
Christopher H. Hunter		Chief Executive Officer and Director
David M. Duckworth		Chief Financial Officer
Christopher L. Howard		Executive Vice President, General Counsel and Secretary
John S. Hollinsworth		Executive Vice President of Operations
Laurence L. Harrod		Executive Vice President of Finance
Debra K. Osteen		Former Chief Executive Officer and Director

 

Executive Summary

 

Acadia is the leading publicly traded pure-play provider of behavioral healthcare services in the United States. Our business strategy is to acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations. We strive to improve the operating results of our facilities by providing high-quality services, expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services within existing locations.

 

Acadia has a history of motivating leaders through the use of performance-based pay with challenging annual and long-term incentives and a record of good alignment with stockholders’ interests as a result of incentive designs and executive equity ownership. As described in greater detail below, our executive compensation program seeks to:

 

(i)

attract and retain superior executives by providing the opportunity to earn competitive compensation packages,

(ii)

align the pay of our executive officers with Company performance, and

(iii)

recognize and reward senior management’s individual and collective efforts relating to the financial performance of the Company and creation of stockholder value.

 

The Company successfully executed on its growth strategy and produced strong operating results in 2022, which drove our 36% one-year TSR, as described below. As a result of the Company’s strong performance in 2022, our executive officers realized above target payouts under cash and equity incentive programs. Furthermore, the Compensation Committee did not make any discretionary adjustments in determining the Company’s Adjusted EBITDA and Adjusted EPS for 2022 compensation plan purposes. We believe that the compensation of our executive officers was well aligned with our financial and operating performance, and the returns experienced by our stockholders. We remain committed to providing quality patient care at our facilities and supporting our long-term strategic objectives. We believe that the Company is well positioned to address the challenges facing it and to grow by focusing on its five growth pathways: expansion of existing facilities, joint venture partnerships, de novo facilities, acquisitions and expansion across our continuum of care. The Company expects each of these growth pathways to contribute to additional stockholder value creation in the future.

Summary of 2022 Company Performance

 

Results for 2022 include:

 

●

Adjusted EPS (as defined below) for purposes of our compensation plans was $3.19 for 2022. For purposes of our 2022 equity and non-equity incentive awards, our target level Adjusted EPS was $3.01 and our maximum level Adjusted EPS was $3.46.

 

●

Adjusted EBITDA (as defined below) for purposes of our compensation plans was approximately $616.8 million for 2022. For purposes of our 2022 non-equity incentive awards, our target level Adjusted EBITDA was $594.5 million and our maximum level Adjusted EBITDA was $683.7 million.

 

●

During 2022 we added 560 beds to our operations through organic growth, consisting of 290 beds added at existing facilities and 270 beds added through the opening of one wholly-owned de novo facility and two joint venture facilities, ending the year with over 11,000 beds in 250 facilities in 39 states and Puerto Rico. During 2022 we also opened seven comprehensive treatment centers.

 

●

Our one-year TSR for 2022 was approximately 36%. Our three-year TSR for compensation plan purposes for 2020 through 2022 was approximately 157%.

 

A reconciliation of non-GAAP financial measures can be found at the end of this Proxy Statement.

 

Pay for Performance

 

Compensation paid to executive officers for 2022 reflects the alignment of pay with the Company’s performance, as more fully described in this Compensation Discussion and Analysis:

 

●

Above Target Payment of 2022 Non-Equity Incentive Compensation. The Adjusted EBITDA and Adjusted EPS measures set forth in our non-equity incentive compensation plan for 2022 were achieved at 103.8% and 106.0% of target, respectively, resulting, along with the Compensation Committee’s evaluation of the achievement of certain non-financial goals, in the payment of above-target cash bonuses to our Named Executive Officers as described below in the section entitled “Components of Executive Compensation - Annual Non-Equity Incentive Compensation.”

 

●

Vesting of Certain Equity Awards at Above Target Levels. Based on actual 2022 Adjusted EPS and Adjusted EBITDA performance in relation to targets, the first tranche of the performance-vesting restricted stock units granted in 2022 were earned at an above-target level and the third tranche of the performance-vesting restricted stock units granted in 2020 were earned at an above-target level, subject to the TSR modifier, as described below in the section entitled “Components of Executive Compensation - Equity-Based Compensation.”

 

See “EXECUTIVE COMPENSATION – Pay Versus Performance Table” for more information about the compensation to our Named Executive Officers in comparison to certain financial performance measures of the Company.

Stockholder Approval of Executive Compensation on an Advisory Basis

 

At our 2022 Annual Meeting of Stockholders in May 2022, we held an advisory vote to approve the compensation of our Named Executive Officers as disclosed in our Proxy Statement dated April 8, 2022 related to the annual meeting. Stockholders of the Company expressed strong support for the compensation of our Named Executive Officers, with approximately 99% of the votes cast supporting the Company’s executive compensation. Given the strong support of the stockholders, the Compensation Committee’s approach to compensation programs for 2023 has remained relatively consistent with 2022.

 

Executive Compensation Highlights

 

Following review and discussions with our independent compensation consultant, Pay Governance LLC (“Pay Governance”), about our executive compensation program and that of our peer companies, our executive compensation program included the following features for 2022:

 

●

Modest Increases to Total Direct Compensation for our Named Executive Officers — Modest 3% raises to the base salary of each of our Named Executive Officers for 2022 which resulted in corresponding increases in their total direct compensation, except for Ms. Osteen whose base salary did not increase for 2022 and for Mr. Hunter who was appointed Chief Executive Officer in 2022.

 

●

For Named Executive Officers, Re-affirm our Approach of Allocating the Majority of Equity Value to Performance-Vesting Restricted Stock Unit Awards — Other than Ms. Osteen (who did not receive any long-term incentive awards in 2022 other than a director grant of restricted stock) and Mr. Hunter, 75% of overall long-term incentive value for each Named Executive Officer is delivered as performance-vesting restricted stock units and 25% as time-vesting restricted stock awards. For Mr. Hunter, pursuant to his employment agreement, approximately 78% of overall long-term incentive value is delivered as performance-vesting restricted stock units and approximately 22% as time-vesting restricted stock awards.

 

●

For Named Executive Officer-Performance-Vesting Restricted Stock Units, Goals Set at Grant for Performance Measured Each Year of 2022-2024 Performance and Vesting Period — For each of our Named Executive Officers, except for Ms. Osteen, the performance-vesting restricted stock units granted in 2022 will vest only if the Company meets or exceeds established Adjusted EPS and Adjusted EBITDA goals for each year of the 2022-2024 period, rather than measuring performance solely on a performance period three years out from grant. The Compensation Committee believes that structuring the awards to vest based on the Company’s actual Adjusted EPS and Adjusted EBITDA compared to Adjusted EPS and Adjusted EBITDA goals set contemporaneously with the grant date for the years ending December 31, 2022, 2023 and 2024 better aligns the Named Executive Officers’ compensation with achievement of the Company’s long-term growth strategy.

 

●

Introduced Certain Non-Financial Goals as Component of Annual Non-Equity Incentive Awards in lieu of Revenue — Introduced non-financial goals focused on (i) patient safety and outcomes and (ii) leadership and talent development as qualitative measures for determining annual cash incentive awards. In 2021, 20% of the Named Executive Officers’ bonuses were based on the Company’s revenue. The non-financial goals discussed above replaced revenue as an incentive plan metric for 2022. The Compensation Committee determined the introduction of such non-financial goals as an incentive plan metric would better align the Named Executive Officers’ compensation with the Company’s mission and values and facilitate long-term stockholder value creation.

 

See “EXECUTIVE COMPENSATION – Summary Compensation Table” for more information about the compensation paid to our Named Executive Officers.

 

Compensation Process and Philosophy

 

The Compensation Committee is responsible for discharging our Board of Directors’ responsibilities relating to the oversight, administration and approval of our compensation plans, policies and programs for our executive officers and directors. The primary responsibilities and duties of the Compensation Committee are described above in the section entitled “CORPORATE GOVERNANCE - Committees of the Board of Directors - Compensation Committee.”

Our executive compensation program seeks to:

 

●

Link the interests of management with those of our stockholders by encouraging stock ownership and aligning performance equity awards with stockholder returns;

 

●

Attract and retain superior executives by providing them with the opportunity to earn total compensation packages that are competitive within the healthcare industry;

 

●

Recognize and reward senior management’s individual and collective efforts relating to the financial performance of the Company and creation of stockholder value through salary, annual cash incentives and long-term stock-based incentives; and

 

●

Manage compensation based on the individual’s level of skill, knowledge, effort and responsibility.

 

The Compensation Committee believes that the compensation of our executive officers should provide a competitive level of total compensation necessary to attract and retain talented and experienced executives, and motivate them to contribute to our success. The Compensation Committee has a pay-for-performance philosophy that works to align the interests of management with the interests of stockholders through the use of incentive compensation and an approach that puts a majority of the compensation of our Named Executive Officers at risk if the Company does not perform.

 

Our Compensation Committee reviews and approves, in advance, employment and similar arrangements or payments to be made to any executive officer. Historically, our Chief Executive Officer provided the Compensation Committee with input regarding the performance of and compensation recommendations for other executive officers based on his direct knowledge of their contributions during the year. Our Chief Executive Officer does not play any role with respect to the deliberations and determinations about his own compensation. Our Chief Executive Officer considers internal pay equity issues, individual contribution and performance, competitive pressures and our financial performance in making his recommendations to the Compensation Committee.

 

Our Compensation Committee believes that our executive compensation program should be internally consistent and equitable in order to achieve our compensation goals. The Compensation Committee relies on its collective judgment together with the information provided to it by management, the analyses and goals described above and the recommendations of our Chief Executive Officer. The Compensation Committee also considers the qualifications, length of service, experience, consistency of performance, position, responsibilities, individual performance and available competitive alternatives of our executives, their existing compensation and our financial resources, performance and prospects in determining appropriate levels of compensation for our executives.

 

Executive Compensation Practices

 

Highlighted below are some of the key elements of our compensation program that the Compensation Committee believes evidence strong corporate governance and alignment of our executive compensation with long-term stockholder interests.

 

What We Do

✓

Vast majority of pay is performance-based and not guaranteed

✓

Engage stockholders and seek feedback on our executive compensation program

✓

Apply stringent share ownership and share retention policies

✓

Use of peer market data for benchmarking and calibration

✓

Consult with an independent compensation consultant

✓

Prohibit hedging and short sales by officers and directors

✓

Prohibit officers and directors from pledging Company stock or holding Company stock in a margin account

✓

Utilize double trigger severance agreements upon a change in control

✓

Include clawback provisions in our key compensation programs

✓

Conduct an annual risk assessment of our compensation program

✓

Have a Compensation Committee composed entirely of independent directors

✓

Separate Chief Executive Officer and Chairman of the Board

 

What We Don’t Do

X

No supplemental executive retirement plans

X

No stock option repricing or exchanges without stockholder approval

X

No single trigger vesting of equity or cash severance payments upon a change in control

X

No excessive perquisites

X

No tax gross-ups related to change in control or otherwise

 

Role of Compensation Consultant

 

Since 2018, the Compensation Committee has retained Pay Governance to advise it with respect to the Company’s executive compensation program. The Compensation Committee has considered the relationships that Pay Governance has had with the Company, the members of the Compensation Committee and our executive officers, and has taken into account the factors required by NASDAQ to be considered when assessing a consultant’s independence. For 2022, after considering such relationships and factors, the Compensation Committee determined that the work of Pay Governance did not raise any conflicts of interest. Outside of their direct engagement by the Compensation Committee as independent compensation consultants to the Compensation Committee with respect to executive compensation matters, Pay Governance did not provide other services to the Company in 2022.

 

Peer Group Comparison

 

In late 2021, for purposes of reviewing 2021 compensation and setting 2022 compensation for our executive officers, Pay Governance assisted the Compensation Committee in establishing a peer group of publicly-traded healthcare companies generally similarly sized and with similar service offerings to us (the “2022 Peer Group”). The 2022 Peer Group consisted of the following companies:

 

●         Amedisys, Inc.	●         The Ensign Group, Inc.
●         AMN Healthcare Services, Inc.	●         Healthcare Services Group, Inc.
●         Brookdale Senior Living Inc.	●         LHC Group, Inc.
●         Chemed Corporation	●         Magellan Health, Inc.(1)
●         DaVita Inc.	●         Pediatrix Medical Group, Inc.(2)
●         Encompass Health Corporation	●         Select Medical Holdings Corporation

 

(1)

Ceased to be a publicly traded company during 2022.

(2)

Formerly known as Mednax, Inc.

 

The 2022 Peer Group was established using similar criteria for selection of the prior year’s peer group selected by our Compensation Committee, specifically: industry, market capitalization, revenue and revenue growth, and adjusting for mergers and acquisition activity among peers.

 

In late 2022, for purposes of reviewing 2022 compensation and setting 2023 compensation for our executive officers, Pay Governance assisted the Compensation Committee in establishing a peer group for 2023 (the “2023 Peer Group”). The 2023 Peer Group consisted of all of the companies in the 2022 Peer Group with the addition of Option Care Health, Inc., Surgery Partners, Inc. and Universal Health Services, Inc. and the removal of Magellan Health, Inc. and Healthcare Services Group, Inc.

Chief Executive Officer Transition

 

Mr. Hunter’s Compensation Arrangements

 

Mr. Hunter’s annual base salary is $1,000,000 and his target annual non-equity incentive compensation for each calendar year during his employment period with the Company is 100% of his base salary. Mr. Hunter’s base salary may be adjusted from time to time as determined by the Compensation Committee, but in no event will it be reduced below $1,000,000 without his consent. For 2022, Mr. Hunter is entitled to a long-term incentive award with a target value equal to not less than $4.5 million. Thereafter, Mr. Hunter will be eligible to receive annual grants of equity or other long-term incentive awards in amounts as determined by the Compensation Committee. See “EXECUTIVE COMPENSATION – Potential Payments Upon Termination or Change in Control under the Employment Agreements” for more information about the terms of Mr. Hunter’s Employment Agreement.

 

Ms. Osteen’s Payments related to Retirement

 

Ms. Osteen retired as the Company’s Chief Executive Officer effective March 31, 2022, but continued as a member of the Board of Directors. In connection with her retirement as Chief Executive Officer and pursuant to the terms of a side letter to her Employment Agreement with the Company, Ms. Osteen received (a) accelerated vesting for outstanding time-vesting restricted stock awards, (b) approximately $200,000 for unused paid time off and sick pay accrued through her retirement date, and (c) approximately $100,000 of consulting fees post-retirement. Ms. Osteen also received a retention bonus equal to $900,000 for her continued service as our Chief Executive Officer through March 31, 2022. In addition, Ms. Osteen will be entitled to receive additional shares of common stock in the future pursuant to performance vesting restricted stock units previously granted to her while serving as Chief Executive Officer based upon the Company’s performance. See “Executive Compensation” for additional details.

 

Components of Executive Compensation

 

The components of our compensation program for executive officers include base salary, performance-based cash and equity incentive compensation, and time-based equity awards.

 

The following table summarizes the elements of our compensation program for our Named Executive Officers and provides information about each element:

 

Category of Compensation		Elements of Compensation		Metrics Used		Rationale for Compensation
Base Compensation		Base Salary		N/A		•    Attract, retain, and motivate key executive talent •    Provide income security •    Recognizes different levels of responsibility
Short-Term Incentives		Annual Cash Payment		Adjusted EBITDA Adjusted EPS Non-Financial Goals		•    Motivate and reward annual financial performance results •    Encourages focus on Company’s mission and values
Long-Term Incentives		Time-Vesting and Performance-Vesting Equity Grants		Adjusted EPS		•    Attract, retain, and motivate key executive talent •    Align interests of executives and stockholders •    Motivate and reward long-term financial performance •    Encourage executive stock ownership
Benefits		Retirement Benefits  Personal Benefits Severance & Change in Control Benefits		N/A		•    Attract and retain key executive talent •    Enhance executive productivity •    Provide opportunity for financial security in retirement

As illustrated in the charts below and consistent with our pay-for-performance philosophy, 84% of Mr. Hunter’s total direct compensation for 2022 and, on average, 79% of the other non-CEO Named Executive Officers’ total direct compensation for 2022 was performance-based pay, with a significant emphasis on long-term performance and stockholder value creation. For the purposes of these charts, total direct compensation includes base salary, actual non-equity incentive compensation and the grant date fair value of our annual equity grants made in 2022. The stock awards portion of these charts were determined using a Monte-Carlo simulation value for performance-vesting restricted stock units issued in 2020 and assume that target performance goals for performance-vesting restricted stock units issued in 2022 and 2020, as applicable, are attained during the 2022 performance period in accordance with ASC 718. See “EXECUTIVE COMPENSATION – Summary Compensation Table” for more information about the compensation paid to our Named Executive Officers.

 

 

Base Salary

 

Our Compensation Committee generally meets on an annual basis to review each Named Executive Officer’s base salary and to consider adjustments to each Named Executive Officer’s base salary for the following year. The base salaries under the employment agreements for our Named Executive Officers are subject to an annual review and potential increase in the sole discretion of the Compensation Committee.

 

In setting base salaries for 2022 and 2023, the Compensation Committee reviewed the composition of the relevant peer group and discussed peer group information with the Compensation Committee’s independent compensation consultants. For setting 2022 base salaries, Ms. Osteen provided the Compensation Committee with an evaluation of the individual performance and roles and responsibilities of each executive officer other than herself. Given our financial performance for 2022 and other considerations deemed relevant by the Compensation Committee, the committee determined to provide 3.0% raises to the base salary of each of our Named Executive Officers (other than Mr. Hunter) for 2023.

 

The base salaries for the Named Executive Officers effective as of January 1, 2021 and 2022 were as follows:

 

Name		Base Salary As of January 1, 2021				Base Salary As of January 1, 2022				Percentage Increase
Christopher H. Hunter		$	N/A			$	1,000,000	(1)			0.0	%
David M. Duckworth			654,625				674,264				3.0	%
Christopher L. Howard			599,032				617,003				3.0	%
John S. Hollinsworth			614,601				633,039				3.0	%
Laurence L. Harrod			583,083				600,575				3.0	%
Debra K. Osteen			1,000,000				1,000,000				0.0	%

 

(1) As of April 11, 2022, the effective date of his appointment as our Chief Executive Officer.

The base salaries for the Named Executive Officers effective as of January 1, 2022 and 2023 were as follows:

 

Name		Base Salary As of January 1, 2022				Base Salary As of January 1, 2023				Percentage Increase
Christopher H. Hunter		$	1,000,000	(1)		$	1,000,000				0.0	%
David M. Duckworth			674,264				694,492				3.0	%
Christopher L. Howard			617,003				635,513				3.0	%
John S. Hollinsworth			633,039				652,030				3.0	%
Laurence L. Harrod			600,575				618,592				3.0	%
Debra K. Osteen			1,000,000				N/A				0.0	%

 

(1) As of April 11, 2022, the effective date of his appointment as our Chief Executive Officer.

 

See “EXECUTIVE COMPENSATION – Summary Compensation Table” for more information about the base salaries paid to our Named Executive Officers.

 

Annual Non-Equity Incentive Compensation

 

Annual non-equity incentive awards paid to our Named Executive Officers are a reward for the realization of established performance objectives. Our Compensation Committee annually adopts a cash bonus plan pursuant to the Company’s incentive compensation plan for each Named Executive Officer. The Compensation Committee generally meets in February or March to review whether and the extent to which performance objectives have been achieved for the prior year. All non-equity incentive awards are subject to the review and approval of the Compensation Committee, which has the discretion to adjust any and all such awards.

 

2022 Awards

 

Annual non-equity incentive compensation payable to our Named Executive Officers for 2022 was based 80% on the Company-wide measures Adjusted EBITDA and Adjusted EPS and 20% on achieving certain non-financial goals, with each of Adjusted EBITDA and Adjusted EPS determining 40% of the total incentive award. For 2022, the non-financial goals focused on the Compensation Committee’s assessments of (i) patient safety and outcomes and (ii) leadership and talent development. The Compensation Committee used these measures for determining annual cash incentive awards because they are important measures of our performance and the performance of our management, they drive our success and growth and they are key criteria by which management plans and analyzes our business.

 

For purposes of determining 2022 non-equity incentive compensation, we define Adjusted EBITDA as the sum of the following: (a) net income from continuing operations, (b) interest expense, (c) income tax expense, (d) depreciation and amortization expense, (e) equity-based compensation expense, (f) transaction-related expenses (e.g. acquisition-related diligence and advisory costs, contract termination costs, etc.), (g) gain or loss on extinguishment of debt, (h) impairment and other non-cash gains and charges (e.g. gain or loss on disposal of property), (i) legal settlement costs, (j) severance and restructuring costs, and (k) gain or loss on foreign currency derivatives, as disclosed in or derived from the Company’s Annual Report on Form 10-K, press releases or other financial records, as appropriate. Adjusted EPS is defined as (a) adjusted income from continuing operations attributable to the Company divided by (b) diluted weighted-average shares outstanding. Adjusted income from continuing operations attributable to the Company is defined as the sum of (a) net income attributable to the Company; (b) income or loss from discontinued operations; and (c) provision for income taxes; plus the sum of (d) transaction-related expenses (e.g. acquisition-related diligence and advisory costs, contract termination costs, etc.); (e) gain or loss on extinguishment of debt; (f) impairment and other non-cash gains and charges (e.g. gain or loss on disposal of property); (g) legal settlement costs; (h) severance and restructuring costs; and (i) gain or loss on foreign currency derivatives; minus (j) adjusted income tax provision, as disclosed in or derived from the Company’s Annual Report on Form 10-K, press releases or other financial records, as appropriate. Adjusted EBITDA and Adjusted EPS are calculated net of non-equity incentive payments and excluding the impact of gains or losses as a result of foreign currency conversions or fluctuations in foreign currency exchange rates. A reconciliation of these non-GAAP financial measures can be found at the end of this Proxy Statement.

The Compensation Committee did not make any adjustments in determining Adjusted EBITDA and Adjusted EPS goals for 2022 compensation plan purposes. The Company produced strong operating results in 2022. Based on the Company’s financial performance in 2022, our executive officers realized above target payouts under cash and equity incentive programs.

 

The table below sets forth the threshold, target and maximum cash incentive award for 2022 (as a percentage of base salary) for each of the applicable Named Executive Officers (other than Ms. Osteen).

 

Name		Threshold(1)				Target				Maximum
Christopher H. Hunter			50.0	%			100	%			200	%
David M. Duckworth			42.5	%			85	%			170	%
Christopher L. Howard			42.5	%			85	%			170	%
John S. Hollinsworth			42.5	%			85	%			170	%
Laurence L. Harrod			42.5	%			85	%			170	%

 

(1) As described below, Named Executive Officers may receive an aggregate of less than the threshold percentage of their base salary listed above if performance exceeds the threshold level of one or more, but not all, of the applicable performance measures.

 

These target and maximum percentages are no less than the target and maximum percentages that each executive is eligible to earn (as a percentage of base salary) pursuant to the employment agreements entered into with each applicable executive.

 

The table below summarizes the performance measures and actual results applicable to our 2022 non-equity incentive awards. Straight-line interpolation is used to determine awards for performance between goal levels. Payout ranges reflect a percentage of a Named Executive Officer’s base salary.

 

		Weighting				Threshold				Target				Maximum				Actual				% of Target
(amounts in millions, other than EPS)
Performance Metric
Adjusted EBITDA			40	%		$	535.1			$	594.5			$	683.7			$	616.8				103.8	%
Adjusted EPS			40	%		$	2.71			$	3.01			$	3.46			$	3.19				106.0	%
Non-Financial Goals			20	%			–				–				–				–				–
Performance Range (as % of Target measure)							90	%			100	%			115	%
Payout Range (CEO)							50.0	%			100.0	%			200.0	%
Payout Range (other NEOs)							42.5	%			85.0	%			170.0	%

 

For 2022, the non-financial goals focused on the Compensation Committee’s assessments of (i) patient safety and outcomes and (ii) leadership and talent development. The patient safety and outcomes goal was measured based on regulatory survey results across our acute and residential inpatient facilities. The leadership and talent development goal was measured based on development of an overall talent strategy, using a thorough talent assessment and evaluating feedback, development and succession planning for our key executive officers and operations leaders.

In February 2023, the Compensation Committee evaluated whether and the extent to which the performance goals for the 2022 annual non-equity incentive awards had been achieved. As a result of 2022 performance, the Named Executive Officers listed below received the following cash incentive payments with respect to 2022. The resulting payout for our applicable Named Executive Officers as a percentage of target was 126.1%.

 

Name		EBITDA Component				% of Target				EPS Component				% of Target				Non- Financial Component				% of Target				Total Cash Incentive Payment				% of Target
Christopher H. Hunter(1)		$	362,673				124.9			$	407,323				140.3			$	145,205				100.0			$	915,202				126.1
David M. Duckworth			286,293				106.2				321,540				119.2				114,625				100.0				722,458				126.1
Christopher L. Howard			261,980				106.2				294,234				119.2				104,891				100.0				661,104				126.1
John S. Hollinsworth			268,789				106.2				301,881				119.2				107,617				100.0				678,287				126.1
Laurence L. Harrod			255,005				106.2				286,400				119.2				102,098				100.0				643,503				126.1

 

 

(1) The amount payable to Mr. Hunter is a pro rata amount (72.6%) based on the date of his appointment as our Chief Executive Officer.

 

Equity-Based Compensation

 

Our Compensation Committee believes that time-vesting restricted stock and performance-vesting restricted stock units are key components to the compensation of our executive officers, and providing a mix of different types of equity awards is consistent with market practice for executive officers in our peer group. The Compensation Committee believes that time-vesting restricted stock and performance-vesting restricted stock units provide a substantial incentive to our Named Executive Officers by allowing them to directly participate in any increase in our long-term value. These incentives are intended to reward, motivate and retain the services of our Named Executive Officers. The Compensation Committee believes that a mix of equity awards aligns the interests of our Named Executive Officers with those of our stockholders and is consistent with our pay-for-performance philosophy. Equity-based awards are typically granted under the Company’s incentive compensation plan in March of each year.

 

Equity Awards Granted in 2022

 

The Compensation Committee has established Adjusted EPS and Adjusted EBITDA as the core long-term metrics for purposes of performance vesting equity awards and continues to believe that a substantial portion of equity awards should be performance based (with 75% of awards being performance-vesting restricted stock units and 25% of awards being time-vesting restricted stock, other than for Mr. Hunter with 78% of his awards being performance-vesting restricted stock units and 22% of his awards being time-vesting restricted stock). In addition, awards of equity-based compensation are subject to the following parameters:

 

●

Financial performance is measured annually, with Adjusted EPS and Adjusted EBITDA goals for each of the three years in the performance period set at the time of grant for each year of the three-year term of the award.

 

●

Shares earned based on Adjusted EPS and Adjusted EBITDA results are issued at the end of the three-year term of the award. The Compensation Committee believes that issuance of shares at the end of the three-year term increases the long-term orientation of the compensation program.

 

●

The Adjusted EPS and Adjusted EBITDA performance range is 90% to 115%. This range recognizes potential business volatility over a three-year term and is consistent with the approach taken by our peers.

Effective April 11, 2022, the Compensation Committee approved annual grants of the following number of performance-vesting restricted stock units (subject to the achievement of certain performance goals and continued employment) and shares of time-vesting restricted stock under the Incentive Plan to our Named Executive Officers. In addition, Ms. Osteen received 2,303 shares of time vesting restricted stock on May 19, 2022 as a non-management director of the Board.

 

Name		Performance-Vesting Restricted Stock Units				Time-Vesting Restricted Stock				Grant Date Fair Value of Stock Awards(1)
Christopher H. Hunter			47,323				13,521			$	4,500,022
David M. Duckworth			15,384				5,128				1,517,068
Christopher L. Howard			14,078				4,693				1,388,303
John S. Hollinsworth			15,128				5,043				1,491,847
Laurence L. Harrod			13,398				4,466				1,321,221
Debra K. Osteen			–				2,303				160,012

 

 

(1) Reflects the aggregate grant date fair value of such time-vesting restricted stock and performance-vesting restricted stock units, computed in accordance with ASC 718. The awards are described in more detail in the “EXECUTIVE COMPENSATION - Grants of Plan-Based Awards” section below.

 

The allocation among performance-vesting restricted stock units (generally 75% of the total equity award) and time-vesting restricted stock (generally 25% of the total equity award) is not based on a formula approach but reflects the Compensation Committee’s view that most equity-based incentives should be performance-based and at risk. The Named Executive Officers must be employed by the Company at the time the performance-vesting restricted stock units and/or time-vesting restricted stock vest in order to receive the shares of Common Stock underlying each award, except in the case of certain terminations of employment as discussed under the heading “Executive Compensation - Potential Payments Upon Termination or Change in Control under the Employment Agreements.” An executive who retires prior to issuance will receive a pro rata share of any earned awards based on the date of retirement. Pursuant to the terms of a side letter to her Employment Agreement with the Company, upon her retirement as Chief Executive Officer, Ms. Osteen received accelerated vesting for outstanding time-vesting restricted stock awards and is entitled to receive additional shares of common stock in the future pursuant to her performance vesting restricted stock units previously granted to her while serving as Chief Executive Officer based upon the Company’s performance.

 

Performance-Vesting Restricted Stock Units. For the Named Executive Officers other than Ms. Osteen, the performance-vesting restricted stock units granted effective April 11, 2022 are earned in three equal annual installments based upon the achievement of a specified performance level of Adjusted EPS and Adjusted EBITDA for 2022, 2023, and 2024. On May 12, 2022, the Compensation Committee established the performance objectives for each of 2022, 2023 and 2024 for purposes of the vesting of restricted stock units. The Compensation Committee believes that Adjusted EPS and Adjusted EBITDA are the appropriate financial measures for determining vesting of performance-vesting restricted stock unit awards because each is an important measure of our performance and the performance of our management, each drives our success and growth, and each is a key criterion by which management plans and analyzes our business.

 

The number of shares of Common Stock that may be issued upon vesting of the performance-vesting restricted stock units ranges from 0% to 200% of the total number of units set forth above in accordance with a formula based on our Adjusted EPS and Adjusted EBITDA, equally-weighted between such measures. None of the performance-vesting restricted stock units will vest for performance below 90.0% of the specified Adjusted EPS. Unearned performance awards in the performance period are forfeited.

 

For 2022, the threshold award (as a percentage of the number of performance-vesting restricted stock units eligible for vesting based on the applicable performance period) for each applicable Named Executive Officer was 50%, the target award was 100% and the maximum award was 200%. 

For purposes of our 2022 awards of performance-vesting restricted stock units, our target level Adjusted EPS was $3.01 and target level Adjusted EBITDA was $594.5 million. The table below sets forth the number of shares of Common Stock that each applicable Named Executive Officer was eligible to be earned for 2022 (as a percentage of the number of performance-vesting restricted stock units eligible to be earned based on 2022 performance), subject to continued employment throughout the full three-year performance and vesting period, based upon the Company’s actual Adjusted EPS and Adjusted EBITDA for 2022. For example, if our actual Adjusted EPS and Adjusted EBITDA for 2022 was $3.01 and $594.5 million, respectively, each applicable Named Executive Officer would earn the number of shares of Common Stock equal to 100% of the number of performance-vesting restricted stock units granted.

 

Weighting		Adjusted EPS of				Adjusted EPS of				Adjusted EPS of
		$2.71 - $3.01				$3.01 - $3.46				$3.46 or Greater
50%			50% - 100	%			100% - 200	%			200	%

 

Weighting		Adjusted EBITDA of				Adjusted EBITDA of				Adjusted EBITDA of
		$535.0m - $594.5m				$594.5m - $683.7m				$683.7m or Greater
50%			50% - 100	%			100% - 200	%			200	%

 

In February 2023, the Compensation Committee evaluated whether and the extent to which the performance goals for the 2022 performance-vesting restricted stock unit awards had been achieved. The Compensation Committee determined that actual Adjusted EPS for 2022 was $3.19 and actual Adjusted EBITDA for 2022 was $616.8 million, resulting in approximately 140% and 125% of each portion of the 2022 performance-vesting restricted stock unit annual award being earned with respect to such measure as reflected in the table below (all of these earned shares are subject to continued time-based vesting through the full three-year period):

 

Name		2022 Performance-Vesting Restricted Stock Unit Grant		Target Shares Subject to 2022 Performance(1)		Shares Allocated to each Measure		Shares Earned per Adjusted EPS		Shares Earned per Adjusted EBITDA		Total Shares Earned for 2022 Performance
Christopher H. Hunter		47,323		15,774		7,887		11,073		9,853		20,926
David M. Duckworth		15,384		5,128		2,564		3,600		3,203		6,803
Christopher L. Howard		14,078		4,693		2,346		3,294		2,931		6,224
John S. Hollinsworth		15,128		5,043		2,521		3,539		3,149		6,689
Laurence L. Harrod		13,398		4,466		2,233		3,135		2,790		5,925

 

 

(1) Amounts reflect one-third of the grant.

 

Time-Vesting Restricted Stock. The time-vesting restricted stock granted in 2022 vests 25% per year on the four successive anniversaries of the date of grant.

 

2020 Performance-Vesting Restricted Stock Unit Awards Earned

 

On March 24, 2020, the Compensation Committee approved grants of the following number of performance-vesting restricted stock units under the Incentive Plan to our Named Executive Officers listed below:

 

Name		2020-2022 Performance-Vesting Restricted Stock Units
Debra K. Osteen		254,669
David M. Duckworth		80,928
Christopher L. Howard		83,313
John S. Hollinsworth		85,478
Laurence L. Harrod		79,292

The performance-vesting restricted stock units granted in 2020 are earned in three equal annual installments based upon the achievement of specified performance levels of Adjusted EPS. The performance-vesting restricted stock units granted in 2020 include the application of the TSR modifier described below that measures the Company’s TSR performance relative to a group of industry comparators over the full three-year performance period. The number of shares accumulated during the term of the performance period for the applicable performance-vesting restricted stock units are increased or decreased by up to 25% at the end of the three-year term based on our three-year TSR relative to that of the companies listed in the S&P Composite 1500 Index within the GICS Healthcare Providers and Services Industry Group, plus any companies in the Company’s compensation peer group that are not S&P 1500 constituents (collectively, the “TSR Peer Group”). If our absolute TSR is negative, the TSR modifier is capped at 100% and cannot increase the share payout. Further, our TSR modifier schedule requires 55th percentile achievement or greater for positive (i.e., 100% or greater) increase to shares accumulated.

 

Relative TSR Achieved (compared to TSR Peer Group)		% of Target Awarded(1)(2)
75th percentile or greater			125	%
55th percentile			100	%
30th percentile or less			75	%

 

(1) Interpolated for performance between percentiles.

(2) TSR modifier capped at 100% if the Company’s TSR is negative, regardless of applicable Adjusted EPS amount.

 

The number of shares of Common Stock that may be issued upon vesting of the performance-vesting restricted stock units ranges from 0% to 200% of the total number of units set forth above in accordance with a formula based on our Adjusted EPS. None of the performance-vesting restricted stock units granted in 2020 will vest for performance below 92.5% of the specified Adjusted EPS.

 

One-third of the target amounts for the 2020 awards are subject to 2022 Adjusted EPS performance. For 2022 performance under the 2020 performance-vesting restricted stock unit awards, the threshold award (as a percentage of the number of performance-vesting restricted stock units eligible for vesting based on 2022 performance) for each applicable Named Executive Officer was 50%, the target award was 100% and the maximum award was 200%. The actual number of shares of Common Stock to be issued upon vesting of the performance-vesting restricted stock units each year is based on the Company’s actual Adjusted EPS relative to the specified Adjusted EPS for the corresponding year.

 

For purposes of our 2020 awards of performance-vesting restricted stock units, our target level Adjusted EPS for 2022 was $3.01. The table below sets forth the number of shares of Common Stock that each applicable Named Executive Officer was eligible to earn for 2022 performance under the 2020 performance-vesting restricted stock unit awards (as a percentage of the number of performance-vesting restricted stock units eligible for vesting based on 2022 performance), subject to continued employment throughout the performance period, based upon the Company’s actual Adjusted EPS for 2022. For example, for the 2020 performance-vesting restricted stock unit awards, if our Adjusted EPS for 2022 was $3.01, each Named Executive Officer would earn the number of shares of Common Stock equal to 100% of the number of performance-vesting restricted stock units that may vest based on 2022 performance, or one-third of the respective target grant.

 

Adjusted EPS of			Adjusted EPS of			Adjusted EPS of
$2.78- $3.01			$3.01 - $3.24			$3.24 or Greater
50% - 100%			100% - 200%			200%

In February 2023, the Compensation Committee evaluated whether and the extent to which the 2022 performance goals for the 2020 performance-vesting restricted stock unit awards had been achieved. The Compensation Committee determined that actual Adjusted EPS for 2022 was $3.19. As a result, the following number of shares of Common Stock were earned by the Named Executive Officers listed below for 2022 pursuant to the 2020 performance-vesting restricted stock unit awards, subject to the three-year TSR modifier:

 

2020-2022 Performance-Vesting Restricted Stock Units

 

Name		2020-2022 Performance-Vesting Restricted Stock Unit Grant		Target Shares Subject to 2022 Performance(1)		Shares Earned Under 2020 Performance-Vesting Restricted Stock Unit Grant(2)
Debra K. Osteen		254,669		84,889		151,976
David M. Duckworth		80,928		26,976		48,294
Christopher L. Howard		83,313		27,771		49,718
John S. Hollinsworth		85,478		28,492		51,008
Laurence L. Harrod		79,292		26,430		47,317

 

(1) Amounts reflect one-third of the grant.

(2) Amounts reflect one-third of the grant multiplied by 179%.

 

On February 21, 2023, following review of materials prepared by our independent compensation consultant, the Compensation Committee confirmed the three-year TSR results for the 2020 performance-vesting restricted stock unit awards. The Compensation Committee determined that the Company’s three-year TSR was 156.5%, which placed the Company at the 95% percentile of the TSR Peer Group during that period. Under the terms of the award, that ranking resulted in the application of a three-year TSR modifier of 125% to the shares earned, as reflected in the table below:

 

Name		2020-2022 Annual Performance-Vesting Restricted Stock Unit Grant		Shares Earned for 2020 Performance(1)		Shares Earned for 2021 Performance(2)		Shares Earned for 2022 Performance		Subtotal		Shares Issued(3)
Debra K. Osteen		254,669		169,778		169,778		151,976		491,534		614,418
David M. Duckworth		80,928		53,952		53,952		48,294		156,198		195,248
Christopher L. Howard		83,313		55,542		55,542		49,718		160,802		201,003
John S. Hollinsworth		85,478		56,986		56,986		51,008		164,980		206,225
Laurence L. Harrod		79,292		52,862		52,862		47,317		153,041		191,301

 

(1) See the section in our Proxy Statement dated March 24, 2021 entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation - 2020 Annual Awards” for more information.

(2) See the section in our Proxy Statement dated April 8, 2022 entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation - 2020 and 2019 Performance-Vesting Restricted Stock Unit Awards Earned” for more information.

(3) Amounts reflect application of three-year TSR modifier of 125%.

 

Perquisites and other Benefits

 

We provide our Named Executive Officers with modest perquisites (less than $10,000 on an annual basis) that our Compensation Committee believes are reasonable and consistent with our overall executive compensation program. Our Compensation Committee believes that such perquisites help us to retain our executive personnel and allows them to operate more effectively.

 

Our Named Executive Officers are eligible for health and welfare benefits available to eligible Company employees during active employment under the same terms and conditions. These benefits include medical, dental, vision, short-term and long-term disability and group-term life insurance coverage. The Named Executive Officers also participate in a separate insurance plan that provides long term care benefits to the executives and their spouses. Our general policies applicable to all employees govern paid vacation and other time off for our Named Executive Officers.

Compensation Clawback Policy

 

If the Company is required to restate its financial statements as a result of misconduct, Section 304 of the Sarbanes-Oxley Act requires the Chief Executive Officer and the Chief Financial Officer to reimburse the Company for: (i) any bonus or other incentive-based or equity-based compensation received during the 12 months following the public issuance of the financial statements; and (ii) any profits realized from the sale of Company securities during those 12 months. On February 26, 2015, the Compensation Committee adopted and approved a compensation clawback policy applicable to performance-based equity awards issued to executive officers during and after 2015. Under the clawback policy, if a Named Executive Officer is determined by the Board to have engaged in fraud or misconduct contributing to restatement of the Company’s financial statements, the Board shall take appropriate action to address such events, including requiring (i) reimbursement of any equity securities that vested during the preceding three year period, including any proceeds from the sale of such securities, and (ii) cancellation of all unvested equity securities during such three-year period.

 

Section 954 of the Dodd-Frank Act directs the SEC to promulgate additional rules requiring companies listed on stock exchanges to adopt policies regarding the recovery of executive compensation from executive officers for accounting restatements resulting from material noncompliance with any financial reporting requirement under the securities laws. In accordance with Section 954 of the Dodd-Frank Act, the SEC issued final rules effective in January 2023 requiring the national securities exchanges to establish listing standards requiring qualifying issuers to develop and implement clawback policies. Upon NASDAQ’s adoption and publication of listing standards implementing the SEC’s rules, the Compensation Committee will review and, if necessary, revise the Company’s clawback policy to conform with such rules.

 

Deferred Compensation Plan

 

On February 28, 2013, our Board adopted and approved the Acadia Healthcare Company, Inc. Deferred Compensation Plan, effective February 1, 2013 (the “Deferred Compensation Plan”). The Deferred Compensation Plan is designed to provide tax-deferred compensation for our eligible employees, including executive officers. Deferred compensation plans are common in our industry and help in the recruitment and retention of top executive talent.

 

Under the Deferred Compensation Plan, participants may defer up to 50% of their annual base compensation and up to 100% of any performance-based compensation. Participants are fully vested in their deferral accounts as to amounts they elect to defer. No employer matching contributions are made to the Deferred Compensation Plan. Participants will be able to select from several fund choices and their deferred compensation account will increase or decrease in value in accordance with the performance of the funds selected. Participants may receive a distribution from the Deferred Compensation Plan upon a qualifying distribution event such as separation from service, disability, death, change in control or an unforeseeable emergency. Following a participant’s separation from the Company for any reason, the participant’s vested interest in the account is paid to the participant (or the participant’s beneficiary in the event of the participant’s death) either in a lump sum or up to ten annual installments, as elected by the participant. The Deferred Compensation Plan is intended to be an unfunded plan administered and maintained by the Company primarily for the purpose of providing deferred compensation benefits to participants.

 

Risk Assessment

 

In addition to overseeing the Company’s executive compensation program, the Compensation Committee considers the risk profile of the Company’s compensation policies and practices for all employees. The Compensation Committee has concluded that the Company’s compensation program does not encourage excessive or inappropriate risk taking and determined that such program is not reasonably likely to have a material adverse impact on the Company. See “CORPORATE GOVERNANCE – Risk Oversight” for more information about the Board’s role in our risk management process.

 

Internal Revenue Code Section 162(m)

 

Code Section 162(m) limits the deductibility of compensation in excess of $1 million paid to certain “covered employees” of a publicly held corporation. For taxable years ending December 31, 2017 and earlier, “covered employees” generally referred to the company’s Chief Executive Officer and its next three most highly compensated executive officers (excluding the Chief Financial Officer) in the year that the compensation is paid. This limitation does not apply to compensation that is considered “qualified performance-based compensation” under the rules of Section 162(m). The exemption from Section 162(m)’s deduction limitation for “qualified performance-based compensation” was repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million is not deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. In addition, beginning with taxable years beginning after December 31, 2017, “covered employees” generally was expanded to include the Company’s chief financial officer; also, each individual who is a covered employee for any taxable year beginning after December 31, 2016 will remain a covered employee for all future years.

 

Stock Ownership Guidelines, Insider Trading Policy, Hedging and Pledging

 

In March 2012, the Board of Directors adopted stock ownership guidelines for non-management directors. The guidelines require that each non-management director hold an investment position in our Common Stock equal in value to five times the annual cash retainer (exclusive of any Board committee retainers) paid to non-management directors. The guidelines provide for a five-year transition period during which directors can attain the required ownership. As of December 31, 2022, all of our non-management directors not in a transition period satisfied the applicable stock ownership guidelines.

 

In December 2014, the Board of Directors adopted stock ownership guidelines for certain designated officers. The guidelines require that the Named Executive Officers hold an investment position in our Common Stock equal to the following multiples of annual base salary:

 

Position	Fair Market Value of Stock Holdings as a Multiple of Base Salary
Chief Executive Officer	5x
Other Named Executive Officers	3x

 

The guidelines provide for a five-year transition period during which executive officers can attain the required ownership. If an executive officer becomes subject to a greater ownership threshold due to an increase in the amount of his or her annual base salary, the executive officer must satisfy the greater ownership threshold within the later of the original five-year transition period or two years from the effective date of the increase in annual base salary. As of December 31, 2022, all of our Named Executive Officers satisfied the applicable stock ownership guidelines.

 

Pursuant to the stock ownership guidelines applicable to non-management directors and executive officers, ownership of the following shares of Common Stock (“Qualified Shares”) are counted toward the satisfaction of the applicable ownership requirements: (i) shares owned directly by the non-management director or the executive officer; (ii) shares owned indirectly (e.g. by a spouse or in trust); (iii) restricted shares, including restricted shares that have been granted but that have not vested; (iv) shares issuable upon the settlement of vested performance-vesting restricted stock units; and (v) shares obtained through stock option exercises. For the avoidance of doubt, shares that underlie unexercised options, whether or not vested, will not be deemed to be Qualified Shares.

 

We maintain an insider trading policy that governs transactions in our securities by directors, officers and other employees. Among other provisions, the policy prohibits “short-selling” of any equity security of the Company and any hedging transactions. Directors and officers are also prohibited from holding our securities in a margin account or otherwise pledging our securities as collateral for a loan.

 

Termination and Change-in-Control Arrangements

 

Under the terms of the compensation plans and employment agreements with the Named Executive Officers, the Named Executive Officers are entitled to payments and benefits upon the occurrence of specified events including termination of employment. The specific terms of these arrangements are discussed under the heading “Executive Compensation – Potential Payments Upon Termination or Change in Control under the Employment Agreements.” The Compensation Committee believes that these arrangements are appropriate and necessary to attract and retain talented senior executives. The Compensation Committee believes that the potential payments and benefits provide security and encourage retention in the event of an actual or potential change in control, such as a sale or “hostile” takeover. The absence of such arrangements could impact our ability to hire talented executives and an executive’s willingness to work through a merger or sale transaction which could be beneficial to our stockholders.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by SEC Regulation S-K, Item 402(b) with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

COMPENSATION COMMITTEE:   Wade D. Miquelon, Chairman Michael J. Fucci Vicky B. Gregg William M. Petrie, M.D.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following summary compensation table reflects the compensation paid or accrued by us with respect to each of the Named Executive Officers:

 

Name and Principal Position		Year			Salary				Bonus				Stock Awards(1)				Non-Equity Incentive Plan Compensation(2)				All Other Compensation(3)				Total
Christopher H. Hunter(4) Chief Executive Officer		2022			$	1,000,000			$	–			$	4,500,022			$	915,202			$	–			$	6,415,224
David M. Duckworth Chief Financial Officer		2022 2021 2020				674,264 654,625 635,558				– – –				1,803,013 1,941,749 1,248,999				722,458 1,033,065 833,974				24,663 21,463 21,185				3,224,398 3,650,902 2,739,716
Christopher L. Howard Executive Vice President, General Counsel and Secretary		2022 2021 2020				617,003 599,032 581,584				– – –				1,682,676 1,992,159 1,316,121				661,104 945,333 763,150				8,186 5,602 5,337				2,968,969 3,542,126 2,666,192
John S. Hollinsworth Executive Vice President of Operations		2022 2021 2020				633,039 614,601 596,700				– – –				1,793,884 2,033,824 986,564				678,287 969,903 782,985				9,331 6,437 6,121				3,114,541 3,624,765 2,372,370
Laurence L. Harrod Executive Vice President of Finance		2022 2021 2020				600,575 583,083 566,100				– 410,000 410,000	(5) (6)			1,601,401 1,886,643 915,185				643,503 920,164 742,832				9,619 6,764 5,306				2,855,098 3,806,654 2,639,423
Debra K. Osteen Former Chief Executive Officer		2022 2021 2020				361,538 1,000,000 918,000	(7)			900,000 – –	(8)			1,059,857 6,989,753 2,789,779				– 1,856,590 1,417,168				298,648 6,764 6,448				2,620,043 9,853,107 5,131,395

 

 

(1)

Reflects the aggregate grant date fair value of time-vesting restricted stock and performance-vesting restricted stock units granted to each applicable Named Executive Officer pursuant to the Incentive Plan, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation,” or ASC 718 and, for the 2020 performance-vesting restricted stock unit awards determined using a Monte-Carlo simulation value. The awards are described in more detail in the Grants of Plan-Based Awards section below. See Note 16 to the Consolidated Financial Statements contained in the Company’s 2022 Annual Report on Form 10-K for assumptions relevant to the valuation of stock awards. With respect to annual grants of performance-vesting restricted stock units, other than the 2021 performance-vesting restricted stock unit awards, the units vest over three years and the amounts for a given year assume that the performance goals are attained during a respective annual performance period in accordance with ASC 718. With respect to annual grants of performance-vesting restricted stock units in 2021, the units vest based upon the achievement of specified performance goals in 2023, and the amounts assume that such performance goals are attained during such performance period in accordance with ASC 718.

 

The amounts relating to performance-vesting restricted stock unit awards for 2022 represent the sum of the grant date fair value of the target number of shares that may be earned pursuant to (a) the target amount of the 2022 performance-vesting restricted stock unit award, and (b) the third tranche of the 2020 performance-vesting restricted stock unit award, as applicable to each Named Executive Officer.

 

The amounts relating to performance-vesting restricted stock unit awards for 2021 represent the sum of the grant date fair value of the target number of shares that may be earned pursuant to (a) the target amount of the 2021 performance-vesting restricted stock unit award, (b) the second tranche of the 2020 performance-vesting restricted stock unit award and (c) the third tranche of the 2019 performance-vesting restricted stock unit award, as applicable to each Named Executive Officer.

 

The amounts relating to performance-vesting restricted stock unit awards for 2020 represent the sum of the grant date fair value of the target number of shares that may be earned based on 2020 performance pursuant to (a) the first tranche of the 2020 performance-vesting restricted stock unit award, (b) the second tranche of the 2019 performance-vesting restricted stock unit award and (c) the third tranche of the 2018 performance-vesting restricted stock unit award, as applicable to each Named Executive Officer.

 

Assuming that the maximum performance goals are attained during a respective annual performance period in accordance with ASC 718 for the applicable tranche of the performance-vesting restricted stock units granted in 2022, 2021 and 2020, (i) the aggregate grant date fair value of the annual grants of performance-vesting restricted stock units would have been, and (ii) the aggregate grant date fair value of the total stock awards (including awards of both time-vesting restricted stock and performance-vesting restricted stock units) would have been:

 

Name		Year			2022 RSU Awards				2021 RSU Awards				2020 RSU Awards				2019 RSU Awards				Total RSU Awards				Total Stock Awards
Christopher H. Hunter		2022			$	7,000,018			$	–			$	–			$	–			$	7,000,018			$	8,000,031
David M. Duckworth		2022				2,275,601				–				571,891				–				2,847,492				3,226,759
		2021				–				2,021,793				571,891				693,193				3,228,925				3,556,212
		2020				–				–				571,891				693,193				1,862,444				2,180,222
Christopher L. Howard		2022				2,082,418				–				588,745								2,671,163				3,018,257
		2021				–				1,963,841				588,745				699,890				3,310,429				3,647,374
		2020				–				–				588,745				699,890				1,977,956				2,305,099
John S. Hollinsworth		2022				2,237,734				–				604,073				–				2,841,807				3,214,787
		2021				–				2,074,331				604,030				697,802				3,376,164				3,721,906
		2020				–				–				604,030				697,802				1,301,832				1,637,480
Laurence L. Harrod		2022				1,981,832				–				560,358				–				2,542,191				2,872,496
		2021				–				1,924,223				560,316				647,339				3,131,878				3,452,582
		2020				–				–				560,316				647,339				1,207,655				1,519,012
Debra K. Osteen		2022				–				–				1,799,689				–				1,779,689				1,959,702
		2021				–				10,399,956				1,799,647				1,779,902				13,979,505				13,979,505
		2020				–				–				1,799,647				1,779,902				3,579,549				4,579,553

 

See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation” for more information about the time-vesting restricted stock and performance-vesting restricted stock units.

 

(2)	Reflects cash awards earned during the years indicated under the Incentive Plan. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Annual Non-Equity Incentive Compensation” for more information.

 

(3)	Represents certain long term care insurance benefits and 401(k) plan matching contributions by the Company to each Named Executive Officer, other than Ms. Osteen. For Ms. Osteen, amounts shown in this column for 2022 reflect the following components:

 

Director compensation		$	99,500
Unused paid time off and sick pay accrued through her retirement date			197,682
Long term care insurance benefits			1,466
Total		$	298,648

 

(4)	Mr. Hunter was appointed Chief Executive Officer effective April 11, 2022.

 

(5)	Reflects Mr. Harrod’s second anniversary retention bonus pursuant to the terms of his Employment Agreement.

 

(6)	Reflects Mr. Harrod’s first anniversary retention bonus pursuant to the terms of his Employment Agreement.

 

(7)	Includes $100,000 paid to Ms. Osteen in her capacity as a consultant to the Company following her retirement as Chief Executive Officer effective April 11, 2022.

 

(8)	Reflects Ms. Osteen’s retention bonus pursuant to the terms of a side letter to her Employment Agreement, as amended.

 

Grants of Plan-Based Awards

 

The following table sets forth certain information regarding plan-based awards granted to the Named Executive Officers during 2022:

Grant

Estimated Possible Payouts Under Non- Equity Incentive Plan Awards(1)

Estimated Future Payouts Under Equity Incentive Plan Awards(2)

All Other Stock Awards: Number of Shares of Stock or

Grant Date Fair Value of Stock and Option

Name

Type

Date

Threshold

Target

Maximum

Threshold

Target

Maximum

Units(3)

Awards(4)

Christopher H. Hunter

Bonus

N/A

$

500,000

$

1,000,000

$

2,000,000

–

–

–

–

$

–

RSA

4/11/22

–

–

–

–

–

–

13,521

1,000,013

2022 RSU

4/11/22

–

–

–

23,662

47,323

94,646

–

3,500,009

(5)

David M. Duckworth

Bonus

N/A

286,562

573,124

1,146,249

–

–

–

–

–

RSA

4/11/22

–

–

–

–

–

–

5,128

379,267

2022 RSU

4/11/22

–

–

–

7,692

15,384

30,768

–

1,137,801

(5)

2020 RSU

4/11/22

–

–

–

13,488

26,976

53,952

–

285,946

(6)

Christopher L. Howard

Bonus

N/A

262,226

524,453

1,048,905

–

–

–

–

–

RSA

4/11/22

–

–

–

–

–

–

4,693

347,094

2022 RSU

4/11/22

–

–

–

7,039

14,078

28,156

–

1,041,209

(5)

2020 RSU

4/11/22

–

–

–

13,886

27,771

55,542

–

294,373

(6)

John S. Hollinsworth

Bonus

N/A

269,042

538,083

1,076,166

–

–

–

–

–

RSA

4/11/22

–

–

–

–

–

–

5,043

372,980

2022 RSU

4/11/22

–

–

–

7,564

15,128

30,256

–

1,118,867

(5)

2020 RSU

4/11/22

–

–

–

14,247

28,494

56,988

–

302,036

(6)

Laurence L. Harrod

Bonus

N/A

255,244

510,489

1,020,978

–

–

–

–

–

RSA

4/11/22

–

–

–

–

–

–

4,466

330,305

2022 RSU

4/11/22

–

–

–

6,699

13,398

26,796

–

990,916

(5)

2020 RSU

4/11/22

–

–

–

13,216

26,432

52,864

–

280,179

(6)

Debra K. Osteen

RSA

5/19/22

–

–

–

–

–

–

2,303

160,012

2020 RSU

4/11/22

–

–

–

42,445

84,891

169,782

–

899,845

(6)

 

(1)

The estimated payouts shown reflect non-equity incentive awards granted under the Incentive Plan, where receipt is contingent upon the achievement of specified performance goals. The amounts in the “Threshold” column assume threshold performance for all of the specified performance goals. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Annual Non-Equity Incentive Compensation” for more information about the awards.

 

(2)

Reflects the number of shares of Common Stock issuable upon vesting of performance-vesting restricted stock units granted under the Incentive Plan, and in the case of the 2020 RSU awards, subject to adjustment based on the TSR modifier. The performance-vesting restricted stock units granted April 11, 2022 to all applicable Named Executive Officers are earned based upon the achievement of certain performance goals in 2022, 2023 and 2024, and continued employment. The third tranche of performance-vesting restricted stock units granted March 24, 2020 to all applicable Named Executive Officers is earned based upon the achievement of certain performance goals in 2022, and continued employment. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation” for more information about the performance-vesting restricted stock units.

 

(3)

Reflects shares of time-vesting restricted stock granted to all Named Executive Officers (other than Ms. Osteen) under the Incentive Plan, which will vest in four equal annual installments commencing one year after the date of grant. For Ms. Osteen, shares relate to her role as a non-executive director following her retirement as the Company’s Chief Executive Officer and will vest in three equal annual installments beginning on year after the date of grant.

 

(4)	Reflects the aggregate grant date fair value computed in accordance with ASC 718.

 

(5)

The amounts shown reflect the grant date fair value of the target number of shares subject to the 2022 annual award of performance-vesting restricted stock units assuming that target performance goals are attained during the performance period in accordance with ASC 718, continued employment throughout the performance period. For additional information, see the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – Equity Awards Granted in 2022.”

 

(6)

The amounts shown were determined using a Monte-Carlo simulation value and reflect the grant date fair value of the target number of shares subject to the third tranche of the 2020 annual award of performance-vesting restricted stock units assuming that target performance goals are attained during the third year of the performance period in accordance with ASC 718, continued employment throughout the performance period, and no adjustment as a result of the TSR modifier. For additional information, see the section entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – 2020 Annual Awards” in our Proxy Statement dated March 24, 2021.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides certain information with respect to the applicable Named Executive Officers regarding outstanding equity awards as of December 31, 2022 that represent potential amounts that may be realized in the future:

Option Awards

Stock Awards

Number of Securities Underlying Unexercised Options(1)

Option

Option

Number of Shares or Units of Stock That

Market Value of Shares or Units of Stock Held that

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That

Name

(Exercisable)

(Unexercisable)

Exercise Price

Expiration Date

Have Not Vested

Have Not Vested(2)

Have Not Vested

Have Not Vested(2)

Christopher H. Hunter

–

–

$

–

–

13,521

(3)

$

1,113,049

–

$

–

–

–

–

–

–

–

94,646

(4)

7,791,259

David M. Duckworth

3,897

–

50.75

2/27/24

–

–

–

–

–

–

–

–

2,407

(5)

198,144

–

–

–

–

–

–

13,488

(6)

1,110,332

–

–

–

–

–

–

–

–

161,856

(7)

13,323,986

–

–

–

–

3,990

(8)

328,457

–

–

–

–

–

–

–

–

31,922

(9)

2,627,819

–

–

–

–

5,128

(3)

422,137

–

–

–

–

–

–

–

–

30,768

(4)

2,532,822

Christopher L. Howard

–

–

–

–

–

–

–

–

–

–

–

–

2,431

(5)

200,120

–

–

–

–

–

–

13,887

(6)

1,143,178

–

–

–

–

–

–

–

–

166,626

(7)

13,716,652

–

–

–

–

4,108

(8)

338,171

–

–

–

–

–

–

–

–

32,864

(9)

2,705,364

–

–

–

–

4,693

(3)

386,328

–

–

–

–

–

–

–

–

28,156

(4)

2,317,802

John S. Hollinsworth

3,750

1,250

(10)

28.25

3/7/29

–

–

–

–

–

–

–

–

5,000

(11)

411,600

–

–

–

–

–

–

2,837

(12)

233,542

–

–

–

–

–

–

14,247

(6)

1,172,813

–

–

–

–

–

–

–

–

170,956

(7)

14,073,098

–

–

–

–

4,215

(8)

346,979

–

–

–

–

–

–

–

–

33,718

(9)

2,775,666

–

–

–

–

5,043

(3)

415,140

–

–

–

–

–

–

–

–

30,256

(4)

2,490,674

Laurence L. Harrod

–

–

–

–

2,632

(12)

216,666

–

–

–

–

–

–

13,217

(6)

1,088,023

–

–

–

–

–

–

–

–

158,584

(7)

13,054,635

–

–

–

–

3,910

(8)

321,871

–

–

–

–

–

–

–

–

31,278

(9)

2,574,805

–

–

–

–

4,466

(3)

367,641

–

–

–

–

–

–

–

–

26,796

(4)

2,205,847

Debra K. Osteen

–

–

–

–

2,303

(13)

189,583

–

–

–

–

–

–

–

–

509,338

(4)

41,928,704

 

 

(1)	The amounts shown reflect stock options granted under the Incentive Plan.

 

(2)	Based on the closing sales price of our Common Stock of $82.32 on The NASDAQ Global Select Market on December 31, 2022.

 

(3)	One-fourth of these shares of time-vesting restricted stock vest on each of April 11, 2023, April 11, 2024, April 11, 2025 and April 11, 2026.

 

(4)

Reflects the aggregate maximum number of shares that will vest upon the achievement of certain performance goals established for the annual award of performance-vesting restricted stock units granted in 2022 under the Incentive Plan and continued employment. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – Equity Awards Granted in 2022” for more information about the performance-vesting restricted stock units.

 

(5)	These shares of time-vesting restricted stock vest on May 2, 2023.

 

(6)	One-half of these shares of time-vesting restricted stock vest on each of March 24, 2023 and March 24, 2024.

 

(7)

Reflects the aggregate maximum number of shares that will vest upon the achievement of certain performance goals established for the annual award of performance-vesting restricted stock units granted in 2020 under the Incentive Plan and continued employment. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – 2020 Performance-Vesting Restricted Stock Unit Awards Earned” for more information about the performance-vesting restricted stock units.

 

(8)	One-third of these shares of time-vesting restricted stock vest on each of April 23, 2023, April 23, 2024 and April 23, 2025.

 

(9)

Reflects the aggregate maximum number of shares that will vest upon the achievement of certain performance goals established for the annual award of performance-vesting restricted stock units granted in 2021 under the Incentive Plan and continued employment. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – Equity Awards Granted in 2021” for more information about the performance-vesting restricted stock units.

 

(10)	These stock options will become exercisable on March 7, 2023.

 

(11)	These shares of time-vesting restricted stock vest on March 7, 2023.

 

(12)	These shares of time-vesting restricted stock vest on August 14, 2023.

 

(13)	One-third of these shares of time-vesting restricted stock vest on each of May 19, 2023, May 19, 2024, May 19, 2025.

 

Option Exercises and Stock Vested

 

The following table shows the amounts received by the applicable Named Executive Officers upon the exercise of stock options or the vesting of time-vesting restricted stock and performance-vesting restricted stock units during 2022:

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise				Value Realized on Exercise				Number of Shares Acquired on Vesting				Value Realized  on Vesting
Christopher H. Hunter		–				$	–			–				$	–
David M. Duckworth			–				–				51,002				2,904,172	(1)
			–				–				1,330				90,453	(2)
			–				–				6,744				434,853	(3)
			–				–				2,406				163,319	(4)
			–				–				1,766				107,090	(5)
Christopher L. Howard			6,137				184,171	(6)			51,515				2,932,234	(1)
			–				–				1,369				93,106	(2)
			–				–				6,942				447,620	(3)
			–				–				2,429				164,881	(4)
			–				–				2,037				123,524	(5)
John S. Hollinsworth			–				–				60,110				3,421,461	(1)
			–				–				1,405				95,554	(2)
			–				–				7,123				459,291	(3)
			–				–				5,000				311,050	(7)
			–				–				2,834				234,117	(8)
Laurence L. Harrod			–				–				55,761				3,173,916	(1)
			–				–				1,303				88,617	(2)
			–				–				6,607				426,019	(3)
			–				–				2,629				217,182	(8)
Debra K. Osteen			–				–				76,026				4,002,769	(9)
			–				–				300,066				17,079,756	(10)

 

(1)

Based on the closing sales price of our Common Stock of $56.92 on The NASDAQ Global Select Market on February 25, 2022, the date that the performance-vesting restricted stock units vested. See the section entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – 2019 Annual Awards” in our Proxy Statement dated March 25, 2020 for more information about the performance-vesting restricted stock units.

 

(2)	Based on the closing sales price of our Common Stock of $68.01 on The NASDAQ Global Select Market on April 22, 2022, the date that the shares of time-vesting restricted stock vested.

 

(3)	Based on the closing sales price of our Common Stock of $64.48 on The NASDAQ Global Select Market on March 23, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(4)	Based on the closing sales price of our Common Stock of $67.88 on The NASDAQ Global Select Market on April 29, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(5)	Based on the closing sales price of our Common Stock of $60.64 on The NASDAQ Global Select Market on March 1, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(6)	Based on the closing sales price of our Common Stock of $80.76 on The NASDAQ Global Select Market on August 4, 2022, the date that the options were exercised, less the option exercise price of $50.75.

 

(7)	Based on the closing sales price of our Common Stock of $62.21 on The NASDAQ Global Select Market on March 4, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(8)	Based on the closing sales price of our Common Stock of $82.61 on The NASDAQ Global Select Market on August 12, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(9)	Based on the closing sales price of our Common Stock of $52.31 on The NASDAQ Global Select Market on January 28, 2022, the first business day immediately prior to the date that the shares of time-vesting restricted stock vested.

 

(10)

Based on the closing sales price of our Common Stock of $56.92 on The NASDAQ Global Select Market on February 25, 2022, the date that the performance-vesting restricted stock units vested. See the section entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – 2019 Annual Awards” in our Proxy Statement dated March 25, 2020 and the section entitled “COMPENSATION DISCUSSION AND ANALYSIS – Components of Executive Compensation – Equity-Based Compensation – 2021 Annual Awards” in our Proxy Statement dated April 8, 2022 for more information about the performance-vesting restricted stock units.

 

Nonqualified Deferred Compensation

 

The following table shows the activity during 2022 and the aggregate balances held by each of our Named Executive Officers at December 31, 2022 under the Deferred Compensation Plan.

 

Name		Executive Contributions in 2022($)(1)				Company Contributions in 2022($)				Aggregate Earnings in 2022($)				Aggregate Withdrawals / Distributions($)				Aggregate Balance at December 31, 2022($)(2)
Christopher H. Hunter		$	–			$	–			$	–			$	–			$	–
David M. Duckworth			211,311				–				(428,090	)			–				1,725,628
Christopher L. Howard			257,758				–				(829,200	)			–				2,294,853
John S. Hollinsworth			31,616				–				(5,869	)			–				52,297
Laurence L. Harrod			987,565				–				(214,854	)			–				1,670,176
Debra K. Osteen			–				–				–				–				–

 

 

(1)       These amounts are included in the Summary Compensation Table above.

(2)       All amounts other than 2022 earnings are included in the Summary Compensation Table above.

 

Under the plan, participants may defer up to 50% of their annual base compensation and up to 100% of any performance-based compensation. Participants are fully vested in their deferral accounts as to amounts they elect to defer. No employer matching contributions are made to the Deferred Compensation Plan. Participants will be able to select from several fund choices and their deferred compensation account will increase or decrease in value in accordance with the performance of the funds selected. Participants may receive a distribution from the Deferred Compensation Plan upon a qualifying distribution event such as separation from service, disability, death, change in control or an unforeseeable emergency or on a specified date selected by a participant. Following a participant’s separation from the Company for any reason, the participant’s vested interest in the account is paid to the participant (or the participant’s beneficiary in the event of the participant’s death) either in a lump sum or up to ten annual installments, as elected by the participant. The Deferred Compensation Plan is intended to be an unfunded plan administered and maintained by the Company primarily for the purpose of providing deferred compensation benefits to participants.

 

Potential Payments Upon Termination or Change in Control under the Employment Agreements

 

We entered into an employment agreement with Mr. Hunter effective April 11, 2022 (the “Hunter Agreement”). We entered into an employment agreement with Ms. Osteen in January 2021, as amended in December 2021 and in January 2022 (the “Osteen Agreement”). In July and August 2019, we entered into employment agreements with Messrs. Hollinsworth and Harrod, respectively (the “EVP 2019 Agreements”). In April 2014, we entered into an amended and restated employment agreement with Mr. Howard, and an employment agreement with Mr. Duckworth (collectively with the Hunter Agreement, the Osteen Agreement and the EVP 2019 Agreements, the “Employment Agreements”). A summary of the Employment Agreements for each Named Executive Officer (other than Ms. Osteen) is provided below.

 

Compensation and Benefits

 

The base salaries under the Employment Agreements are subject to an annual increase in the sole discretion of our Board. In addition to base salary, under the Employment Agreements the executives are entitled to participate, in their sole discretion, in all of our employee benefit programs for which senior executive employees are generally eligible. Each executive is also reimbursed for reasonable expenses incurred in connection with services performed under each executive’s Employment Agreement.

 

Non-Competition and Non-Solicitation

 

During the term of each Employment Agreement and for 12 months thereafter (in the case of Messrs. Duckworth, Harrod and Hollinsworth) or 24 months thereafter (in the case of Messrs. Hunter and Howard), each such executive is prohibited from (i) directly or indirectly managing, controlling, consulting, rendering services for or participating, engaging or owning an interest in any business which derives 25% of its gross revenue from the business of providing behavioral healthcare and/or related services and (ii) directly or indirectly managing, controlling, rendering services for or participating or consulting with any unit, division, segment or subsidiary of any other business that engages in or otherwise competes with (or was organized for the purpose of engaging in or competing with) the business of providing behavioral healthcare and/or related services (subject to certain exceptions), in each case within any geographical area in which we engage in such businesses. During the term of each Employment Agreement and for 12 months thereafter (in the case of Messrs. Duckworth, Harrod and Hollinsworth) or 24 months thereafter (in the case of Messrs. Hunter and Howard), each such executive is prohibited from directly or indirectly soliciting or hiring any employee or independent contractor of ours or directly or indirectly soliciting any customer, supplier, licensee, licensor or other business relation of ours. For Mr. Hunter, his non-compete and non-solicitation periods are reduced to 18 months if he is terminated without “Cause” or resigns with “Good Reason” during the period beginning 3 months prior to and 18 months following a “Change in Control” of the Company (the “Change in Control Period”). In addition, the executives are subject to customary confidentiality and non-disparagement obligations both during and following their employment with the Company.

 

Retention Bonus

 

Under a January 2022 side letter to her Employment Agreement, Ms. Osteen received a retention bonus equal to $900,000 for her continued service as our Chief Executive Officer through March 31, 2022.

 

Severance

 

Under the Employment Agreements for Messrs. Duckworth and Howard, if the executive is terminated without “Cause” or resigns with “Good Reason,” such executive is generally entitled to receive (subject to the satisfaction of certain conditions):

 

●

Such executive’s base salary through the termination date;

 

●

A prorated bonus amount for the calendar year in which the termination occurs;

 

●

An amount equal to, for Mr. Duckworth, the target annual cash bonus amount, and for Mr. Howard, two (2) times the target annual cash bonus amount to which such executive would be entitled with respect to the calendar year in which the termination date occurs, determined as if all of the performance objectives for such year have been achieved at the target level;

 

●

An amount equal to, for Mr. Duckworth, twelve (12) months, and for Mr. Howard, twenty-four months, of such executive’s base salary as in effect on the termination date;

 

●

Any unused and unpaid time off and sick pay accrued through the termination date and any incurred but unreimbursed business expenses as of the termination date;

 

●

An amount equal to the cost of the premiums for continued health and dental insurance for the executive and/or his dependents in accordance with COBRA for a specified period;

 

●

Full and immediate vesting of such executive’s stock options, time-vesting restricted stock and other equity-based awards that are not intended to be performance-based compensation under Code Section 162(m); and

 

●

Delay of vesting and forfeiture of such executive’s time-vesting restricted stock and other equity-based awards that are intended to be performance-based compensation under Code Section 162(m) until the Company certifies the applicable performance goals have been met (all such payments collectively, the “Old Termination Payments”).

 

Under the Employment Agreements for Messrs. Harrod, Hollinsworth and Hunter, if the executive is terminated without “Cause” or resigns with “Good Reason,” such executive is generally entitled to receive (subject to the satisfaction of certain conditions):

 

●

Such executive’s base salary through the termination date;

 

●

Any accrued but unpaid cash bonus with respect to a completed performance period;

 

●

Any unused and unpaid time off and sick pay accrued through the termination date, any incurred but unreimbursed business expenses as of the termination date, and all other payments, benefits or fringe benefits pursuant to any applicable compensation arrangement as of the termination date;

 

●

For Mr. Hunter, an amount equal to one and a half (1.5) times, and two (2) times, his base salary and target cash bonus as in effect on the termination date, depending on whether such termination occurs outside, or during, the Change of Control Period, respectively;

 

●

For Messrs. Harrod and Hollinsworth, an amount equal to two (2) times such executive’s base salary as in effect on the termination date;

 

●

For Messrs. Harrod and Hollinsworth, a prorated cash bonus amount for the calendar year in which the termination occurs, determined as if all of the subjective performance objectives for such year have been achieved at the target level;

 

●

An amount equal to the after-tax cost of the premiums for continued health and dental insurance for the executive and/or his or her dependents in accordance with COBRA for a specified period;

 

●

For Mr. Hunter, either full accelerated vesting of a prorated portion of outstanding performance-vesting equity awards (with outstanding performance conditions deemed satisfied at target levels) or delay of vesting and forfeiture of a prorated portion of outstanding performance-vesting equity awards, depending on whether such termination occurs outside, or during, the Change of Control Period, respectively; and

 

●

For Messrs. Harrod and Hollinsworth, full and immediate vesting of the time-vesting components of such executive’s outstanding annual equity and equity-based awards, and delay of vesting and forfeiture of such executive’s outstanding annual equity and equity-based awards that are subject to performance-vesting criteria (all such payments collectively, the “New Termination Payments”).

 

“Cause” (as defined in the Employment Agreements for Mr. Hunter) means the occurrence of one or more of the following with respect to the applicable executive; provided that no determination of “Cause” may be made under certain circumstances until Mr. Hunter has been given written notice detailing the specific Cause event and a period of thirty (30) business days following receipt of such notice to cure such event:

 

●

the arrest and indictment for, conviction of or plea of nolo contendere to a felony or other crime involving moral turpitude or the conviction of any crime involving misappropriation, embezzlement or fraud with respect to the Company or any of its subsidiaries or any of their customers, suppliers or other business relations;

 

●

willful conduct outside the scope of his duties and responsibilities under his Employment Agreement that causes the Company or any of its subsidiaries substantial public disgrace or disrepute or demonstrable economic harm;

 

●

repeated failure to perform duties consistent with his Employment Agreement as reasonably directed by the Board;

 

●

any willful act or knowing omission of aiding or abetting a competitor of the Company or any of its subsidiaries to the disadvantage or detriment of the Company or any of its subsidiaries;

 

●

material breach of fiduciary duty or gross negligence in the performance of his duties to the Company or any of its subsidiaries;

 

●

intentional misconduct in the performance of his duties to the Company or any of its subsidiaries;

 

●

an administrative or other proceeding arising as a result of his action that results in his suspension or debarment from participation in any contracts with, or programs of, the United States or any of the fifty states or any agency or department thereof, or any finding of a governmental agency that he personally has engaged in misconduct in connection with his employment by the Company;

 

●

any other material breach by him of his Employment Agreement or material breach of any other agreement between him and the Company or any of its subsidiaries or any written policy of the Company or any of its subsidiaries; or

 

●

failure by him to, or notification from him of his intent not to, relocate to the greater Nashville, Tennessee area as requested by the Board.

 

“Cause” (as defined in the Employment Agreements for Messrs. Duckworth and Howard) means the occurrence of one or more of the following with respect to the applicable executive:

 

●

The conviction of or plea of nolo contendere to a felony or other crime involving moral turpitude or the conviction of any crime involving misappropriation, embezzlement or fraud with respect to the Company or any of its subsidiaries or any of their customers, suppliers or other business relations;

 

●

Conduct outside the scope of such executive’s duties and responsibilities under his Employment Agreement that causes the Company or any of its subsidiaries substantial public disgrace or disrepute or economic harm;

 

●

Repeated failure to perform duties consistent with such Employment Agreement as reasonably directed by our Board;

 

●

Any act or knowing omission aiding or abetting a competitor, supplier or customer of ours to our disadvantage or detriment;

 

●

Breach of fiduciary duty, gross negligence or willful misconduct with respect to us;

 

●

An administrative or other proceeding resulting in the suspension or debarment of such executive from participation in any contracts with, or programs of, the United States or any individual state or any agency or department thereof; or

 

●

Any other material breach by such executive of his Employment Agreement or any other agreement between such executive and us, which is not cured to the reasonable satisfaction of our Board within 30 days after written notice thereof to such executive.

 

“Cause” (as defined in the Employment Agreements for Messrs. Harrod and Hollinsworth) means the occurrence of one or more of the following with respect to such executive; provided that no determination of “Cause” may be made until such executive has been given written notice detailing the specific Cause event and a period of fifteen (15) business days following receipt of such notice to cure such event:

 

●

The conviction of or plea of nolo contendere to a felony or the conviction of any crime involving misappropriation, embezzlement or fraud with respect to the Company or any of its subsidiaries or any of their customers, suppliers or other business relations;

 

●

Willful conduct outside the scope of such executive’s duties and responsibilities under their Employment Agreement that causes the Company or any of its subsidiaries substantial public disgrace or disrepute or demonstrable economic harm;

 

●

Repeated failure to perform duties consistent with such Employment Agreement as reasonably directed by our Board;

 

●

Any willful act or knowing omission of aiding or abetting a competitor of ours to our disadvantage or detriment;

 

●

Material breach of fiduciary duty, gross negligence or willful misconduct with respect to us;

 

●

An administrative or other proceeding arising as a result of such executive’s actions that results in the suspension or debarment of such executive from participation in any contracts with, or programs of, the United States or any individual state or any agency or department thereof, or any finding of a governmental agency that such executive personally has engaged in misconduct in connection with her employment by the Company or any predecessor employer; or

 

●

Any other material breach by such executive of their Employment Agreement or any other agreement between such executive and us.

 

“Good Reason” (as defined in the Employment Agreements) means if the applicable executive resigns his or her employment with the Company as a result of one or more of the following actions (in each case taken without the executive’s written consent): (i) a reduction in such executive’s base salary (other than, for Messrs. Duckworth and Howard, as part of an across-the-board reduction that (A) results in a 10% or less reduction of such executive’s base salary as in effect on the date of any such reduction or (B) is approved by our Chief Executive Officer); (ii) a material diminution of such executive’s job duties or responsibilities inconsistent with the executive’s position; (iii) any other material breach by us of such Employment Agreement; or (iv) a relocation of our principal executive offices and corporate headquarters outside of a 30-mile radius of Nashville, Tennessee following relocation thereto in accordance with such Employment Agreement; provided that, none of the events described in clauses (i) through (iv) shall constitute Good Reason unless such executive shall have notified us in writing describing the event which constitutes Good Reason within 90 days after the occurrence of such event and then only if we shall have failed to cure such event within 30 days after our receipt of such written notice and such executive elects to terminate his or her employment as a result at the end of such 30 day period.

 

If an executive that is party to an Employment Agreement dies or becomes disabled, such executive is entitled to the Old Termination Payments (other than the amount equal to a multiple of the target annual cash bonus amount and the amount equal to a multiple of such executive’s base salary as in effect on the termination date) or New Termination Payments, as applicable; provided, that in the case of Mr. Hunter, his payment with respect to the annual cash bonus shall be a prorated cash bonus amount for the calendar year in which the termination occurs. In the event that an executive becomes disabled not due to death, such executive is entitled to receive continued installment payments of such executive’s base salary as in effect on the termination date for a specified period of time.

 

If we terminate an executive under an Employment Agreement for Cause or if any such executive resigns without Good Reason, such executive is only entitled to receive his or her unpaid base salary through the termination date and any bonus amount to which such executive is entitled by reference to the calendar year that ended on or prior to the termination date, and in the case of Messrs. Harrod, Hollinsworth and Hunter, all other payments, benefits or fringe benefits pursuant to any applicable compensation arrangement as of the termination date. Upon any termination of employment under an Employment Agreement, whether voluntary or otherwise, such executive has the option to elect to continue health insurance coverage until the earlier of (A) such time as the executive is eligible to participate in another health plan or (B) the executive becomes eligible for Medicare.

The tables below show the amounts that each Named Executive Officer (other than Ms. Osteen) would have received assuming that the Named Executive Officer’s employment was terminated or he or she died or became disabled effective December 31, 2022. As of December 31, 2022, none of the Named Executive Officers were entitled to any compensation or benefits for resignation or retirement. Furthermore, the Employment Agreements (other than the Hunter Agreement) do not distinguish a termination following a change in control from a termination in another context. Therefore, a termination following a change in control will entitle a Named Executive Officer to severance benefits only if the Named Executive Officer’s employment is otherwise terminated without Cause by the Company or by the Named Executive Officer for Good Reason.

 

Mr. Hunter

 

Executive Benefits and Payments upon Termination		Involuntary Termination without Cause (outside of CoC Period)(1)				Involuntary Termination without Cause during CoC Period(2)				Death or Disability
Base Salary		$	1,500,000	(3)		$	2,000,000	(3)		$	500,000	(4)
Non-Equity Incentive Plan Compensation(5)			2,500,000				3,000,000				1,000,000
Time-Vesting Restricted Stock (unvested)(6)			1,113,049				1,113,049				1,113,049
Insurance Benefits			46,025	(7)			46,025	(7)			15,342	(8)
Accrued Vacation(9)			41,846				41,846				41,846

 

Mr. Duckworth

 

Executive Benefits and Payments upon Termination		Involuntary Termination without Cause(1)				Death or Disability
Base Salary		$	674,264	(3)		$	337,132	(4)
Non-Equity Incentive Plan Compensation(5)			1,146,249				1,146,249
Time-Vesting Restricted Stock (unvested)(6)			2,059,070				2,059,070
Insurance Benefits			30,507	(7)			15,254	(8)
Accrued Vacation(9)			51,867				51,867

 

Mr. Howard

 

Executive Benefits and Payments upon Termination		Involuntary Termination without Cause(1)				Death or Disability
Base Salary		$	1,234,006	(3)		$	308,502	(4)
Non-Equity Incentive Plan Compensation(5)			1,573,358				1,048,905
Time-Vesting Restricted Stock (unvested)(6)			2,067,796				2,067,796
Insurance Benefits			47,891	(7)			11,973	(8)
Accrued Vacation(9)			47,462				47,462

 

Mr. Hollinsworth

 

Executive Benefits and Payments upon Termination		Involuntary Termination without Cause(1)				Death or Disability
Base Salary		$	1,266,078	(3)		$	316,520	(4)
Non-Equity Incentive Plan Compensation(5)			1,076,166				1,076,166
Time-Vesting Restricted Stock (unvested)(6)			2,580,073				2,580,073
Insurance Benefits			31,537	(6)			10,512	(7)
Accrued Vacation(9)			48,696				48,696

 

Mr. Harrod

 

Executive Benefits and Payments upon Termination		Involuntary Termination without Cause(1)				Death or Disability
Base Salary		$	1,201,150	(3)		$	300,288	(4)
Non-Equity Incentive Plan Compensation(5)			1,020,978				1,020,978
Time-Vesting Restricted Stock (unvested)(6)			1,994,202				1,994,202
Insurance Benefits			33,714	(7)			11,238	(8)
Accrued Vacation(9)			24,323				24,323

 

 

(1)

The amounts shown would have been payable if we terminated the Named Executive Officer’s employment without Cause (as defined in his Employment Agreement) or if the Named Executive Officer resigned his employment for Good Reason (as defined in his Employment Agreement), provided that the Named Executive Officer had not breached the non-competition, non-solicitation, confidentiality and proprietary information provisions of his Employment Agreement.

 

(2)

The amounts shown would have been payable if we terminated Mr. Hunter’s employment without Cause (as defined in his Employment Agreement) or if Mr. Hunter resigned his employment for Good Reason (as defined in his Employment Agreement) during the Change of Control Period (as defined in his Employment Agreement), provided that Mr. Hunter had not breached the non-competition, non-solicitation, confidentiality and proprietary information provisions of his Employment Agreement.

(3)

The amount shown reflects, for Mr. Hunter, one and a half (1.5) and two (2) times his base salary depending on whether such termination occurs outside, or during, the Change of Control Period, respectively, for Mr. Duckworth, twelve months of his base salary, and for Messrs. Harrod, Hollinsworth and Howard, the product of two (2) times the Named Executive Officer’s base salary, in each case such base salary as in effect on December 31, 2022 pursuant to the terms of his Employment Agreement (assuming that he is not in violation of the restrictive covenants set forth in his Employment Agreement or his General Release, if applicable). Pursuant to the Employment Agreements, base salary amounts are payable in regular installments over the course of the applicable severance period.

 

(4)

The amount shown reflects the Named Executive Officer’s base salary as in effect on December 31, 2022 payable for a period of six months in the event of disability pursuant to the terms of his Employment Agreement.

 

(5)

The amount shown reflects the cash incentive award for 2022 of 100% of the base salary for Mr. Hunter, two (2) times 85% of the base salary for Messrs. Duckworth, Harrod and Hollinsworth, and three (3) times 85% of the base salary for Mr. Howard, assuming achievement of the performance goals at the target level, pursuant to the terms of his Employment Agreement and each of their non-equity incentive compensation plans for 2022. In addition, Mr. Hunter is entitled to an additional payment of one and a half (1.5) times and two (2) times his target annual cash bonus depending on whether such termination occurs outside, or during, the Change of Control Period, respectively.

 

(6)

The amount shown reflects the value of all unvested time-vesting restricted stock not intended to qualify as performance-based compensation for each Named Executive Officer, which will immediately vest pursuant to the terms of his or her Employment Agreement, based on a market value of $82.32 per share as of December 31, 2022. See “EXECUTIVE COMPENSATION - Outstanding Equity Awards at Fiscal Year-End.” Pursuant to each Named Executive Officer’s Employment Agreement, unvested performance-vesting restricted stock unit awards intended to qualify as performance-based compensation are not immediately forfeited at termination but remain subject to forfeiture restrictions related to pre-established performance goals until the results of the related goals have been satisfied. As of December 31, 2022, all unvested performance-vesting restricted stock units of each Named Executive Officer would remain subject to pre-established performance goals and would vest in future years based on future performance. See “EXECUTIVE COMPENSATION - Outstanding Equity Awards at Fiscal Year-End” for potential amounts that may be realized in the future with respect to each Named Executive Officer’s unvested performance-vesting restricted stock units as of December 31, 2022.

 

(7)

The amount shown reflects the cost of the premiums for continued health, dental and vision insurance for the Named Executive Officer or his or her dependents, in accordance with COBRA, for a period of 24 months for Mr. Howard, 18 months for Mr. Hunter and for Messrs. Harrod and Hollinsworth, and 12 months for Mr. Duckworth, pursuant to the terms of the Employment Agreements.

 

(8)

The amount shown reflects the cost of the premiums for continued health, dental and vision insurance for the Named Executive Officer or his or her dependents, in accordance with COBRA, for a period of six months pursuant to the terms of his or her Employment Agreement.

 

(9)

The amount shown reflects unused paid time off, pursuant to the terms of the Named Executive Officer’s Employment Agreement and our paid time off policies.

 

2020, 2021 and 2022 Performance Vesting Equity Awards

 

As described in “COMPENSATION DISCUSSION AND ANALYSIS - Components of Executive Compensation - Equity-Based Compensation,” shares earned under performance-vesting restricted stock unit awards made in 2020, 2021 and 2022 are generally accumulated and released at the end of the three-year term of the award, and for such awards made in 2020, subject to adjustment based on the relative TSR modifier. Given the longer payout for such awards, awards of an executive whose employment is terminated during the performance period due to death, disability, retirement, or without cause or for good reason will vest at the end of the performance period, subject to the Company’s achievement of the performance goals.