def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRE IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant x
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to §240.14a-12
HMS Holdings Corp.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required.
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o
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Fee computed on table below per
Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities
to which transaction applies:
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which transaction applies:
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value
of transaction:
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o
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Fee paid previously with
preliminary materials.
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o Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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401 Park
Avenue South
New York, New York 10016
April 30,
2010
Dear Shareholder:
On behalf of the Board of Directors and management, we cordially
invite you to attend our Annual Meeting of Shareholders to be
held on Wednesday, June 9, 2010, beginning at
10:00 a.m., Eastern Daylight Time, at the offices of HMS
Holdings Corp., 401 Park Avenue South, New York, NY 10016. The
formal Notice of Annual Meeting is set forth in the enclosed
material.
The matters expected to be acted upon at the meeting are
described in the attached Proxy Statement.
It is important that your views be represented whether or not
you are able to be present at the Annual Meeting. You may cast
your vote by signing and dating the enclosed proxy card, or, for
shares held in street name, the voting instruction form, and
promptly returning it in the return envelope provided. No
postage is required if this envelope is mailed in the United
States. You have the option to cast your vote in person at the
Annual Meeting on June 9, 2010. Registered shareholders may
also vote electronically by telephone or over the Internet by
following the instructions included with your proxy card. If
your shares are held in street name, as an alternative to
returning the voting instruction form you receive, you will have
the option to cast your vote by telephone or over the Internet
if your voting instruction form includes instructions and a
toll-free telephone number or Internet website to do so.
We appreciate your investment in HMS Holdings Corp. and urge you
to return your proxy or voting instruction card as soon as
possible.
I look forward to seeing you at the Annual Meeting.
Sincerely,
Walter D. Hosp
Chief Financial Officer and
Corporate Secretary
April 30, 2010
401 Park
Avenue South, New York, NY 10016
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
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Time and Date:
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10:00 a.m., local time, on Wednesday, June 9, 2010
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Place:
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401 Park Avenue South,
10th
Floor, New York, NY 10016
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Items of Business:
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(1) To elect four directors for a term expiring on the date
of our 2012 Annual Meeting of Shareholders, or at such time as
their successors have been duly elected and qualified.
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(4) To ratify the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2010.
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(5) To consider such other business as may properly come
before the 2010 Annual Meeting of Shareholders (the 2010
Annual Meeting).
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Adjournments
and
Postponements:
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Any action on the items of business described above may be
considered at the 2010 Annual Meeting at the time and on the
date specified above or at any time and date to which the 2010
Annual Meeting may be properly adjourned or postponed.
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Record Date:
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You are entitled to vote only if you were a shareholder of HMS
as of the close of business on April 30, 2010 (the Record
Date).
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Meeting
Admission:
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You are entitled to attend the 2010 Annual Meeting only if you
were an HMS shareholder as of the close of business on the
Record Date or hold a valid proxy for the 2010 Annual Meeting.
You should be prepared to present photo identification for
admittance. If you are not a shareholder of record but hold
shares through a broker or nominee (i.e., in street
name), you should provide proof of beneficial ownership as of
the Record Date, such as your most recent account statement
dated prior to April 30, 2010, a copy of the voting instruction
card provided by your broker, trustee or nominee, or other
similar evidence of ownership. If, upon request, you do not
provide photo identification or comply with the other procedures
outlined above, you will not be admitted to the 2010 Annual
Meeting.
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Directions to the meeting may be obtained by calling our office
at
(212) 857-5986
or by email to ir@hms.com.
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Voting:
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Your vote is very important. Whether or not you plan to
attend the 2010 Annual Meeting, we encourage you to read this
Proxy Statement and submit your proxy card or voting
instructions as soon as possible. You may submit your vote by
completing, signing, dating and returning your proxy card or
voting instruction card in the pre-addressed envelope provided,
or by following the instructions on your proxy card or voting
instruction card for voting over the Internet or by telephone.
For specific instructions on how to vote, please refer to the
Questions and Answers section beginning on page 1 of
the Proxy Statement.
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By the Order of the Board of Directors,
Walter D. Hosp
Chief Financial Officer and Corporate Secretary
April 30, 2010
Important
Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be
held on June 9, 2010
Our Proxy
Statement and 2009 Annual Report to Shareholders are available
at
http://bnymellon.mobular.net/bnymellon/hmsy
PROXY
STATEMENT
TABLE OF CONTENTS
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HMS
HOLDINGS CORP.
PROXY
STATEMENT FOR THE
ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 9, 2010
QUESTIONS
AND ANSWERS
Q: Why
am I receiving these materials?
A: The Board of Directors, or the Board, of
HMS Holdings Corp., a New York corporation (which may be
referred to in this proxy statement as we,
us, our, the Company, or
HMS), is providing these proxy materials to you in
connection with our 2010 Annual Meeting of Shareholders (the
2010 Annual Meeting), to be held at 10:00 a.m.,
local time, on Wednesday, June 9, 2010 at 401 Park Avenue
South,
10th
Floor, New York, NY 10016. As a shareholder, you are invited to
attend the 2010 Annual Meeting and are entitled and requested to
vote on the items of business described in this Proxy Statement.
This Proxy Statement and accompanying proxy card or voting
instruction card are being mailed on or about May 7, 2010
to all shareholders entitled to vote at the 2010 Annual Meeting.
Q: What
information is contained in this Proxy Statement?
A: The information included in this Proxy
Statement relates to the proposals to be voted on at the 2010
Annual Meeting, the voting process, our Board and Board
committees, the compensation of our directors and executive
officers, beneficial ownership of the Company, and certain other
required information.
Q: How
can I access the proxy materials over the
Internet?
A: Pursuant to rules promulgated by the
Securities and Exchange Commission, or the SEC, we have elected
to provide access to our proxy materials both by sending you
this full set of proxy materials, including a proxy card or
voting instruction card, as applicable, and by notifying you of
the availability of our proxy materials on the Internet. This
Proxy Statement and our 2009 Annual Report are available at
http://bnymellon.mobular.net/bnymellon/hmsy,
which does not have cookies that identify
visitors to the site.
Your proxy card or voting instruction card will contain
instructions on how to view our proxy materials for the annual
meeting on the Internet.
Your proxy and or voting instruction card will also contain
instructions on how you may request to access proxy materials
electronically on an ongoing basis. Choosing to access your
future proxy materials electronically will help us conserve
natural resources and reduce the costs of printing and
distributing our proxy materials. If you choose to access future
proxy materials electronically, next year you will receive an
e-mail with
instructions containing a link to the website where those
materials are available and a link to the proxy voting website.
Your election to access proxy materials by
e-mail will
remain in effect until you terminate it.
Q: What
should I do if I receive more than one paper copy of the proxy
materials?
A: You may receive more than one paper copy of
the proxy materials, including multiple paper copies of this
proxy statement and multiple proxy cards or voting instruction
cards. For example, if you hold your shares in more than one
brokerage account, you may receive a separate voting instruction
card for each brokerage account in which you hold shares. If you
are a shareholder of record and your shares are registered in
more than one name, you may receive more than one proxy
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card. To vote all of your shares by proxy, you must complete,
sign, date and return each proxy card and voting instruction
card that you receive.
Q: I
share an address with another shareholder, and we received only
one paper copy of the proxy materials. How may I obtain an
additional copy of the proxy materials?
If you share an address with another shareholder, you may
receive only one set of proxy materials unless you have provided
contrary instructions.
If you are shareholder of record and wish to receive a separate
set of proxy materials now, please request the additional copy
by contacting our transfer agent, BNYMellon at (U.S.)
1.877.206.1131 or (Intl) 1.201.680.6578. Alternatively,
you can write to BNY Mellon Shareowner Services at:
BNY
Mellon
480 Washington Boulevard
Jersey City, NJ
07310-1900
If you are the beneficial owner of shares held through a broker,
trustee or other nominee and you wish to receive a separate set
of proxy materials in the future, please call Broadridge
Financial Solutions, Inc. at 1.800.542.1061.
All shareholders may also write to us at the address below to
request a separate copy of these materials:
HMS
Holdings Corp.
Attn: Investor Relations
401 Park Avenue South
New York, NY 10016
Email: ir@hms.com
Telephone: 212.857.5986
Q: How
may I obtain a copy of HMSs 2009
Form 10-K
and other financial information?
A: Shareholders may request a free copy of our
2009
Form 10-K
by contacting us at the address/phone number listed in the
answer to the prior question. We also will furnish any exhibits
to the 2009
Form 10-K
if specifically requested.
Alternatively, shareholders can access the 2009
Form 10-K
and other financial information under the Investor Relations tab
on our website at www.hms.com.
Annual
Meeting Information
Q: How
can I attend the 2010 Annual Meeting?
A: You are entitled to attend the 2010 Annual
Meeting only if you were a shareholder of record of our common
stock as of the close of business on the Record Date or you hold
a valid proxy for the 2010 Annual Meeting. You should be
prepared to present photo identification for admittance. A list
of shareholders eligible to vote at the 2010 Annual Meeting will
be available for inspection at the 2010 Annual Meeting and for a
period of ten days prior to the 2010 Annual Meeting, during
regular business hours, at our principal executive office, which
is located at 401 Park Avenue South, 10th floor, New York, NY
10016.
If you are not a shareholder of record, but hold shares through
a broker or nominee (i.e., in street name), you should
provide proof of beneficial ownership on the Record Date, such
as your
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most recent account statement dated prior to April 30,
2010, a copy of the voting instruction card provided by your
broker, trustee or nominee, or other similar evidence of
ownership. If, upon request, you do not provide photo
identification or comply with the other procedures outlined
above, you will not be admitted to the 2010 Annual Meeting.
The 2010 Annual Meeting will begin promptly at 10:00 a.m.,
local time. Check-in will begin at 9:30 a.m., local time,
and you should allow ample time for the check-in procedures.
Q: How
many shares must be present or represented to conduct business
at the 2010 Annual Meeting?
A: The quorum requirement for holding the 2010
Annual Meeting and transacting business is that holders of a
majority of shares of HMSs common stock entitled to vote
must be present in person or represented by proxy at the 2010
Annual Meeting. Both abstentions and broker non-votes are
counted for the purpose of determining the presence of a quorum.
Broker non-votes are shares held in street name by
brokers who are present in person or represented by proxy at a
meeting, but who have not received a voting instruction on a
particular item or matter on behalf of the customers who
actually own our shares and the item or matter is not within the
brokers discretionary authority to vote. See What
if I am a beneficial shareholder and I do not give the nominee
voting instructions? on page 3 for more
information.
Q: What
if a quorum is not present at the 2010 Annual
Meeting?
A: If a quorum is not present in person or
represented by proxy at the 2010 Annual Meeting, the
shareholders present or represented at the meeting and entitled
to vote, although less than a quorum, or if no shareholder is
present, any officer entitled to preside or to act as secretary
of such meeting, may adjourn the 2010 Annual Meeting until a
quorum is present or represented. The time and place of the
adjourned meeting will be announced at the time the adjournment
is taken and no other notice will be given, unless the
adjournment is for more than 30 days from the date of the
original meeting or a new record date is set for the adjourned
meeting, in which case, a notice of the adjourned meeting shall
be given to each shareholder entitled to vote at the meeting.
Voting
Information
Q: What
items of business will be voted on at the 2010 Annual
Meeting?
A: The items of business scheduled to be voted
on at the 2010 Annual Meeting are:
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The election of four directors for a term expiring on the date
of our 2012 Annual Meeting of Shareholders, or at such time as
their successors have been duly elected and qualified; and,
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The ratification of the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2010 (the 2010 Fiscal
Year).
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We will also consider other business that properly comes before
the 2010 Annual Meeting.
Q: How
does the Board recommend that I vote?
A: Our Board recommends that you vote your
shares FOR the nominees to the Board, and
FOR the ratification of the appointment of KPMG LLP
as our independent registered public accounting firm for the
2010 Fiscal Year.
Q: Who
is entitled to vote at the 2010 Annual Meeting?
A: Only shareholders of record at the close of
business on April 30, 2010 are entitled to vote at the 2010
Annual Meeting. We refer to this date as our Record Date.
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You may vote all shares of HMSs common stock owned by you
as of the Record Date, including (i) shares that are held
directly in your name as the shareholder of record, and
(ii) shares held for you as the beneficial owner through a
broker, trustee or other nominee, such as a bank.
On the Record Date, we had 28,673,324 shares of common
stock issued and outstanding.
Q: What
are the voting rights of the Companys holders of common
stock?
A: Each outstanding share of the
Companys common stock on the Record Date will be entitled
to one vote on each matter considered at the meeting.
Q: What
is the difference between holding shares as a shareholder of
record and holding shares as a beneficial owner?
A: Most of our shareholders hold their shares
through a broker or other nominee rather than directly in their
own name. We have summarized below some of the distinctions
between being a shareholder of record and being a beneficial
owner:
Shareholder
of Record
If your shares are registered directly in your name, or as a
joint holder, with our transfer agent, BNYMellon, you are
considered, with respect to those shares, the shareholder of
record, and these proxy materials are being sent to you directly
by HMS. As a shareholder of record, you have the right to grant
your voting proxy directly to us or to vote in person at the
2010 Annual Meeting. We have enclosed a proxy card for you to
use.
Beneficial
Owner
If your shares are held in a brokerage account or by another
nominee, you are considered the beneficial owner of shares held
in street name, and these proxy materials, together with a
voting instruction card, are being forwarded to you by your
broker or other nominee. As a beneficial owner, you have the
right to direct your broker, trustee or nominee how to vote and
are also invited to attend the 2010 Annual Meeting.
Since a beneficial owner is not the shareholder of record, you
may not vote these shares in person at the meeting unless you
obtain a legal proxy from the broker, trustee or
nominee that holds your shares, giving you the right to vote the
shares at the 2010 Annual Meeting. Your broker, trustee or
nominee has enclosed or has previously provided voting
instructions for you to use in directing the broker, trustee or
nominee how to vote your shares.
Q: How
can I vote?
A: Whether you hold shares directly as a
shareholder of record or beneficially in street name, you may
direct how your shares are voted without attending the 2010
Annual Meeting.
You may vote by mail: If you are a shareholder of
record of our common stock, you may submit your proxy by
completing, signing and dating the enclosed proxy card and
mailing it in the accompanying pre-addressed envelope. If you
are a shareholder who holds shares beneficially in street name,
you may vote by mail by completing, signing and dating the
enclosed voting instruction card provided by your broker,
trustee or nominee and mailing it in the accompanying
pre-addressed envelope.
You may vote by telephone or over the Internet: If
you are a shareholder of record, you may vote by telephone or
over the Internet by following the instructions included on the
proxy card. If your shares are held in street name in an account
at a bank or brokerage firm that participates in a program that
offers telephone and Internet voting options, they will provide
you with a voting instruction form that includes instructions on
how to vote your
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shares by telephone or over the Internet. If you vote by
telephone or over the Internet, you do not have to mail in your
proxy card. Internet and telephone voting are available
24 hours a day. Votes submitted through the Internet or by
telephone must be received by 11:59 p.m. EDT on
June 8, 2010. We encourage you to vote by telephone
or over the Internet by calling the toll-free number or going to
the Internet address provided on your enclosed proxy card or
voting instruction form, in each case using the voting control
number assigned to you, so that your vote will be recorded
immediately.
You may vote in person at the 2010 Annual
Meeting: Shares held in your name as the shareholder of
record may be voted in person at the 2010 Annual Meeting. Shares
held beneficially in street name may be voted in person only if
you obtain a legal proxy from the broker, trustee or nominee
that holds your shares, giving you the right to vote the shares.
Even if you plan to attend the 2010 Annual Meeting, we
recommend that you also submit your proxy or voting instructions
as described above so that your vote will be counted if you
later decide not to attend the 2010 Annual Meeting.
Q: Is
my vote confidential?
A: Proxy cards, ballots and voting
instructions and tabulations that identify individual
shareholders will be tabulated by BNYMellon Investor Services
LLC and will be handled in a manner that protects your voting
privacy. Your vote will not be disclosed either within HMS or to
third parties, except: (i) as necessary to meet applicable
legal requirements, (ii) to allow for the tabulation of
votes and certification of the vote, and (iii) to
facilitate a successful proxy solicitation.
Q: How
are my votes cast when I return a proxy card?
A: When you sign the proxy card or submit your
proxy by telephone or over the Internet, you appoint William C.
Lucia, our President and Chief Executive Officer and Walter D.
Hosp, our Chief Financial Officer and Corporate Secretary, as
your representative at the 2010 Annual Meeting. Messrs. Lucia
and Hosp will vote your shares at the 2010 Annual Meeting as you
have instructed on the proxy card. Messrs. Lucia and Hosp
are also entitled to appoint a substitute to act on their behalf.
Q: May
I change my vote?
A: Yes. You may change your vote at any time
prior to the vote at the 2010 Annual Meeting. If you are the
shareholder of record, you may change your vote by granting a
new proxy bearing a later date (which automatically revokes the
earlier proxy), by providing a written notice of revocation to
our Corporate Secretary prior to your shares being voted, or by
attending the 2010 Annual Meeting and voting in person. For your
written notice of revocation to be effective, it must be
received by our Corporate Secretary at our principal executive
offices no later than June 8, 2010. Attendance at the 2010
Annual Meeting will not cause your previously granted proxy to
be revoked unless you specifically so request or if you cast a
new vote. For shares you hold beneficially in street name, you
may change your vote by submitting new voting instructions to
your broker, trustee or nominee, or, if you have obtained a
legal proxy from your broker, trustee or nominee giving you the
right to vote your shares, by attending the 2010 Annual Meeting
and voting in person. If you are a shareholder of record or if
your shares are held in street name and your bank or brokerage
firm offers telephone and Internet voting options, you may also
change your vote at any time prior to 11:59 p.m. EDT on
June 8, 2010 by voting over the Internet or by telephone.
If you change your vote, your latest telephone or Internet proxy
is counted.
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Q: How
are votes counted?
A: In the election of the directors, you may
vote FOR a nominee or you may WITHHOLD
AUTHORITY with respect to a nominee. A proxy or ballot
marked WITHHOLD AUTHORITY will be the equivalent of
an abstention from voting.
For the ratification of the appointment of KPMG LLP as our
independent registered public accounting firm, you may vote
FOR, AGAINST or ABSTAIN. If
you ABSTAIN, the abstention has the same effect as a
vote AGAINST. If you provide specific instructions
with regard to certain items, your shares will be voted as you
instruct on such items.
Q: What
if I sign and return my proxy without making any
decisions?
A: If you sign and return your proxy without
making any selections, your shares will be voted FOR
each of the proposals. If other matters properly come before the
Annual Meeting, Messrs. Lucia and Hosp will have the
authority to vote on those matters for you at their discretion.
As of the date of this proxy statement, we are not aware of any
matters that will come before the Annual Meeting other than
those disclosed in this proxy statement.
Q: What
if I am a beneficial shareholder and I do not give the nominee
voting instructions?
A: If you are a beneficial shareholder and
your shares are held in the name of a broker, the broker is
bound by the rules of the New York Stock Exchange regarding
whether or not it can exercise discretionary voting power for
any particular proposal if the broker has not received voting
instructions from you. Brokers have the authority to vote shares
for which their customers do not provide voting instructions on
certain routine matters. If the broker does not vote
on a particular proposal because that broker does not have
discretionary voting power, this is referred to as a
broker non-vote. Broker non-votes will be considered
as represented for purposes of determining a quorum, but will
not otherwise affect voting results.
On July 1, 2009, the SEC approved a change to the NYSE
rules that stated that the election of directors would no longer
be considered a routine matter, whether or not the
election was contested. Consequently, if you do not give your
broker instructions, your broker will not be able to vote on the
election of directors. If you are a beneficial shareholder and
your shares are held in the name of a broker, the broker is
permitted to vote your shares on the ratification of the
appointment of KPMG LLP as our independent registered public
accounting firm for the 2010 Fiscal Year, even if the broker
does not receive voting instructions from you.
Q: What
vote is required to approve each of the proposals?
A: The affirmative vote of a plurality of the
shares of common stock present in person or represented by proxy
and entitled to vote at the 2010 Annual Meeting is required to
elect the four nominees to the Board. In the election of the
directors, the nominees receiving the highest number of
FOR votes at the 2010 Annual Meeting will be
elected. A properly executed proxy marked WITHHOLD
AUTHORITY with respect to a nominee will not be voted with
respect to that nominee, although it will be counted for
purposes of determining whether there is a quorum.
The affirmative vote of a majority of the shares of common stock
present in person or represented by proxy at the 2010 Annual
Meeting is required to ratify the appointment of KPMG LLP as our
independent registered public accounting firm for the 2010
Fiscal Year.
Q: What
happens if a nominee is unable to stand for
election?
A: If a nominee is unable to stand for
election, the Board may either reduce the number of directors to
be elected or substitute a nominee. If a substitute nominee is
selected, the proxy holders, Messrs. Lucia and Hosp, will
vote your shares for the substitute nominee, unless you have
withheld authority.
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Q: What
happens if additional matters are presented at the 2010 Annual
Meeting?
A: Other than the two items of business
described in this Proxy Statement, we are not aware of any other
business to be acted upon at the 2010 Annual Meeting. If you
grant a proxy, the persons named as proxy holders,
Messrs. Lucia and Hosp, will have the discretion to vote
your shares on any additional matters properly presented for a
vote at the 2010 Annual Meeting.
Q: Who
will serve as inspector of elections?
A: BNYMellon Investor Services LLC will
tabulate votes and a representative of BNYMellon will act as
inspector of elections.
Q: Who
will bear the cost of soliciting votes for the 2010 Annual
Meeting?
A: HMS is making this solicitation and will
pay the entire cost of preparing, assembling, printing, mailing
and distributing these proxy materials and soliciting votes. In
addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person, by
telephone or by electronic communication by our directors,
officers and employees. These individuals will not receive any
additional compensation for such solicitation activities. Upon
request, we will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for forwarding proxy
materials to shareholders.
Q: Where
can I find the voting results of the 2010 Annual
Meeting?
A: We intend to announce preliminary voting
results at the 2010 Annual Meeting and publish final results on
a
Form 8-K
within four business days of the 2010 Annual Meeting.
Q: What
if I have questions for HMSs transfer agent?
A: Please contact our transfer agent, at the
phone number or address listed below, with questions concerning
stock certificates, transfer of ownership or other matters
pertaining to your stock account.
BNY
Mellon
480 Washington Boulevard
Jersey City, NJ
07310-1900
(U.S.) 1.877.206.1131 or (Intl) 1.201.680.6578
Q: What
is the deadline for submitting proposals for inclusion in
HMSs proxy statement for the 2011 Annual Meeting of
Shareholders?
A: Pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, as amended,
shareholders may present proper proposals for inclusion in our
proxy statement relating to, and for consideration at, the 2011
Annual Meeting of Shareholders (the 2011 Annual
Meeting), by submitting their proposals to us in a timely
manner. Such proposals will be so included if they are received
in writing at our principal executive office no later than
January 7, 2011 and if they otherwise comply with the
requirements of
Rule 14a-8.
Proposals should be addressed to: Corporate Secretary, HMS
Holdings Corp., 401 Park Avenue South, New York, NY 10016.
With regard to any proposal by a shareholder not seeking to have
such proposal included in the Proxy Statement, but seeking to
have such proposal considered at the 2011 Annual Meeting, if
such shareholder fails to notify us of such proposal by
March 23, 2011, then the persons appointed as proxies may
exercise their discretionary voting authority if the proposal is
considered at the 2011 Annual Meeting notwithstanding that
shareholders have not been advised of the proposal in the
7
Proxy Statement for the 2011 Annual Meeting. Any proposals
submitted by shareholders must comply in all respects with
(i) the rules and regulations of the SEC, (ii) the
provisions of our certificate of incorporation and by-laws and
(iii) applicable New York law.
Further
Questions
Q: Who
can help answer my questions?
A: If you have any questions about the 2010
Annual Meeting or how to vote or revoke your proxy, you should
contact our Corporate Secretary, Walter D. Hosp at 212.857.5000.
If you need additional copies of this Proxy Statement or voting
materials, please contact our Investor Relations Department by
telephone at 212.857.5986 or by email to ir@hms.com.
8
CORPORATE
GOVERNANCE
Board
of Directors
Our business affairs are managed under the direction of the
Board of Directors in accordance with the New York Business
Corporations Law, our Certificate of Incorporation, as amended,
and our By-laws.
Board
Determination of Independence
Under Rule 5605(a)(2) of the NASDAQ Stock Market, Inc.
Marketplace Rules (the NASDAQ Marketplace Rules), a
director will only qualify as an independent
director if, in the opinion of our Board of Directors,
that person does not have a relationship which would interfere
with the exercise of independent judgment in carrying out the
responsibilities of a director.
Based on its review of the applicable independence standards and
answers to annual questionnaires completed by the directors, our
Board of Directors has determined that each of Ms. Rudnick,
Dr. Stocker and Messrs. Kelly, Neal, Powers and Stowe
is an independent director as defined under the
NASDAQ Marketplace Rules.
Meetings
of the Board of Directors
The Board of Directors held seven meetings during 2009. Each
director attended at least 75% of the aggregate of the total
number of meetings of (a) the Board of Directors, and
(b) the committees on which the director served.
We do not have a policy with regard to directors
attendance at annual meetings. Mr. Lucia was the only
director in attendance at our 2009 Annual Meeting.
Board
Committees
The Board of Directors has the following standing committees:
Audit Committee, Compensation Committee, Compliance Committee,
and Nominating Committee, each of which operates pursuant to a
separate charter that has been approved by the Board of
Directors. A current copy of each charter is available on our
website at www.hms.com, under the Investor
Relations/ Corporate Governance tabs or at
http://investor.hms.com/governance.cfm.
Each committee periodically reviews the appropriateness of its
charter.
The Board of Directors makes committee and committee chair
assignments annually at its meeting following the annual meeting
of shareholders, although further changes to committee
assignments are made from time to time as deemed appropriate by
the Board of Directors. The Board of Directors and each
committee retain the authority to engage its own advisors and
consultants.
9
The composition and primary responsibilities of each committee
are summarized below.
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Committee
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Independent Director
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Audit
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Compensation
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Compliance
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Nominating
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James T. Kelly
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ü
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ü
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ü
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William W. Neal
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ü
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ü
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Galen D. Powers
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ü*
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ü
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Ellen A. Rudnick
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ü
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*
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ü
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ü
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Michael A. Stocker, M.D.
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Richard H. Stowe
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ü
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ü*
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Audit Committee. The Audit Committee consists of
Ms. Rudnick (Chair) and Messrs. Kelly and Stowe. The
Board of Directors has determined that each member of the Audit
Committee is an independent director, as defined in the NASDAQ
Marketplace Rules and the independence requirements contemplated
by
Rule 10A-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) and meets NASDAQs financial
knowledge and sophistication requirements. In addition, the
Board has determined that Mr. Kelly qualifies as an
audit committee financial expert, as such term is
defined in Item 407(d)(5)(ii) of
Regulation S-K.
As more fully described in its Charter, the Audit
Committees primary function is to assist the Board of
Directors in fulfilling its oversight responsibilities. Among
other things, the Audit Committee reviews (i) the integrity
of our financial statements, including our systems of internal
controls regarding finance, accounting, and legal compliance,
(ii) the independent registered public accounting
firms qualifications and independence, and (iii) the
performance of the independent registered public accounting
firm. The responsibilities of the Audit Committee include
appointing the independent registered public accounting firm to
conduct the annual audit of our accounts, reviewing the scope
and results of the independent audits, and approving all
professional services to be provided to us by our independent
accountants. The Audit Committee also approves the compensation
of our independent accountants. The Audit Committee held four
meetings in 2009.
Additional information regarding the Audit Committee and its
functions and responsibilities is included in this proxy
statement under the captions Audit Committee Report
and Proposal Two - Ratification of the Selection
of Independent Registered Public Accounting Firm.
Compensation Committee. The Compensation Committee
consists of Messrs. Stowe (Chair), Kelly and Neal. The
Board has determined that each member of the Compensation
Committee is an independent director, as defined in the NASDAQ
Marketplace Rules.
As more fully described in its Charter, the Compensation
Committees primary function is to oversee compensation
programs that enable the Company to attract, retain and motivate
executives capable of establishing and accomplishing business
plans in the best interests of the shareholders. Specific
responsibilities within this overall mission include
(i) annually reviewing and approving corporate goals and
objectives relevant to the compensation of our Chief Executive
Officer, evaluating our Chief Executive Officers
performance in light of these goals and objectives and
recommending to the Board of Directors the Chief Executive
Officers overall compensation levels based on this
evaluation; (ii) reviewing and approving the annual
compensation of our Chief Executive Officer and senior
executives; and (iii) reviewing and approving all other
incentive awards
10
and opportunities, employment agreements, severance and other
agreements as they affect our Chief Executive Officer and senior
executives. The Compensation Committee held two meetings in 2009.
The Compensation Committee determines and approves total
executive remuneration based on its review and evaluation of
proposals and recommendations presented by the Companys
senior management. To establish total compensation levels, the
Compensation Committee reviews data collected by the Company and
by an independent compensation consulting firm retained by the
Committee. The Companys philosophy is that executive
compensation should be closely aligned with the performance of
the Company, and to that end annual performance goals are
determined and set forth in writing at the beginning of each
calendar year for the Company as a whole and for each executive.
Annual corporate goals are proposed by management and approved
by the Board of Directors at the end of each calendar year for
the following year. Annual corporate goals target the
achievement of specific strategic, operational and financial
performance milestones. Annual individual goals focus on
contributions that facilitate the achievement of the corporate
goals.
Under the terms of its Charter, the Compensation Committee has
the authority to retain compensation consultants and other
outside advisors to assist in the evaluation of executive
officer compensation. In 2009, the Compensation Committee
retained Frederic W. Cook & Co., Inc. to assist the
Compensation Committee in among other matters, the design and
development of the 2009 executive compensation program and the
development of the Companys peer group to be used by the
Compensation Committee in making compensation determinations.
Frederic W. Cook & Co., Inc. provides services only
to, and at the discretion of, the Compensation Committee and did
not provide additional services to the Company in 2009.
Representatives of Frederic W. Cook & Co., Inc.
attended meetings of the Compensation Committee in 2009 to
advise the Committee.
The Compensation Committee has delegated to our President and
Chief Executive Officer the authority to grant equity awards to
employees of the Company, other than executive officers. The
Compensation Committee has established narrowly defined,
pre-approved parameters regarding the terms and conditions of
grants under the delegated authority, including the eligible
employee groups, the maximum number of shares subject to the
delegation, the determination of the exercise price and other
terms and conditions of the awards.
Additional information regarding compensation of executive
officers and the role of Frederic W. Cook Co., Inc. is provided
in the section titled Compensation Discussion and
Analysis.
Compliance Committee. The Compliance Committee
consists of Mr. Powers (Chair), Ms. Rudnick and
Dr. Stocker. The Board has determined that each member of
the Compliance Committee is an independent director, as defined
in the NASDAQ Marketplace Rules.
As more fully described in its Charter, the Compliance
Committees primary function is to oversee the operation of
the Companys Corporate Compliance Program providing for
adherence to healthcare-related laws, regulations, and guidance.
The Compliance Committee held four meetings in 2009.
Nominating Committee. The Nominating Committee
consists of Dr. Stocker (Chair), Ms. Rudnick, and
Messrs. Kelly, Neal, Powers, and Stowe. The Board has
determined that each member of the Nominating Committee is an
independent director, as defined in the NASDAQ Marketplace Rules.
As more fully described in its Charter, the Nominating
Committees primary responsibilities are: (i) to
identify individuals qualified to join the Board of Directors,
and to recommend director nominees for election at the annual
meeting of shareholders; (ii) to recommend Corporate
Governance Guidelines to the Board of Directors; (iii) to
lead the Board of Directors in its annual performance review;
and (iv) to recommend nominees for each committee to the
Board of Directors. The processes and procedures followed by the
Nominating Committee in identifying and evaluating director
candidates are described below under the heading Director
Nomination Process. The Nominating Committee did not meet
separately in 2009; rather, matters falling within the scope of
11
the Nominating Committees responsibilities were reviewed
and approved by the full Board of Directors.
Review
and Approval of Related Person Transactions
The Audit Committees Charter provides that the Audit
Committee shall review all related person transactions on an
ongoing basis and that all such transactions must be approved by
the Audit Committee.
Our Audit Committee has not adopted any written policies or
procedures governing the review, approval or ratification of
related person transactions. The Audit Committees practice
is to evaluate whether a related person (as defined in
Item 404 of
Regulation S-K)
will have a direct or indirect interest in a transaction in
which the Company may be a party. Where the Audit Committee
determines that such proposed transaction involves a related
person, the Audit Committee reviews any and all information it
deems necessary and appropriate to evaluate the fairness of the
transaction to us and our shareholders (other than the
interested person involved in such transaction), and may
consider among other things, the following factors: the related
persons relationship to us and direct or indirect interest
in the transaction, both objective (for example, the dollar
amount of the related persons interest) and subjective
(for example, any personal benefit not capable of
quantification); whether the interested transaction is on terms
no less favorable than terms generally available to an
unaffiliated third-party under the same or similar
circumstances; if applicable, the availability of other sources
of comparable products or services; the benefits to us of the
proposed interested transaction; and the impact on a
directors independence in the event the related person is
a director, an associated person of a director or an
entity in which a director is a partner, member, shareholder or
officer.
If the Audit Committee decides not to approve a transaction, the
Audit Committee will notify our President and Chief Executive
Officer and Chief Financial Officer, who will ensure that the
transaction is not consummated.
Board
Leadership Structure and Role in Risk Oversight
The structure of our Board of Directors provides strong
oversight by the independent directors. The Board of Directors
convenes at least five times a year and is comprised of over a
two-thirds
majority of independent directors. Each of the standing
committees of our Board of Directors is chaired by an
independent director and is comprised entirely of independent
directors. Following each Board meeting, our non-employee Board
members meet in an executive session to review key decisions,
discuss their observations and shape future Board agendas, all
in a manner that is independent of management and where
necessary, critical of management. The executive session is
often led by our Non-Executive Chairman, Robert M. Holster. We
believe that this structure creates an environment for increased
engagement of the Board as a whole and that the independent
majority of our directors provides an effective and independent
oversight of management.
Robert M. Holster, our Non-Executive Chairman since March 2009,
has served as a member of our Board of Directors since 2005 and
as the Chairman of our Board since 2006. Mr. Holster has
been a member of HMSs management team and our predecessor,
Health Management Systems, Inc.s management team for an
aggregate of over 20 years. Since 2001, Mr. Holster
has held senior executive level positions with us, including
serving as our Chief Executive Officer from 2005 to 2009 and as
our President and Chief Operating Officer from 2001 to 2005. In
March 2009, Mr. Holster stepped down as our Chief Executive
Officer, but has remained an employee of the Company. Given his
extensive history with the Company, Mr. Holster brings an
unmatched depth of industry and company-specific experience to
his role as our Non-Executive Chairman.
Mr. Holster works closely with our President and Chief
Executive Officer, William C. Lucia, providing guidance on
matters such as the Companys risk profile, long-term
strategy and potential
12
growth opportunities. Through his role as Non-Executive
Chairman, Mr. Holster is able to draw on the Boards
input to establish a Board agenda that, based on his full
understanding of the Company and its business, focuses on the
Companys challenges, and ensures that the Board is
presented with the necessary information required to fulfill its
responsibilities. In addition, given his experience on both
sides of a Board meeting, Mr. Holster is also able to
advise our President and Chief Executive Officer as to the
quality, quantity and timeliness of the flow of information from
management, thereby ensuring productive and effective Board
meetings. For example, immediately following each executive
session, Mr. Holster discusses the non-employee
directors assessments of the meeting, any desired agenda
items for future meeting and any issues raised in the executive
session with Mr. Lucia.
Our Board of Directors bears the responsibility for maintaining
oversight over the Companys exposure to risk. The Board,
itself and through its committees, regularly discusses our
material risk exposures, the potential impact on the Company and
the efforts of management it deems appropriate to deal with the
risks that are identified. The Board recently appointed an
Enterprise Risk Management (ERM) Task Force that is led by
members of the management team together with a consulting firm
specializing in ERM. The ERM Task Force is responsible for
implementing ERM across the Company and will regularly report to
the Board on the progress of the implementation of the ERM
program and its assessment of the key risks facing the Company.
As part of the Boards general oversight function for risk
management, the Audit Committee works with management and the
independent auditors to assess the quality and adequacy of the
Companys processes and controls that could affect the
Companys financial statements and financial reporting,
including discussing significant financial risk exposure and the
steps management has taken to monitor, control and report such
exposure. In addition, the Compensation Committee, in connection
with the performance of its duties, considers risks associated
with the elements of the Companys compensation programs.
The Compliance Committee also meets regularly with management to
assess the Companys security programs and healthcare
compliance policies and procedures and risks associated
therewith. Lastly, the Nominating Committee, with guidance from
outside counsel, considers the risks associated with corporate
governance. Our Committees generally report to the Board at each
regularly scheduled Board meeting.
The Company has grown significantly over the past several years,
both as a result of internal growth and through acquisitions. As
a result, at this time of significant growth and expansion of
the Company, we believe that this balance of leadership between
the Chairman and the President and Chief Executive Officer
strengthens both the ability of our Board to provide meaningful
guidance to our management team and the ability of our
management team to direct its focus and resources toward growing
the Company and expanding the breadth of its business. In
addition, we believe that this leadership structure is
strengthened by a Board with a majority of independent directors
that work together and in tandem through their various
functional areas of expertise to ensure proper oversight of the
Company.
Director
Nomination Process
The Board of Directors is responsible for recommending director
candidates for election by the shareholders and for electing
directors to fill vacancies or newly created directorships. The
Board of Directors has delegated the screening and evaluation
process of director candidates to the Nominating Committee,
which identifies, evaluates and recruits highly qualified
director candidates and recommends them to the Board of
Directors.
Criteria for Nomination to the Board. The Nominating
Committee does not have a formal policy for evaluating director
candidates, including with respect to considering diversity, but
rather believes that each nominee, regardless of the source of
the nomination, should be evaluated based on his or her
individual merits, taking into account the needs and composition
of the Board of Directors at the time. In evaluating prospective
candidates, the Nominating Committee will consider the
composition of the Board of Directors as a whole (including
diversity of skills, background and
13
experience), the characteristics of each candidate (including
independence, diversity, age, skills and experience), and the
performance and continued tenure of incumbent directors. The
Nominating Committee has not established specific minimum
qualifications for a candidate to be recommended for nomination
to the Board of Directors. In addition, given the historically
small number of shareholder recommendations received in the
past, the Board of Directors has not established a formal policy
for the consideration of candidates recommended by shareholders.
Shareholder Recommendations of Director
Candidates. The Nominating Committee does not have a
formal policy regarding consideration of director candidates
recommended by shareholders. The Nominating Committee will
consider director candidates suggested by our shareholders,
provided that the recommendations are made in accordance with
the procedures described in this Proxy Statement in the Q&A
Section under the heading Shareholder Proposals and
Director Nominations. Shareholder nominees whose nominations
comply with these procedures will be evaluated by the Nominating
Committee in the same manner as the Nominating Committees
nominees.
Process for Identifying and Evaluating Nominees. The
members of the Nominating Committee initiate the process for
identifying and evaluating nominees to the Board of Directors by
identifying a slate of candidates who have the specific
qualities or skills being sought, based on input from all
members of the Board of Directors. In the past, the Committee
has identified director nominees from various sources, including
officers, directors and professional search consultants. The
Nominating Committee members evaluate these candidates by
reviewing their biographical information and qualifications and
checking the candidates references. Qualified nominees are
interviewed by at least one member of the Nominating Committee.
Appropriate candidates meet with a majority of the Nominating
Committee, and based on the input from such interviews and the
information obtained by them, the members of the Nominating
Committee evaluate which of the prospective candidates is
qualified to serve as a director and whether they should
recommend to the Board of Directors that it nominate, or elect
to fill a vacancy, with these final prospective candidates.
Candidates recommended by the Nominating Committee are presented
to the Board of Directors for selection as nominees to be
presented for the approval of the shareholders or for election
to fill a vacancy.
Shareholder
Communication with the Board of Directors.
Shareholders may communicate with the Board of Directors by
sending a letter to HMS Holdings Corp. Board of Directors
c/o Corporate
Secretary, 401 Park Avenue South, New York, NY 10016. The
Corporate Secretary will receive and review all correspondence
and forward it to the Chairman of the Board, the Chairman of the
Audit Committee or to any individual director or directors to
whom the communication is directed, as appropriate.
Notwithstanding the above, the Corporate Secretary has the
authority to discard or disregard any communication that is
unduly hostile, threatening, illegal or otherwise inappropriate,
or to take any other appropriate actions with respect to such
communications.
Code
of Ethics
We have adopted a Code of Business Conduct For Designated Senior
Financial Managers that applies to our principal executive
officer, principal financial officer, principal accounting
officer, controller, or persons performing similar functions,
and such other personnel of the Company or its wholly-owned
subsidiaries as may be designated from time to time by the
Chairman of the Companys Audit Committee. The Code of
Business Conduct is posted on our website at www.hms.com and can
also be obtained free of charge by sending a request to our
Corporate Secretary at 401 Park Avenue South, New York, New York
10016. Any changes to or waivers under the Code of Business
Conduct as it relates to our principal executive officer,
principal financial officer, principal accounting officer,
controller or persons performing similar functions must be
approved by our Board of Directors and will be disclosed in a
Current Report on
Form 8-K
within four business days of the change or waiver.
14
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
March 19, 2010 by (i) each of our non-employee
directors, (ii) Messrs. Holster, Lucia, Hosp and
Schmid, whom we refer to as our Named Executive Officers,
(iii) all of our directors and Named Executive Officers as
a group, and (iv) each person (or group of affiliated
persons) known by us to be the beneficial owner of more than 5%
of our common stock.
Beneficial ownership and percentage ownership are determined in
accordance with the rules of the SEC. This information does not
necessarily indicate beneficial ownership for any other purpose.
Under the SEC rules, beneficial ownership includes any shares as
to which an entity or individual has sole or shared voting power
or investment power and also any shares that the entity or
individual has the right to acquire as of May 18, 2010
(60 days after March 19, 2010) through the
exercise of stock options. Beneficial ownership includes all
shares of restricted stock held by an entity or individual,
whether or not vested, but excludes options or other rights
vesting after May 18, 2010.
Percentage of beneficial ownership is based on
28,774,416 shares of common stock outstanding as of
March 19, 2010. For each individual and group included in
the table below, percentage ownership is calculated by dividing
the number of shares beneficially owned by such entity or
individual by the sum of the shares of common stock outstanding
on March 19, 2010 and the number of shares of common stock
that such entity or individual had the right to acquire as of
May 19, 2010.
Unless otherwise indicated and subject to applicable community
property laws, to our knowledge, each shareholder named in the
following table possesses sole voting and investment power over
the shares listed, except for those jointly owned with that
persons spouse. Unless otherwise noted below, the address
of each person listed on the table is
c/o HMS
Holdings Corp., 401 Park Avenue South, New York, NY 10016.
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Name of Beneficial Owner
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Shares Beneficially Owned*
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Numbers of
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Percent
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Shares
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(%)
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Directors and Named Executive Officers
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Robert M.
Holster(1)
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453,962
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1.56
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Walter D.
Hosp(2)
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74,751
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*
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James T.
Kelly(3)
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57,019
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*
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William C.
Lucia(4)
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318,314
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1.10
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William F.
Miller(5)
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207,331
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*
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William S.
Mosakowski(6)
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15,950
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*
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William W.
Neal(7)
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64,900
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*
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Galen D.
Powers(8)
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17,125
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*
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Ellen A.
Rudnick(9)
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84,888
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*
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John D.
Schmid(10)
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12,084
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*
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Michael A. Stocker
M.D.(11)
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15,950
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*
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Richard H.
Stowe(12)
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61,888
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*
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All current directors and executive officers as a group
(12 persons)(13)
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1,384,162
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4.59
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Five Percent Shareholders
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BlackRock,
Inc.(14)
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1,978,560
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6.88
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AXA Financial,
Inc.(15)
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1,426,784
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4.96
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*Represents less than 1%.
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15
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(1)
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Includes 16,773 shares of
common stock owned by members of Mr. Holsters family,
40,000 shares of common stock issuable to the 2007 Robert
M. Holster Family Trust (the Holster Trust) upon the
exercise of options vested as of May 18, 2010, of which
Mr. Holsters wife is trustee, and 312,375 shares
of common stock issuable to Mr. Holster upon the exercise
of options vested as of May 18, 2010. Mr. Holster
disclaims beneficial ownership of the shares of common stock
held by his family and by the Holster Trust.
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(2)
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Includes 39,167 shares of
common stock issuable to Mr. Hosp upon the exercise of
options vested as of May 18, 2010 and 25,584 shares of
restricted stock, which vest in four equal installments on
February 19, 2011, 2012, 2013 and 2014.
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(3)
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Consists of 34,325 shares of
common stock issuable to Mr. Kelly upon the exercise of
options vested as of May 18, 2010.
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(4)
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Includes 286,334 shares of
common stock issuable to Mr. Lucia upon the exercise of
options vested as of May 18, 2010 and 31,980 shares of
restricted stock, which vest in equal installments on
February 19, 2011, 2012, 2013 and 2014.
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(5)
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Includes 4,000 shares of
common stock owned by members of Mr. Millers family
and 16,888 shares of common stock issuable to
Mr. Miller upon the exercise of options vested as of
May 18, 2010. Mr. Miller disclaims beneficial
ownership of the shares of common stock held by his family.
|
|
(6)
|
|
Consists of 15,950 shares of
common stock issuable to Mr. Mosakowski upon the exercise
of options vested as of May 18, 2010.
|
|
(7)
|
|
Includes 48,000 shares of
common stock owned by members of Mr. Neals family and
11,900 shares of common stock issuable to Mr. Neal
upon the exercise of options vested as of May 18, 2010.
Mr. Neal disclaims beneficial ownership of the shares of
common stock held by his family. Mr. Neal has pledged
10,000 shares of common stock as collateral for a loan.
|
|
(8)
|
|
Includes 237 shares of common
stock owned by members of Mr. Powers family and
16,888 shares of common stock issuable to Mr. Powers
upon the exercise of options vested as of May 18, 2010.
Mr. Powers disclaims beneficial ownership of the shares of
common stock held by his family.
|
|
(9)
|
|
Consists of 81,888 shares of
common stock issuable to Ms. Rudnick upon the exercise of
options vested as of May 18, 2010.
|
|
(10)
|
|
Consists of 12,084 shares of
common stock issuable to Mr. Schmid upon the exercise of
options vested as of May 18, 2010.
|
|
(11)
|
|
Consists of 15,950 shares of
common stock issuable to Dr. Stocker upon the exercise of
options vested as of May 18, 2010.
|
|
(12)
|
|
Consists of 61,888 shares of
common stock issuable to Mr. Stowe upon the exercise of
options vested as of May 18, 2010.
|
|
(13)
|
|
Consists of: Ms. Rudnick,
Dr. Stocker and Messrs. Holster, Hosp, Kelly, Lucia,
Miller, Mosakowski, Neal, Powers, Schmid, and Stowe.
|
|
(14)
|
|
In a Schedule 13G filed with
the SEC on January 29, 2010, BlackRock, Inc. reported that
effective December 1, 2009 it completed its acquisition of
Barclays Global Investors, NA and certain of its affiliates. In
addition, BlackRock reported that it has sole voting and
dispositive power over 1,978,560 shares of our common
stock. BlackRocks principal business address is 40 East
52nd
Street, New York, NY 10022.
|
|
(15)
|
|
In a Schedule 13G filed
jointly on February 12, 2010 by: (i) AXA Financial,
Inc.; (ii) AXA, which owns AXA Financial, Inc.; and
(iii) AXA Assurances I.A.R.D. Mutuelle and AXA Assurances
Vie Mutuelle (collectively AXA Mutuelle) which, as a
group control AXA, AXA Mutuelle and AXA reported beneficial
ownership as of December 31, 2009 of 1,426,784 shares
of our common stock. The Schedule 13G reports that:
(i) AXA Financial, Inc.s subsidiary,
AllianceBernstein L.P., has sole power to dispose or to direct
the disposition of 1,066,122 shares, and sole power to vote
or to direct the vote of 1,017,452 shares, all of which
were acquired solely for investment purposes on behalf of client
discretionary investment advisory accounts, (ii) AXA
Financial, Inc.s subsidiary, AXA Equitable Life
|
16
|
|
|
|
|
Insurance Company, has sole power
to dispose or to direct the disposition of and sole power to
vote or to direct the vote of 74,800 shares, and
(iii) AXAs subsidiary, AXA Investment Managers UK
Ltd. has sole power to dispose or to direct the disposition of
and sole power to vote or to direct the vote of
285,862 shares, all of which were acquired solely for
investment purposes. The Schedule 13G also reports that the
subsidiaries of AXA Financial, Inc. operate under independent
management and make independent voting and investment decisions.
AXA Mutuelle and AXA disclaim beneficial ownership of the
securities covered by the Schedule 13G. AXA Mutuelles
principal business address is 26, rue Drouot 75009, Paris,
France. AXAs principal business address is 25, avenue
Matignon, 75008 Paris, France. AXA Financial, Inc.s
principal business address is 1290 Avenue of the Americas, New
York, NY 10104.
|
17
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members, eight
of whom are non-employee directors. Pursuant to our By-laws, our
Board of Directors is currently divided into two classes, with
one class standing for election each year, for a term of two
years.
Our Board of Directors, based on the recommendation of our
Nominating Committee, has nominated Robert H. Holster, James T.
Kelly, William C. Lucia and William S. Mosakowski for election
as directors at the annual meeting. Galen D. Powers, who is
currently a member of the Board of Directors, is not standing
for re-election. All of the nominees are current directors of
the Company. If elected, each of the nominees will hold office
for a two year term expiring at the annual meeting of
shareholders in 2012. The terms of the other current directors
listed below will expire at the 2011 annual meeting. Each of the
nominees has consented to being named in this proxy statement
and to serve as a director if elected.
Our By-laws provide that directors are elected by a plurality of
the votes cast by shareholders at a meeting at which a quorum is
present. Unless a contrary direction is indicated, it is
intended that proxies received will be voted for the election as
directors of the four nominees, to serve a two-year term, and in
each case until their successors are elected and qualified. In
the event any nominee for director declines or is unable to
serve, the proxies may be voted for a substitute nominee
selected by the Board of Directors. The Board of Directors
expects that each nominee named in the following table will be
available for election.
Our Board
of Directors
The following table sets forth information with respect to our
directors and nominees for election at the 2010 Annual Meeting.
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Committee Memberships
|
|
Robert H. Holster
|
|
63
|
|
Non-executive Chairman and Director Nominee
|
|
|
James T. Kelly
|
|
63
|
|
Director Nominee
|
|
Audit, Compensation, Nominating
|
William C. Lucia
|
|
52
|
|
President, Chief Executive Officer and Director Nominee
|
|
|
William F. Miller III
|
|
60
|
|
Director
|
|
|
William S. Mosakowski
|
|
56
|
|
Director Nominee
|
|
|
William W. Neal
|
|
78
|
|
Director
|
|
Compensation, Nominating
|
Galen D.
Powers**
|
|
73
|
|
Director
|
|
Compliance*,
Nominating
|
Ellen A Rudnick
|
|
59
|
|
Director
|
|
Audit*,
Compliance, Nominating
|
Michael A. Stocker, M.D.
|
|
68
|
|
Director
|
|
Compliance,
Nominating*
|
Richard H. Stowe
|
|
66
|
|
Director
|
|
Audit,
Compensation*,
Nominating
|
|
|
|
*
|
|
Committee Chair
|
**
|
|
Not standing for re-election
|
When an incumbent director is up for re-election, the Nominating
Committee reviews the performance, skills and characteristics of
such incumbent director before making a determination to
recommend that the full Board nominate him or her for
re-election.
The Board of Directors believes that the combination of the
business and professional experience of our directors and the
diversity of their areas of expertise has been a contributing
factor to its effectiveness and provides a valuable resource to
management. With the exception of our President and Chief
Executive Officer, Mr. Lucia, each of our directors has
served on our Board for more than three years and, in
particular, Ms. Rudnick and Messrs. Neal, Powers, and
Stowe has each served on our Board for more than ten years.
During their tenures, our directors have gained considerable
institutional knowledge about the Company and its operations.
Given the growth of our business and the rapidly changing
healthcare environment, this continuity of service and
18
development of institutional knowledge enables our Board to be
more efficient and more effective in developing strategy and
long-term plans for the Company.
A description of the specific experience, qualifications,
attributes and skills that led our Board of Directors to
conclude that each of the continuing members of the Board of
Directors and each of the nominees should serve as a director
follows the biographical information of each director and
nominee below.
Directors
Whose Terms Expire in 2010
Robert M. Holster has served as the Chairman of our Board
of Directors since April 2006 and as one of our directors since
May 2005. From May 2005 to February 2009, Mr. Holster
served as our Chief Executive Officer and from April 2001 to May
2005, he served as President and Chief Operating Officer.
Previously, Mr. Holster served as our Executive Vice
President from 1982 through 1993 and as one of our directors
from 1989 through 1996. Mr. Holster previously served in a
number of executive positions including Chief Executive Officer
of HHL, Inc., Chief Financial Officer of Macmillan, Inc. and
Controller of Pfizer Laboratories, a division of Pfizer, Inc.
Mr. Holster has been a member of HMSs management team
and our predecessor, Health Management Systems, Inc.s
management team, for an aggregate of over 20 years,
including serving as our Chief Executive Officer for four years
and as our President and Chief Operating Officer for four years.
Given his extensive history with the Company, Mr. Holster
brings an unmatched depth of industry and company-specific
experience to his role as our Chairman.
James T. Kelly has served as one of our directors since
December 2001. Mr. Kelly is a private investor. From 1986
to 1996, Mr. Kelly served as the Chief Executive Officer of
Lincare Holdings, Inc., a publicly traded company that provides
respiratory care, infusion therapy and medical equipment to
patients in the home. From 1994 to 2000, Mr. Kelly served
as Chairman of the Board of Directors of Lincare. Prior to
joining Lincare, Mr. Kelly spent 19 years in various
management positions within the Mining and Metals Division of
Union Carbide Corporation. Mr. Kelly also serves as a
director of Emergency Medical Services Corporation, and from
1997 to 2009 Mr. Kelly served as a director of American
Dental Partners, Inc.
Mr. Kelly brings over 20 years of public company
experience to our Board of Directors, both through his board
memberships and through his role as Chief Executive Officer of
Lincare Holdings, Inc. Given his background and experiences, he
provides the Company with valuable financial, operational and
strategic expertise and his extensive experience with financial
reporting rules and regulations in a public company environment
make him well-positioned to serve as a member of the Audit
Committee, as our Audit Committee Financial Expert and as a
member of the Compensation Committee.
William C. Lucia has served as our President and Chief
Executive Officer since March 2009 and as one of our directors
since May 2008. From May 2005 to March 2009, Mr. Lucia
served as our President and Chief Operating Officer. Since
joining us in 1996, Mr. Lucia has held several positions
with us, including: President of our subsidiary Health
Management Systems, Inc. from 2002 to 2009; President of our
Payor Services Division from 2001 to 2002; Vice President and
General Manager of our Payor Services Division from 2000 to
2001; Vice President of our Business Office Services from 1999
to 2000; Chief Operating Officer of our former subsidiary
Quality Medical Adjudication, Incorporated (QMA) and Vice
President of West Coast Operations from 1998 to 1999; Vice
President and General Manager of QMA from 1997 to 1998; and
Director of Information Systems for QMA from 1996 to 1997. Prior
to joining us, Mr. Lucia served in various executive
positions including Senior Vice President, Operations and Chief
Information Officer for Celtic Life Insurance Company and Senior
Vice President, Insurance Operations for North American Company
for Life and Health Insurance. Mr. Lucia is a Fellow of the
Life Management Institute (FLMI) Program through LOMA, an
international association through which insurance and financial
services companies around the world engage in research and
educational activities to improve company operations.
19
With over 14 years experience working across multiple
divisions at HMS and his prior experience in the insurance
industry, Mr. Lucia brings to our board in-depth knowledge
of the Company and the healthcare and insurance industries. In
his prior role as our President and Chief Operating Officer,
Mr. Lucia gained critical insights into managing and
growing our business in our complex and dynamic healthcare
environment, making him well-positioned to lead our management
team and provide essential insight and guidance to the Board of
Directors from an inside perspective.
William S. Mosakowski has served as one of our directors
since December 2006. Mr. Mosakowski is the President and
Chief Executive Officer of Public Consulting Group, Inc. (PCG),
which he founded in 1986. Prior to starting PCG,
Mr. Mosakowski served as Assistant Revenue Director for the
Massachusetts Department of Developmental Services (formerly the
Department of Mental Health and Mental Retardation). He later
served as Manager of Reimbursement for the Harvard Community
Health Plan, and was a senior consultant with Touche
Ross & Company. Mr. Mosakowski is the Chairman of
the Board of Trustees of Clark University and a founding
benefactor of Clark Universitys Mosakowski Institute for
Public Enterprise. Mr. Mosakowski serves on the Board of
Directors of several private and
not-for-profit
companies.
Given Mr. Mosakowskis experiences founding and
growing PCG, he brings to our Board a deep understanding of the
healthcare industry, the services that we provide, the markets
that we serve and the potential for our continued growth.
Galen D. Powers has served as one of our directors since
1992. Mr. Powers founded Powers, Pyles, Sutter &
Verville P.C., a Washington, D.C. law firm specializing in
healthcare and hospital law, in 1983 and served as its President
from 1983 to 2001. Mr. Powers was the first chief counsel
of the federal Health Care Financing Administration (now Centers
for Medicare and Medicaid Services) and has served as a director
and the President of the American Health Lawyers Association.
Mr. Powers also serves as a director of MedCath, Inc., and
several private and
not-for-profit
companies and educational institutions.
Mr. Powers brings extensive experience in the legal
and regulatory aspects of the healthcare industry to our Board
of Directors, which is particularly valuable as we continue to
expand our business. Mr. Powers background and
experience make him well-positioned to serve as the Chairman of
the Compliance Committee and as a member of the Nominating
Committee.
Directors
Whose Terms Expire in 2011
William F. Miller III has served as one of our
directors since October 2000. Mr. Miller is a partner of
Highlander Partners, a private equity group in Dallas, Texas
focused on investments in healthcare products, services and
technology. From October 2000 to April 2005, Mr. Miller
served as our Chief Executive Officer and from December 2000 to
April 2006, Mr. Miller served as our Chairman. From 1983 to
1999, Mr. Miller served as President and Chief Operating
Officer of EmCare Holdings, Inc., a national healthcare services
firm focused on the provision of emergency physician medical
services. From 1980 to 1983, Mr. Miller served as
Administrator/Chief Operating Officer of Vail Mountain Medical.
Mr. Miller also serves as a director of Lincare Holdings,
Inc. and several private companies.
Mr. Miller brings to the Board of Directors both a thorough
understanding of our business and the healthcare industry and
extensive experience in the financial markets. His significant
operational experience both at HMS and at EmCare Holdings, Inc.,
make him well-positioned to provide the Company with insight on
financial, operational and strategic issues.
William W. Neal has served as one of our directors since
1989. Mr. Neal is a private investor. From 1996 to 2001,
Mr. Neal served as Managing Principal of Piedmont Venture
Partners. From 1989 to 1996, Mr. Neal served as Chief
Executive Officer of Broadway and Seymour, a software and
computer systems provider for the banking industry. From 1985 to
1989, he was a
20
general partner of Welsh, Carson, Anderson & Stowe, a
private equity firm. From 1984 to 1985, Mr. Neal served as
Senior Vice President, Marketing of Automated Data Processing,
Inc. (ADP) and from 1978 to 1984, he served as a Group President
of ADP. Mr. Neal also serves as a director of several
private and
not-for-profit
companies and educational institutions.
Mr. Neal brings extensive operational experience and a
strong financial, capital markets and investment background to
the Board of Directors. Mr. Neals background and
experience make him a valuable member of our Nominating and
Compensation Committees.
Ellen A. Rudnick has served as one of our directors since
1997. Since 1999, Ms. Rudnick has served as Executive
Director and Clinical Professor of the Polsky Center for
Entrepreneurship, University of Chicago Booth School of
Business. From 1993 until 1999, Ms. Rudnick served as
Chairman of Pacific Biometrics, Inc., a publicly held healthcare
biodiagnostics company and its predecessor, Bioquant, which she
co-founded. From 1990 to 1992, she served as President and Chief
Executive Officer of Healthcare Knowledge Resources (HKR), a
privately held healthcare information technology corporation,
and subsequently served as President of HCIA, Inc. (HCIA)
following the acquisition of HKR by HCIA. From 1975 to 1990,
Ms. Rudnick served in various positions at Baxter Health
Care Corporation, including Corporate Vice President of Baxter
Healthcare and President and Founder of Baxter Management
Services Division. From 1992 to 2003, Ms. Rudnick served as
Chairman of CEO Advisors, Inc., a privately held consulting
firm. Ms. Rudnick also serves as a director of Patterson
Companies, Inc. and First Midwest Bancorp, Inc.
Ms. Rudnick brings to the Board extensive business
understanding and demonstrated management expertise, having
served in key leadership positions at a number of healthcare
companies. Her management experience has provided her with a
thorough understanding of the financial and other issues facing
large companies, making her particularly valuable as the
Chairman of our Audit Committee and as a member of our
Nominating and Compliance Committees. Ms. Rudnick has a
comprehensive understanding of the operational, financial and
strategic challenges facing companies and knows how to make
businesses work effectively and efficiently.
Michael A. Stocker, M.D. has served as one of our
directors since January 2007. Since September 2008,
Dr. Stocker has served as Chairman of the Board of the New
York City Health and Hospitals Corporation (HHC), the largest
municipal hospital and health care system in the country. From
January 2006 to April 2007, Dr. Stocker served as President
and Chief Executive Officer of WellPoint, Inc.s East
Region. Dr. Stocker served as President and Chief Executive
Officer of Empire Blue Cross Blue Shield (Empire) from 1994
until its acquisition by Wellpoint, Inc. in December 2005.
Dr. Stocker has also held executive level positions with
both CIGNA and US Healthcare. Dr. Stocker serves as a
director of Coventry Health Care, Inc. He also serves on the
Boards of the Arthur Ashe Institute for Urban Health, New York
Stem Cell Foundation, SeeChange Health and Triveris, Inc. (part
of the Psilos Group).
Dr. Stocker brings a unique perspective to our Board given
his background as a medical professional, his recognized
expertise as a business leader, which is exemplified by his
appointment as Chairman of HHC by New Yorks Mayor
Bloomberg, and his executive level experience at some of the
largest US health insurance companies. Dr. Stockers
background and experience make him well-positioned to serve as
the Chairman of the Nominating Committee and as a member of the
Compliance Committee.
Richard H. Stowe has served as one of our directors since
1989. Mr. Stowe is a general partner of Health Enterprise
Partners LLP, a private equity firm. From 1999 to 2005,
Mr. Stowe was a private investor, a senior advisor to the
predecessor funds to Health Enterprise Partners, and a senior
advisor to Capital Counsel LLC, an asset management firm. From
1979 until 1998, Mr. Stowe was a general partner of Welsh,
Carson, Anderson & Stowe. Prior to 1979, he was a Vice
President in the venture capital and corporate finance groups of
New Court Securities Corporation (now Rothschild, Inc.).
Mr. Stowe is also a director of several private and
not-for-profit
companies and educational institutions.
21
Mr. Stowe brings 40 years of financial, capital
markets and investment experience to our Board of Directors.
Mr. Stowes background and experience make him
well-positioned to serve as the Chairman of the Compensation
Committee and as a member of the Audit and Nominating Committees.
The Board
of Directors recommends a vote FOR all
nominees.
22
REPORT OF
AUDIT COMMITTEE
In accordance with its Charter, the Audit Committee of the Board
of Directors (the Board) of HMS Holdings Corp. (the
Company), among its other duties, assists the Board
in fulfilling its responsibility for oversight of the quality
and integrity of our accounting, auditing, and financial
reporting practices. During 2009, the Audit Committee met four
times.
In discharging its oversight responsibility as to financial
reporting process, the Audit Committee reviewed and discussed
our audited financial statements as of and for the fiscal year
ended December 31, 2009 with management. Management has the
responsibility for the preparation of our financial statements
and the Companys independent registered public accounting
firm, KPMG LLP (KPMG) has the responsibility for the examination
of those statements.
The Audit Committee discussed with KPMG the matters required to
be discussed by the Statement on Auditing Standards No. 61,
as amended, Communications with Audit Committees.
The Audit Committee has received from KPMG a formal written
statement describing all relationships between KPMG and the
Company that might bear on KPMGs independence, as required
by applicable requirements of the Public Company Accounting
Oversight Board, and discussed with KPMG any relationships that
may impact its objectivity and independence. The Audit Committee
has also considered whether the provision of non-audit services
by KPMG is compatible with its independence. Based on the
foregoing, the Audit Committee has concluded that KPMG is
independent from the Company and its management.
Based on the above-mentioned review and discussions with
management and KPMG, the Audit Committee recommended to the
Board that the audited financial statements be included in the
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, for filing
with the Securities and Exchange Commission.
By the Audit Committee of the Board of Directors of HMS Holdings
Corp.
Ellen A. Rudnick, Chair
James T. Kelly
Richard H. Stowe
The information contained in the Audit Committee Report shall
not be deemed to be soliciting material or to be
filed with the Securities and Exchange Commission,
nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the
extent that we specifically incorporate it by reference in such
filing.
23
PROPOSAL TWO:
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors, in accordance with the recommendation of
the Audit Committee, has selected, subject to ratification by
shareholders, KPMG LLP (KPMG), an independent registered public
accounting firm, to audit our consolidated financial statements
for the fiscal year ending December 31, 2010. KPMG has
audited our consolidated financial statements and the financial
statements of our predecessor since 1981.
Representatives of KPMG are expected to attend the Annual
Meeting, where they will be available to respond to appropriate
questions from shareholders, and make a statement, if they
desire.
Fees of
Independent Registered Public Accountants during Fiscal Years
2009 and 2008
In addition to retaining KPMG to audit our financial statements,
from time to time, we engage KPMG to perform other services. The
following table sets forth the aggregate fees billed by KPMG in
connection with the services rendered during the past two fiscal
years. All fees set forth below were approved by the Audit
Committee of the Board of Directors.
|
|
|
|
|
|
Type of Fee
|
|
2009
|
|
2008
|
|
Audit
Fees(1)
|
|
$558,500
|
|
$556,500
|
Audit-Related Fees
|
|
-
|
|
-
|
Tax
Fees(2)
|
|
10,620
|
|
125,000
|
All Other Fees
|
|
-
|
|
-
|
|
|
|
|
|
Total Fees for Services Provided
|
|
$569,120
|
|
$681,500
|
|
|
|
(1)
|
|
Audit fees represent fees for
professional services rendered for the audit of our consolidated
financial statements, review of interim financial statements,
services normally provided by the independent registered public
accounting firm in connection with regulatory filings, including
registration statements and for procedures necessary over the
purchase accounting relating to our 2009 acquisitions.
|
|
(2)
|
|
Represents fees for tax services,
including tax compliance, tax advice and tax planning provided
during the ordinary course of operations.
|
Audit
Committee Pre-Approval Policies and Procedures
In accordance with its Charter, the Audit Committee pre-approves
all audit and permissible non-audit services provided by our
independent registered public accounting firm.
The Board of Directors recommends a vote
FOR the proposal to ratify the selection of KPMG LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2010.
24
REPORT OF
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the
Board) of HMS Holdings Corp. (the
Company) has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of
Regulation S-K
with management. Based on this review and discussion, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 and in this proxy
statement.
By the Compensation Committee of the Board of Directors of HMS
Holdings Corp.
Richard H. Stowe, Chair
James T. Kelly
William W. Neal
The information contained in the Compensation Committee
Report shall not be deemed to be soliciting material
or to be filed with the Securities and Exchange
Commission, nor shall such information be incorporated by
reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that we specifically incorporate
it by reference in such filing.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2009, the members of our Compensation Committee were
Richard H. Stowe, William W. Neal, and James T. Kelly, none of
whom has ever been an officer or employee of the Company and
none of whom have had a related person transaction involving the
Company. During 2009, none of our executive officers
(i) served as a member of the Board of Directors or
compensation committee of any other entity that had one or more
of its executive officers serving as a member of our
Compensation Committee or (ii) served as a member of the
compensation committee of any other entity that had one or more
of its executive officers serving as a member of our Board of
Directors.
25
INFORMATION
CONCERNING EXECUTIVE OFFICERS
Our executive officers are subject to annual appointment by the
Board of Directors at its first meeting following our Annual
Meeting of shareholders. Set forth below is information
regarding each of our executive officers. Further information
about Messrs. Holster and Lucia is presented above under
the heading Our Board of Directors.
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Robert H. Holster
|
|
|
63
|
|
|
Non-executive Chairman
|
William C. Lucia
|
|
|
52
|
|
|
President, Chief Executive Officer and Director
|
Walter D. Hosp
|
|
|
52
|
|
|
Chief Financial Officer and Corporate Secretary
|
John D. Schmid
|
|
|
52
|
|
|
Vice President of Human Resources
|
|
|
Walter D. Hosp has served as our Senior Vice President
and Chief Financial Officer since July 2007. Mr. Hosp has
over 20 years of experience in senior financial executive
positions for large publicly-traded healthcare companies. From
August 2002 to July 2007, Mr. Hosp was Vice
President & Treasurer of Medco Health Solutions, Inc.
(MHS). Prior to MHS, Mr. Hosp served as Chief Financial
Officer of Ciba Specialty Chemicals Corporation, and President
of their Business Support Center. Mr. Hosp also served as
Vice President & Treasurer for CIBA-GEIGY Corporation
and Director of Treasury Operations for Avon Products Inc.
Mr. Hosp serves on the Board of the United Way of
Westchester and Putnam.
John D. Schmid has served as our Vice President of Human
Resources since April 2007. Mr. Schmid has over
16 years experience in the human resources field, having
held senior human resource executive positions for public
companies in the service and production industries. From
December 2002 to April 2007, Mr. Schmid served as global
Director of HR Operations for Perot Systems. At Perot, his
responsibilities included IT outsourcing, international services
and the management of new and existing service center operations
to support Perots healthcare provider back offices. Prior
to Perot, Mr. Schmid held field and corporate human
resource positions with Office Depot and Fleming Companies.
Mr. Schmid served in the US Navy as a Surface Warfare
Officer for eight years before moving into the corporate human
resources arena.
26
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis provides a narrative
describing how compensation for our Named Executive Officers was
established for 2009 and should be read in conjunction with the
compensation tables and related narrative descriptions that
follow it.
Effective March 1, 2009, Mr. Lucia was appointed
President and Chief Executive Officer of the Company, replacing
Mr. Holster. Mr. Holster remains an employee of the
Company and our Non-Executive Chairman of the Board of
Directors. As of the end of the fiscal year ended
December 31, 2009, our Named Executive Officers were:
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Robert M. Holster, Non-Executive Chairman/Former Chief Executive
Officer;
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Walter D. Hosp, Chief Financial Officer;
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William C. Lucia, President and Chief Executive Officer; and,
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John D. Schmid, Vice President of Human Resources.
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Objectives
and Philosophy of Our Executive Compensation Program
Our mission is to be a significant provider of quality services
in the markets we serve. To support this and other strategic
objectives as approved by the Board of Directors and to provide
adequate returns to shareholders, we must compete for, attract,
develop, motivate, and retain top quality executive talent at
the corporate office and operating business units during periods
of both favorable and unfavorable business conditions.
Our executive compensation program is a critical management tool
in achieving this goal. Pay for performance is the
underlying philosophy for our executive compensation program.
Consistent with this philosophy, the program has been carefully
conceived and is independently administered by the Compensation
Committee of the Board of Directors, which is comprised entirely
of non-employee directors.
The program is designed and administered to:
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align the interests of our senior executives with the interests
of our shareholders, thus rewarding individual and team
achievements that contribute to the attainment of our business
goals; and
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provide a balance of total compensation opportunities, including
salary, bonus, and longer-term cash and equity incentives, that
are competitive with similarly situated companies and reflective
of our performance.
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Role of
Management
Our President and Chief Executive Officer, working with our
Human Resources Department, develops recommendations regarding
executive compensation program design and individual
compensation levels for our other Named Executive Officers and
certain other highly compensated individuals. He also provides
the Compensation Committee with a performance assessment for
each Named Executive Officer as input to base salary and
incentive award recommendations, and provides financial
information relevant to determining the achievement of our
performance objectives and related annual cash incentive
bonuses. In addition, our President and Chief Executive Officer
and our Chief Financial Officer are involved in setting the
financial objectives that, subject to the approval of the Board
and the Compensation Committee, are used as the performance
measures for the annual and long-term incentive plans.
27
Compensation
Consultant
The Compensation Committee has retained Frederic W.
Cook & Co., Inc. (FWC) as its independent
compensation consultant to provide executive compensation
services to the Compensation Committee. FWC reports directly to
the Compensation Committee and the Compensation Committee
directly oversees the fees paid for their services. The
Compensation Committee utilizes FWC to review managements
recommendations with the instruction that FWC is to advise the
Compensation Committee independent of management and to provide
such advice for the benefit of the Company and its shareholders.
FWC does not provide any consulting services to the Company
beyond its role as a consultant to the Compensation Committee.
FWC provided the following services to the Compensation
Committee in connection with its review of the Companys
2009 executive compensation programs:
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assisted in the design and development of the 2009 executive
compensation program;
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provided competitive benchmarking and market data analysis;
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provided analyses and industry trends relating to the
compensation of our new Chief Executive Officer and our other
Named Executive Officers; and,
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provided analysis and advice regarding the views of various
shareholder review services.
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Peer
Group Compensation Analysis
In making compensation decisions, the Compensation Committee
compares our executive compensation against that paid by a peer
group of public companies in the healthcare information services
industry developed by FWC, and approved by the Compensation
Committee. This peer group, which is periodically reviewed and
updated by the Compensation Committee, consists of companies the
Compensation Committee believes are generally comparable in size
to us and against which the Compensation Committee believes we
compete for executive talent.
Companies included in this peer group for purposes of
establishing 2009 compensation levels were: Allscripts
Healthcare Solutions Inc., AMICAS, Inc., AthenaHealth, Inc.,
Computer Programs & Systems Inc., CorVel Corporation,
eResearch Technology, Inc., Healthways, Inc., MAXIMUS, Inc.,
Omnicell, Inc., Phase Forward Incorporated, PRG-Schultz
International, Inc., Providence Services Corporation, Quality
Systems, Inc., and The TriZetto Group, Inc. (collectively, the
2009 Peer Group). This peer group reflects (relative
to the Companys prior peer group) the addition of
AthenaHealth, Inc., CorVel Corporation, Healthways, Inc., Phase
Forward Incorporated and PRG-Schultz International, Inc. and the
removal of First Consulting Group, Matria Healthcare, Inc.,
Mediware Information Systems, Inc., National Research
Corporation and Quovadx, Inc. These changes were made to ensure
that, in the aggregate, the peer group best reflected the size,
content, financial profile and scope of operations of the
Company.
In the second half of 2009, the Compensation Committee retained
FWC to conduct a comprehensive review of the Companys
executive compensation program, with a particular focus on
equity compensation. This analysis was used by the Compensation
Committee to develop the 2009 Long-term Incentive Plan and to
guide the Compensation Committees 2010 executive
compensation review. The companies included in the peer group
for this analysis were: Allscripts-Misys Healthcare Solutions
Inc., AthenaHealth, Inc., Computer Programs & Systems
Inc., CorVel Corporation, Eclipsys Corporation, Emdeon Inc.,
eResearch Technology, Inc., Healthways, Inc., MAXIMUS, Inc.,
MedAssets, Inc., Phase Forward Incorporated and, Quality
Systems, Inc. (collectively, the 2010 Peer Group).
This peer group reflects the addition of Eclipsys Corporation,
Emdeon Inc., and MedAssets, Inc. and the removal of AMICAS,
Inc., Omnicell, Inc., PRG-Schultz International, Inc. Providence
Services Corporation and The TriZetto Group, Inc. These
additional changes were made to further align the peer group
with the Company in terms of size and business content.
28
We compete with many other companies for executive personnel.
Accordingly, the Compensation Committee generally targets
overall compensation for executives near the median of
compensation paid to similarly situated executives of the
companies in the peer group. Variations to this general target
may occur as dictated by the experience level of the individual
and market factors.
Components
of our Executive Compensation Program
The primary elements of our executive compensation program are:
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base salary;
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annual short term (cash) incentive compensation; and
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a long term incentive, primarily represented by equity awards.
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We also provide our executive officers with insurance,
retirement and other employee benefits.
The Compensation Committee does not have a formal or informal
policy or target for allocating compensation between cash and
non-cash compensation or among the different forms of non-cash
compensation. However, certain components of executive
compensation are paid based on predefined targets established in
connection with a Named Executive Officers employment. For
example, annual short term (cash) incentive compensation is
based on a predetermined financial performance objective and
paid based on a pre-established bonus target percentage. In
allocating compensation between cash and non-cash forms, the
Compensation Committee, after reviewing information provided by
FW Cook, determines what it believes in its business judgment to
be the appropriate level of each of the various compensation
components.
Base Salary. Base salary is used to recognize the
experience, skills, knowledge and responsibilities of our
employees, including our Named Executive Officers. In
determining the amount of compensation to be paid to our Named
Executive Officers, the Compensation Committee adheres to long
established compensation policies pursuant to which executive
compensation is determined. Base salary determinants include the
prevailing rate of compensation for positions of like
responsibility, the level of the Named Executive Officers
compensation in relation to others with the same, more, or less
responsibilities, and tenure. To ensure both competitiveness and
appropriateness of base salaries, we retain independent
compensation consultants on a periodic basis to update the job
classification and pay scale structure pursuant to which
individual Named Executive Officers (and our other employees)
are classified and the pay ranges with which their jobs are
associated.
Base salaries are reviewed at least annually by our Compensation
Committee, and are adjusted from time to time to realign
salaries with market levels after taking into account individual
responsibilities, performance and experience. In March 2009, the
Compensation Committee increased Mr. Schmids base
salary from $200,000 to $220,000 in consideration of his
contributions and performance since joining the Company in 2007.
As discussed in the next paragraph, Mr. Lucias salary
was increased in connection with his appointment as our Chief
Executive Officer and Mr. Holsters salary was
adjusted to reflect his change in position. Mr. Hosps
salary was not increased for 2009. The Compensation Committee
did not increase annual base salaries for Messrs. Holster,
Hosp and Schmid for 2010.
The Compensation Committee retained FWC to assist in the
determination of Mr. Lucias compensation upon his
appointment as the Companys Chief Executive Officer in
March 2009. The compensation analysis was based on a review of
the compensation of the Chief Executive Officers in the 2009
Peer Group, and survey data from one national general industry
survey (based on participating companies with annual revenues
less than $500 million) and one national technology survey
(based on participating companies with annual revenues between
approximately $100 million
29
and $450 million). Determination of Mr. Lucias
2009 compensation took into consideration his salary as our
President and Chief Operating Officer, which was $343,846 for
2008, his contributions in that position, and the compensation
of Chief Executive Officers in the 2009 Peer Group. In
establishing Mr. Lucias annualized base salary at
$400,000 for 2009, the Compensation Committee recognized that
Mr. Lucias salary was below the median of the 2009
Peer Group and below the salary of his predecessor, but noted
that 2009 was Mr. Lucias first year as the
Companys President and Chief Executive Officer. In
February 2010, following a review of Mr. Lucias
performance in his first year as President and Chief Executive
Officer, and taking into consideration the Companys past
compensation practices for Chief Executive Officers and the
salaries of Chief Executive Officers in the 2010 Peer Group, the
Compensation Committee approved an increase in
Mr. Lucias annualized base salary from $400,000 to
$525,000, effective March 1, 2010. In making this
determination, the Compensation Committee also considered that
the Company completed two acquisitions in 2009 and increased
revenue and net income by more than 25% over the prior year.
Annual Short Term (Cash) Incentive Compensation. The
Compensation Committee has the authority to award annual bonuses
to our Named Executive Officers in accordance with specific
performance criteria established each year, and based on the
extent to which those criteria were achieved. The Compensation
Committee believes that the short term bonus plan promotes the
Companys performance-based compensation philosophy by
providing Named Executive Officers with direct financial
incentives in the form of annual cash bonuses for achieving
specific performance goals. Bonus criteria are established, and
bonuses are ultimately awarded, in a manner intended to reward
both overall corporate performance and an individuals
participation in attaining such performance. Our annual short
term incentive bonus is paid in cash, ordinarily in a single
installment in the first quarter following the completion of the
fiscal year, and is tied to the achievement of predetermined
annual corporate financial and individual performance
objectives. The targeted amount of annual performance bonus for
2009 was 65% of base salary for Messrs. Holster and Lucia
and 40% of base salary for Messrs. Hosp and Schmid.
The primary factor that the Compensation Committee considers
when determining incentive compensation for our Named Executive
Officers is a predetermined financial performance objective. If
the Company achieves its financial performance objective, the
Named Executive Officers become entitled to short term cash
incentive compensation. In addition, upon the Companys
achievement of this objective, the Compensation Committee has
the discretion to adjust short term cash incentive payments
based upon its consideration of individual performance during
the course of the year. The Compensation Committee may increase
or decrease the annual bonus paid based on the attainment of
goals relating to strategic objectives or to account equitably
for items impacting the predetermined performance objectives
that are non-recurring in nature.
The financial objective established for 2009 for the
Companys Named Executive Officers was the achievement by
the Company of a specific net income target. The Company uses
net income because it is a primary reporting metric and is based
on generally accepted accounting principles. Net income includes
all income and expense items and all gains and losses, whether
they are considered recurring or non-recurring. As illustrated
in the chart below, the applicable percentage of the bonus
target to be paid varies with the percentage of the
Companys attainment of its net income target. The net
income target for 2009 was $26.5 million.
30
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Net Income Target
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Percent of Target
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(in millions)
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Achieved
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Bonus Multiple
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$21.2
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80%
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$23.8
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90%
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0.5
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$26.5
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100%
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1.0
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$29.2
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110%
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1.4
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$31.8
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120%
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1.9
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$34.5
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130%
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2.3
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$37.1
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140%
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2.7
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As illustrated in the chart, upon the achievement of 100% of the
Companys net income target, the Named Executive Officers
would be entitled to 100% of their respective bonus targets. The
threshold for payment of any amount under the incentive plan for
2009 was attainment of more than 80% of the Companys net
income target. The achievement of 90% of the Companys net
income target would result in payment to the Named Executive
Officers of 50% of the bonus target. There is no maximum on the
bonus amount payable to our Named Executive Officers.
Specific individual goals are not set for each Named Executive
Officer; rather, following completion of the fiscal year, the
Compensation Committee assesses each Named Executive
Officers overall contributions to helping the Company
achieve its financial objective by (i) improving revenue,
net income, cash flow, operating margins, earnings per share,
and return on shareholders equity, (ii) developing
competitive advantages, (iii) dealing effectively with the
growing complexity of our business, (iv) developing
business strategies, managing costs, and improving the quality
of our services as well as customer satisfaction,
(v) successfully executing divestitures, acquisitions and
strategic partnerships, (vi) implementing operating
efficiencies, and (vii) general performance of individual
job responsibilities.
In February 2010, the Compensation Committee approved the cash
bonus amounts to be paid to each of the Named Executive Officers
for services performed in 2009 based on the Companys net
income for 2009 of $30.8 million, which was 16.2% over the
targeted net income amount for 2009. The Compensation Committee
did not adjust bonuses for 2009 based on the individual
performance of each Named Executive Officer. The bonus amounts
awarded to Messrs. Holster, Hosp, Lucia and Schmid were 70%
above their 2009 bonus target, or $276,288, $221,030, $442,060
and $149,620, respectively.
In February 2010, based on its review of bonus targets of Chief
Financial Officers included in the 2010 Peer Group, the
Compensation Committee raised Mr. Hosps annual
performance bonus target to 50% of his base salary.
Long Term Incentive Compensation. The longer-term
component of our executive compensation program has generally
consisted of stock options and in 2009 was expanded to include
restricted stock awards. We believe that equity grants provide
our Named Executive Officers with a strong link to our long-term
performance, create an ownership culture and help to align their
interests with those of our shareholders.
Equity awards are typically granted to our executives annually
in conjunction with the review of their individual performance.
This review takes place at the regularly scheduled meeting of
the Compensation Committee held following the second quarter of
each year. Equity awards are granted upon the recommendation of
management and approval of the Compensation Committee based upon
its subjective evaluation of the appropriate grant depending
upon the level of responsibility of each Name Executive Officer.
In accordance with our Third Amended and Restated 2006 Stock
Plan (the 2006 Plan), we set the exercise price of
all stock options equal to the closing price of our common stock
on the NASDAQ Stock Market on the day of the grant. Stock
options generally become exercisable in installments over the
period specified by the Compensation Committee. Accordingly, a
stock option grant will provide a return to the executive
officer only if
31
the executive officer remains employed during the vesting
period, and then only if the market price of our common stock
appreciates from the options exercise price. As a result,
stock options strongly support our objective of ensuring that
pay is aligned with changes in shareholder value. We have
granted restricted stock to support the goal of retaining key
Named Executive Officers. Restricted stock is issued to
executives at par value ($0.01 per share) and generally vests in
installments over the period specified by the Compensation
Committee. Accordingly, a restricted stock grant will provide a
return to the executive officer only if the executive officer
remains employed during the vesting period. The value of the
restricted stock to the executive increases as the market price
of our common stock increases, but because no specific amount of
market price appreciation is necessary for a return to be
provided to the executive, the number of shares underlying a
restricted stock grant is lower relative to the number of shares
underlying a stock option grant.
For the 2009 fiscal year, the Compensation Committee considered
the individual contributions of the Named Executive Officers
discussed above under Annual Short Term (Cash) Incentive
Compensation in making its determinations with respect to
granting long term incentives, in addition to several more
objective factors, including comparative share ownership of
similarly-situated executives, the Companys financial
performance, the amount of equity previously awarded, the
vesting of such awards, the retention value of the award and
FWCs recommendations. In determining amounts of long term
incentive compensation to be awarded, no fixed or specific
mathematical weighting was applied to the subjective assessment
of the Named Executive Officers individual achievements.
In 2009, the Board of Directors approved a 2009 Long Term
Incentive Plan, which provided for stock option grants of
non-qualified stock options to our executives on October 1,
2009. These stock options are exercisable over seven years and
contain a performance vesting component. The performance vesting
component ensures that stock option compensation is also tied to
the achievement of multi-year performance objectives. The stock
options vest as follows: 50% of the grant vests in one-third
increments on December 31, 2010, 2011 and 2012, and the
remaining 50% cliff vests on December 31, 2012 to the
extent that pre-defined earnings per share (EPS) growth and
service conditions are satisfied. In order for a Named Executive
Officer to vest 100% of his stock option grant, (i) he must
be an employee of the Company on December 31, 2012, and
(ii) the Companys EPS for the fiscal year ending
December 31, 2010 must be at least 15% higher than its EPS
for the fiscal year ending December 31, 2009 and its EPS
for the fiscal year ending December 31, 2011 must be at
least 40% higher than its EPS for the fiscal year ended
December 31, 2009. In October 2009, under the terms of our
2009 Long Term Incentive Plan, the Compensation Committee
granted Messrs. Lucia, Hosp and Schmid stock options to
purchase 20,000, 16,000 and 6,200 shares of our common
stock, respectively, at an exercise price of $37.82 per share
and with the vesting schedule described above. In his capacity
as a member of the Board, Mr. Holster was granted a
non-qualified stock option to purchase 3,100 shares of our
common stock, which vests quarterly over a one year period
commencing on December 31, 2009.
Restricted Stock Awards. In February 2009, the
Compensation Committee approved a retention grant of 31,980 and
25,584 shares of restricted stock to Messrs. Lucia and
Hosp, respectively. Subject to Messrs. Lucias and
Hosps continued employment with the Company, these
restricted stock awards will vest in 25% increments in February
2011, 2012, 2013 and 2014.
Benefits and Other Compensation. We maintain
broad-based benefits that are provided to all employees,
including health and dental insurance, life and disability
insurance and a 401(k) plan. Our Named Executive Officers are
eligible to participate in all of our employee benefit plans, in
each case on the same basis as other employees. The Company
matches 100% of participant contributions to our 401(k) plan up
to 3%, and 50% of the next 2% of their compensation contributed
to the 401(k) plan.
Severance and
Change-in-Control
Benefits. Pursuant to employment agreements we have
entered into with our Named Executive Officers and under the
terms of our 2006 Plan, our Named
32
Executive Officers are entitled to certain benefits in the event
of the termination of their employment under specified
circumstances, including termination following a change in
control of our Company. We have provided detailed information
about these benefits, along with estimates of their value under
various circumstances, under the caption Potential
Payments upon Termination of Employment or
Change-in-Control
below.
We believe providing these benefits helps us compete for
executive talent, promote stability and continuity of senior
management and provide reasonable assurance so that they are not
distracted from their duties during the uncertainty that may
accompany a possible change in control.
Tax
Considerations
Section 162(m) of the Internal Revenue Code prohibits us
from deducting any compensation in excess of $1 million
paid to certain of our executive officers, except to the extent
that such compensation is paid pursuant to a shareholder
approved plan upon the attainment of specified performance
objectives. The Compensation Committee believes that tax
deductibility is an important factor, but not the sole factor,
to be considered in setting executive compensation policy.
Accordingly, the Compensation Committee periodically reviews the
potential consequences of Section 162(m) and generally
intends to take such reasonable steps as are required to avoid
the loss of a tax deduction due to Section 162(m). However,
the Compensation Committee may, in its judgment, authorize
compensation payments that do not comply with the exemptions in
Section 162(m) when it believes that such payments are
appropriate to attract and retain executive talent.
Summary
Compensation Table
The following table sets forth the cash and non-cash
compensation awarded to or earned by our Named Executive
Officers for the fiscal years ended December 31, 2009, 2008
and 2007.
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Non-Equity
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Stock
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Option
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Incentive Plan
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All Other
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Total
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Name and Principal
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Salary
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)(5)
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($)
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Robert M. Holster
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2009
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312,500
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-
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44,900
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276,288
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9,800
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643,488
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Non-Executive
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2008
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467,692
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-
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31,813
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402,968
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9,200
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911,673
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Chairman and
Former(6)
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2007
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438,462
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-
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59,694
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382,067
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8,669
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888,892
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Chief Executive Officer
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William C. Lucia
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2009
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406,923
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1,000,000
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289,600
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442,060
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18,300(8)
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2,156,883
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President and Chief
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2008
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343,846
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-
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240,274
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290,137
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9,200
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883,457
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Executive
Officer(7)
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2007
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328,846
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-
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260,808
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286,550
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9,000
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885,204
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Walter D.
Hosp(9)
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2009
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337,500
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800,000
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231,700
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221,030
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9,800
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1,600,030
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Chief Financial Officer
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2008
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325,000
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-
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142,668
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161,200
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7,015
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635,883
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2007
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150,000
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-
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63,012
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112,883
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1,000
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326,895
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John D.
Schmid(10)
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2009
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223,846
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89,800
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149,620
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9,800
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473,066
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Vice President,
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2008
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200,000
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-
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79,831
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99,200
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9,200
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388,231
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Human Resources
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2007
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142,308
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-
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46,548
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129,200
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26,846(11)
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344,902
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(1)
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Our employees are paid on a
biweekly basis, generally resulting in 26 pay periods per year.
In 2009, there were 27 pay periods within the calendar year so
each salaried employee, including our Named Executive Officers,
received an additional two weeks pay.
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(2)
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In February 2009,
Messrs. Lucia and Hosp were granted 31,980 and
25,584 shares of restricted stock respectively. Subject to
Messrs. Lucias and Hosps continued employment
with the Company, these restricted stock awards will vest in 25%
increments in February 2011, 2012, 2013 and 2014. The amounts in
this column represent the grant date fair value of the
service-based restricted stock award computed in accordance with
FASB ASC Topic 718, assuming all performance conditions are met.
The relevant assumptions made in the valuations may be found in
Note 11 of the Notes to
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Consolidated Financial Statements
in our 2009 Annual Report on
Form 10-K.
The grant date fair value of service-based restricted stock is
determined based on the number of shares granted and the fair
value of our common stock on the grant date, which is the
closing sales price per share of our common stock reported on
The NASDAQ Global Market on that date, less the consideration
paid by the recipient of the award. Under our 2006 Plan,
restricted stock award recipients pay HMS the par value for the
stock ($0.01 per share).
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(3)
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In October 2009,
Messrs. Holster, Lucia, Hosp and Schmid were each granted
non-qualified stock options to purchase shares of our common
stock at an exercise price per share of $37.82, as follows:
Holster (3,100), Lucia (20,000), Hosp (16,000), and Schmid
(6,200). Mr. Holsters stock option grant vests
quarterly over a one year period commencing on December 31,
2009. The other Named Executive Officers stock option
grants vest as follows: 50% of the grant vests in one-third
increments on December 31, 2010, 2011 and 2012 and the
remaining 50% vests on December 31, 2012 to the extent that
certain performance and service conditions are satisfied (see
the section titled 2009 Long Term Incentive Plan in
the Compensation Discussion & Analysis for further
detail). The amounts in this column represent the grant date
fair value of each stock option grant computed in accordance
with FASB ASC Topic 718, assuming all performance conditions are
met (with the exception of the grant to Mr. Holster which
is conditioned only on service). The relevant assumptions made
in the valuations may be found in Note 11 of the Notes to
Consolidated Financial Statements in our 2009 Annual Report on
Form 10-K.
|
|
(4)
|
|
The amounts set forth in this
column reflect the amounts paid to our Named Executive Officers
under the Companys cash incentive plan described in the
Compensation Discussion and Analysis contained in this Proxy
Statement under the heading Annual Short Term (Cash)
Incentive Compensation. These amounts are based on a
percentage of the individuals base salary for the fiscal
year.
|
|
(5)
|
|
Except as described in footnotes 8
and 11 below, the amounts in this column reflect 401(k) employer
matching contributions.
|
|
(6)
|
|
Mr. Holster served as our
Chief Executive Officer until March 1, 2009. He remains an
employee of the Company and serves as the Non-Executive Chairman
of the Board of Directors.
|
|
(7)
|
|
Mr. Lucia became our Chief
Executive Officer effective March 1, 2009. Prior to that
date, Mr. Lucia served as our President and Chief Operating
Officer.
|
|
(8)
|
|
Represents $8,500 in relocation
allowance and $9,800 in 401(k) employer matching contributions.
|
|
(9)
|
|
Mr. Hosp became our Chief
Financial Officer effective July 2, 2007.
|
|
(10)
|
|
Mr. Schmid became our Vice
President of Human Resources effective April 2, 2007.
|
|
(11)
|
|
Represents a $25,000 sign-on bonus
paid in April 2007 and $1,846 in 401(k) employer matching
contributions.
|
34
Grants of
Plan-Based Awards For the Year Ended December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Awards:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Number
|
|
|
Price
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
of
|
|
|
of
|
|
|
Date Fair
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Securities
|
|
|
Option
|
|
|
Value of
|
|
|
|
|
|
Board
|
|
Under Non-Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
of
|
|
|
Underlying
|
|
|
Awards
|
|
|
Stock and
|
|
|
|
Grant
|
|
Approval
|
|
Plan
Awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Options
|
|
|
($/sh)
|
|
|
Option
|
|
Name
|
|
Date
|
|
Date
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
of Stock
|
|
|
(#)
|
|
|
(2)
|
|
|
Awards(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Holster
|
|
|
10/1/09
|
|
|
|
9/16/09
|
|
|
|
8,125
|
|
|
|
162,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,100(4
|
)
|
|
|
37.82
|
|
|
|
44,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Lucia
|
|
|
2/19/09
|
|
|
|
12/22/08
|
|
|
|
13,000
|
|
|
|
260,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,980(5
|
)
|
|
|
|
|
|
|
N/A
|
|
|
|
999,700
|
|
|
|
|
10/1/09
|
|
|
|
9/16/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000(6
|
)
|
|
|
|
|
|
|
|
|
|
|
10,000(4
|
)
|
|
|
37.82
|
|
|
|
144,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter D. Hosp
|
|
|
2/19/09
|
|
|
|
12/22/08
|
|
|
|
6,500
|
|
|
|
130,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,584(5
|
)
|
|
|
|
|
|
|
N/A
|
|
|
|
799,700
|
|
|
|
|
10/1/09
|
|
|
|
9/16/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000(6
|
)
|
|
|
|
|
|
|
|
|
|
|
8,000(4
|
)
|
|
|
37.82
|
|
|
|
115,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Schmid
|
|
|
10/1/09
|
|
|
|
9/16/09
|
|
|
|
4,400
|
|
|
|
88,000
|
|
|
|
|
|
|
|
|
|
|
|
3,100(6
|
)
|
|
|
|
|
|
|
|
|
|
|
3,100(4
|
)
|
|
|
37.82
|
|
|
|
44,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts represent the threshold
and target that could be earned by the Named Executive Officer
under our 2009 Incentive Plan. The threshold amount shown is 5%
of the individuals bonus target amount, which would be
payable if the Company achieved 81% of the targeted net income
for 2009. The target amount shown is 100% of the individual
bonus target amount, which would be payable if the Company
achieved the targeted net income for 2009. Actual incentives
paid for 2009 are shown in the Summary Compensation Table
in the Non-Equity Incentive Plan Compensation
column. The 2009 Incentive Plan is described in the Compensation
Discussion and Analysis contained in this Proxy Statement under
the heading Annual Short Term (Cash) Incentive
Compensation. The individual bonus target amount for
Messrs. Holster and Lucia was 65% of base salary, and
individual bonus target for Messrs. Hosp and Schmid was 40%
of base salary. The target percentages were higher for
Messrs. Holster and Lucia due to their overall
responsibility for the operations and success of the Company.
There is no maximum on the bonus amount payable to our Named
Executive Officers.
|
|
(2)
|
|
The exercise price equals the
closing price of our Common Stock on the date of the grant.
|
|
(3)
|
|
The amounts in this column
represent the grant date fair value of each stock option grant
computed in accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 718,
assuming all performance conditions are met (with the exception
of the grant to Mr. Holster which is conditioned only on
his continued service). The relevant assumptions made in the
valuations may be found in Note 11 of the Notes to
Consolidated Financial Statements in our 2009 Annual Report on
Form 10-K.
The grant date fair value of servicebased restricted stock
is determined based on the number of shares granted and the fair
value of our common stock on the grant date, which is the
closing sales price per share of our common stock reported on
The NASDAQ Global Market on that date, less the consideration
paid by the recipient for the award. Under our 2006 Plan,
restricted stock award recipients pay HMS the par value for the
stock ($0.01 per share).
|
|
(4)
|
|
Amounts represent the portion of
the non-qualified stock option grant made to the Named Executive
Officers in 2009 that is conditioned on continued service. These
non-qualified stock option grants are described in the
Compensation Discussion and Analysis under the heading
2009 Long Term Incentive Plan. The vesting terms for
these grants are described in footnote 3 to the Summary
Compensation Table.
|
|
(5)
|
|
Amounts represent service-based
restricted stock awards made to the Named Executive Officers in
2009. The vesting terms for these awards are described in
footnote 2 to the Summary Compensation Table.
|
|
(6)
|
|
Amounts represent the portion of
the non-qualified stock option grant made to the Named Executive
Officers in 2009 that is conditioned on performance. These
non-qualified stock option grants are described in the
Compensation Discussion and Analysis under the heading
2009 Long Term Incentive Plan. The vesting terms for
these grants are described in footnote 3 to the Summary
Compensation Table.
|
35
Outstanding
Equity Awards at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number
|
|
Market
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
of Shares
|
|
Value of
|
|
|
securities
|
|
securities
|
|
Securities
|
|
|
|
|
|
of Stock
|
|
Shares of
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
that
|
|
Stock That
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Have
|
|
Have Not
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Not
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested
|
|
($)(1)
|
|
Robert M. Holster
|
|
180,000
|
|
-
|
|
-
|
|
1.19
|
|
3/30/2011
|
|
|
|
|
|
|
15,000
|
|
-
|
|
-
|
|
2.48
|
|
12/12/2011
|
|
|
|
|
|
|
33,333
|
|
-
|
|
-
|
|
2.92
|
|
11/4/2013
|
|
|
|
|
|
|
125,000
|
|
-
|
|
-
|
|
3.41
|
|
12/19/2012
|
|
|
|
|
|
|
40,000(2)
|
|
|
|
|
|
6.95
|
|
4/14/2015
|
|
|
|
|
|
|
6,667(3)
|
|
3,333(3)
|
|
10,000(3)
|
|
25.45
|
|
9/30/2012
|
|
|
|
|
|
|
5,000(4)
|
|
10,000(4)
|
|
15,000(4)
|
|
23.99
|
|
9/30/2015
|
|
|
|
|
|
|
775
|
|
2,325(5)
|
|
-
|
|
37.82
|
|
10/1/2016
|
|
|
|
|
William C. Lucia
|
|
|
|
|
|
|
|
|
|
|
|
31,980(6)
|
|
1,557,106
|
|
|
668
|
|
-
|
|
-
|
|
$2.92
|
|
11/4/2013
|
|
|
|
|
|
|
125,000
|
|
-
|
|
-
|
|
$6.95
|
|
4/14/2015
|
|
|
|
|
|
|
61,999
|
|
20,666(4)
|
|
|
|
$9.44
|
|
5/4/2016
|
|
|
|
|
|
|
10,332
|
|
|
|
|
|
$3.41
|
|
12/19/2012
|
|
|
|
|
|
|
88,002
|
|
29,333(4)
|
|
|
|
$10.98
|
|
6/26/2016
|
|
|
|
|
|
|
5,000
|
|
10,000(4)
|
|
15,000
|
|
$23.99
|
|
9/30/2015
|
|
|
|
|
|
|
6,667(3)
|
|
3,333(3)
|
|
10,000(3)
|
|
$25.45
|
|
9/30/2012
|
|
|
|
|
|
|
|
|
10,000(7)
|
|
10,000(7)
|
|
$37.82
|
|
10/1/2016
|
|
|
|
|
Walter D. Hosp
|
|
|
|
|
|
|
|
|
|
|
|
25,584(6)
|
|
1,245,685
|
|
|
30,000
|
|
30,000(8)
|
|
|
|
$19.12
|
|
7/2/2017
|
|
|
|
|
|
|
5,000(3)
|
|
2,500(3)
|
|
7,500(3)
|
|
$25.45
|
|
9/30/2012
|
|
|
|
|
|
|
4,167(4)
|
|
8,333(4)
|
|
12,500(4)
|
|
$23.99
|
|
9/30/2015
|
|
|
|
|
|
|
-
|
|
8,000(7)
|
|
8,000(7)
|
|
$37.82
|
|
10/1/2016
|
|
|
|
|
John D. Schmid
|
|
-
|
|
12,500(8)
|
|
-
|
|
$21.86
|
|
4/2/2017
|
|
|
|
|
|
|
2,500(3)
|
|
2,500(3)
|
|
7,500(3)
|
|
$25.45
|
|
9/30/2012
|
|
|
|
|
|
|
3,334(4)
|
|
6,666(4)
|
|
10,000(4)
|
|
$23.99
|
|
9/30/2015
|
|
|
|
|
|
|
|
|
3,100(7)
|
|
3,100(7)
|
|
$37.82
|
|
10/1/2016
|
|
|
|
|
|
|
|
(1)
|
|
Market value is calculated by
multiplying the closing sales price per share of our common
stock on The NASDAQ Global Market ($48.69) on December 31,
2009 by the number of shares of stock that have not vested.
|
|
(2)
|
|
Transferred by Mr. Holster to
the 2007 Robert M. Holster Family Trust.
|
|
(3)
|
|
Stock options vest as follows: 50%
vests in one-third increments on December 31, 2008, 2009
and 2010. The remaining 50% vests on December 31, 2010 to
the extent that certain pre-defined performance and service
conditions are satisfied.
|
|
(4)
|
|
Stock options vest as follows: 50%
vests in one-third increments on December 31, 2009, 2010
and 2011. The remaining 50% vests on December 31, 2011 to
the extent that certain pre-defined performance and service
conditions are satisfied.
|
|
(5)
|
|
Stock option vests quarterly over
the one year period commencing on December 31, 2009.
|
|
(6)
|
|
Service-based restricted stock
awards vest in 25% increments on February 19, 2011, 2012,
2013 and 2014.
|
|
(7)
|
|
Stock options vest as follows: 50%
vests in one-third increments on December 31, 2010, 2011
and 2012. The remaining 50% vests on December 31, 2012 to
the extent that certain pre-defined performance and service
conditions are satisfied.
|
36
|
|
|
(8)
|
|
Stock options vest annually in 25%
increments beginning of the first anniversary of date of grant
(Mr. Hosp: July 2, 2007; Mr. Schmid:
April 2, 2007).
|
2009
Option Exercises
The following table sets forth certain information concerning
the exercise of stock options by our Named Executive Officers.
Although certain of our Named Executive Officers have received
service-based restricted stock awards, none of those awards have
commenced vesting; hence, the table below does not include
information relating to vested stock.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Exercise
|
|
on Exercise
|
Name
|
|
(#)
|
|
($)(1)
|
|
Robert M.
Holster(2)
|
|
|
246,667
|
|
|
$
|
7,822,774
|
|
William C. Lucia
|
|
|
64,000
|
|
|
$
|
2,058,184
|
|
John D. Schmid
|
|
|
15,000
|
|
|
$
|
163,425
|
|
|
|
|
(1)
|
|
The value realized on the exercise
of stock options is based on the difference between the exercise
price and the market price (used for tax purposes) of our common
stock on the date of exercise.
|
|
(2)
|
|
In 2009, the Robert M. Holster
2007 Family Trust (the Holster Trust), of which
Mr. Holsters spouse is the trustee, exercised 30,000
stock options. The value realized on exercise was $1,065,800.
Mr. Holster disclaims beneficial ownership of the Holster
Trusts holdings.
|
Potential
Payments Upon Termination of Employment or Change in
Control
The following information and table set forth the amount payable
to each of our Named Executive Officers in the event of a
termination of employment as a result of involuntary
termination, resignation following a change in control and
involuntary termination following a change in control.
Assumptions and General Principles. The following
assumptions and general principles apply with respect to the
following table and any termination of employment of a Named
Executive Officer:
|
|
|
|
|
The amounts shown in the table assume that each Named Executive
Officer was terminated on December 31, 2009. Accordingly,
the table reflects amounts earned as of December 31, 2009
and includes estimates of amounts that would be paid to the
Named Executive Officer upon the occurrence of a termination or
change in control. The actual amounts to be paid to a Named
Executive Officer can only be determined at the time of the
termination or change in control.
|
|
|
|
A Named Executive Officer is entitled to receive amounts earned
during his term of employment regardless of the manner in which
the Named Executive Officers employment is terminated.
This amount includes base salary and unused vacation pay.
Amounts due for unused vacation pay for 2009 are not shown in
the table.
|
|
|
|
The amounts in the table assume that each of the Named Executive
Officers would have been entitled to receive the targeted annual
bonus payment for 2009 and not the amount that the Board
determined to pay based upon the level of attainment of the
Company performance objectives. Therefore, the amount set forth
in the table for prorated bonus compensation is the target bonus
compensation for each Named Executive Officer and not the amount
that was actually paid and shown as Non-Equity Incentive Plan
Compensation in the Summary Compensation Table.
|
37
|
|
|
|
|
For purposes of Messrs. Holsters and Lucias
employment agreements, a Change of Control means the
sale or transfer of all or substantially all of the assets of
the Company or any merger, consolidation or other transaction
that would result in the transfer, directly or indirectly, of
more than 50% of the then outstanding capital stock of the
Company to holders who were not holders of its capital stock
immediately prior to such merger. Under the terms of the
employment contracts, a sale of substantially all the
Companys assets may occur but such an event will not
constitute a Change of Control Transaction unless we
have sold all our significant lines of business and intend to
limit our future activities to the distribution of the proceeds
of such transaction.
|
|
|
|
Under the terms of the 2006 Plan, a Change of
Control shall mean the occurrence of any of the following
events: (i) at least a majority of the Board shall cease to
consist of directors of the Company who served in such capacity
at the time the 2006 Plan was adopted or during each subsequent
renewal term; (ii) any person or
group shall have acquired beneficial ownership (as
defined in
Regulation 13d-3)
of shares having 35% or more of the voting power of all
outstanding shares, unless such acquisition is preapproved by
the Board; (iii) a merger or consolidation occurs in which
outstanding shares are converted into shares of another company,
or other securities, or cash or other property; (iv) the
sale of all, or substantially all, of the Companys assets
occurs; or (v) the Companys stockholders approve a
plan of complete liquidation of the Company.
|
|
|
|
The following actions, failures and events by a Named Executive
Officer shall constitute Cause: (i) a
conviction or the entering of a plea of nolo contendere with
respect to a felony, (ii) dependence on, or habitual abuse
of controlled substances or alcohol (in the case of alcohol
abuse, that has a material adverse affect on performance of
employment obligations) or acts of dishonesty that are
materially detrimental to the Company, (iii) willful
misconduct that materially damages the business of the Company,
(iv) gross negligence in the performance of, or willful
disregard of material obligations relating to employment, which
gross negligence or willful disregard continues unremedied, or
(v) failure to obey the reasonable and lawful orders and
policies of the Board of Directors that are material to and
consistent with the provisions of his employment.
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
Resignation
|
|
Termination
|
|
|
|
|
Upon a
|
|
Upon a
|
|
|
Involuntary
|
|
Change of
|
|
Change of
|
Named Executive Officer and
Type of Payment
|
|
Termination
|
|
Control
|
|
Control
|
|
William C. Lucia, President & Chief Executive
Officer(1)
|
Cash severance
|
|
$800,000
|
|
$800,000
|
|
$800,000
|
Bonus payment
|
|
$520,000
|
|
$520,000
|
|
$520,000
|
Continued health insurance coverage
|
|
$11,602
|
|
$11,602
|
|
$11,602
|
Restricted Stock
|
|
$1,556,800(2)
|
|
-
|
|
$1,556,800(2)
|
Stock Options
|
|
$11,746,400(3)
|
|
$11,746,400(3)
|
|
$14,808,400(4)
|
|
|
|
|
|
|
|
Total
|
|
$14,634,802
|
|
$13,078,002
|
|
$17,696,602
|
|
Robert M. Holster, Non-Executive Chairman/Former Chief
Executive
Officer(5)
|
Cash severance
|
|
$290,400
|
|
$290,400
|
|
$290,400
|
Continued health insurance
coverage(6)
|
|
$14,639
|
|
$14,639
|
|
$14,639
|
Stock
Options(3)
|
|
$18,385,300(3)
|
|
$18,385,300(3)
|
|
$19,337,900(4)
|
|
|
|
|
|
|
|
Total
|
|
$18,690,339
|
|
$18,690,339
|
|
$19,642,939
|
|
|
|
|
|
|
|
Walter D. Hosp, Chief Financial
Officer(7)
|
|
|
|
|
|
|
Cash severance
|
|
$325,000
|
|
-
|
|
$325,000
|
Continued health insurance coverage
|
|
$18,815
|
|
-
|
|
$18,815
|
Restricted Stock
|
|
$1,245,400(2)
|
|
-
|
|
$1,245,400(2)
|
Stock Options
|
|
$1,106,200(3)
|
|
$1,106,200(3)
|
|
$2,914,200(4)
|
|
|
|
|
|
|
|
Total
|
|
$2,695,415
|
|
$1,106,200
|
|
$4,503,415
|
|
John D. Schmid, Vice President, Human
Resources(8)
|
Cash severance
|
|
$110,000
|
|
-
|
|
$110,000
|
Continued health insurance coverage
|
|
$6,558
|
|
-
|
|
$6,558
|
Stock Options
|
|
$140,500(3)
|
|
$140,500(3)
|
|
$1,187,300(4)
|
|
|
|
|
|
|
|
Total
|
|
$257,058
|
|
$140,500
|
|
$1,303,858
|
|
|
|
(1)
|
|
If we terminate
Mr. Lucias employment without cause or if
his employment ceases because of his death or disability or if
he terminates his employment within 45 days of a Change of
Control, then provided Mr. Lucia complies with certain
restrictive covenants contained in his employment agreement (as
described below), then for the 24 months following
Mr. Lucias termination, he will be entitled to
receive: (i) severance equal to his base salary,
(ii) his 65% target bonus, and (iii) continued health
insurance coverage. For the 24 months following
Mr. Lucias termination, he is prohibited from:
(i) directly or indirectly engaging in competition with or
owning any interest in, performing any services for,
participating in, or being connected with any business that is
competitive with the business of the Company and its
subsidiaries, (ii) directly or indirectly inducing or
attempting to induce any employee of the Company or its
subsidiaries to leave the employ of the Company, and
(iii) directly or indirectly hiring, engaging or working
with any supplier, contractor or other business relation of the
Company or its subsidiaries if such action would be known by him
to have a material adverse effect on the Companys business
or materially interfere with the Companys relationship
with that person/entity.
|
(2)
|
|
In the event a holder of a
restricted stock award ceases to be employed by the Company by
reason of death, disability or involuntarily (other than
(i) for Cause and (ii) for Cause within 24 months
of a Change of Control, but including without Cause during the
24-month
period following a Change of Control), the restricted stock
shall vest in full. In addition, the Compensation Committee has
the discretion to accelerate vesting of the restricted stock in
the event of a Change of Control. The amounts presented
represent the market value of the restricted stock, which is
determined based on the number of shares granted and the
|
39
|
|
|
|
|
fair value of our common stock on
December 31, 2009, which is the closing sales price per
share of our common stock reported on The NASDAQ Global Market
on that date ($48.69), less the consideration paid by the
recipient for the award ($0.01 per share).
|
(3)
|
|
Under the terms of our 2006 Plan,
upon an employees termination of employment (for any
reason other than gross misconduct), stock option exercises
shall be limited to the stock options that were immediately
exercisable at the date of such termination. The amounts
presented represent the value of each Named Executive
Officers vested stock options as of December 31, 2009
(calculated based on the excess of the closing market price of
our common stock on December 31, 2009, over the exercise
prices of such options).
|
(4)
|
|
Under the terms of our 2006 Plan,
if a Named Executive Officer ceases to be employed by the
Company by reason of involuntary termination by the Company
(other than for Cause) during the
24-month
period following a Change of Control, such Named Executive
Officer is entitled to full accelerated vesting of his stock
options. The numbers included in the table represent the value
of the accelerated vesting of stock options (calculated based on
the excess of the closing market price of our common stock on
December 31, 2009, over the exercise prices of such
options).
|
(5)
|
|
If we terminate
Mr. Holsters employment without cause or
if his employment ceases because of his death or disability or
if he terminates his employment within 45 days of a Change
of Control of the Company, then provided he complies with
certain restrictive covenants contained in his employment
agreement with the Company (as described below),
Mr. Holster will be entitled to receive, through
February 11, 2011, (i) severance equal to his base
salary, and (ii) continued health insurance coverage.
Mr. Holsters employment agreement prohibits him from
doing any of the following through February 11, 2011:
(i) directly or indirectly engaging in competition with or
owning any interest in, performing any services for,
participating in, or being connected with any business that is
competitive with the business of the Company and its
subsidiaries, (ii) directly or indirectly inducing or
attempting to induce any employee of the Company or its
subsidiaries to leave the employ of the Company, and
(iii) directly or indirectly hiring, engaging or working
with any supplier, contractor or other business relation of the
Company or its subsidiaries if such action would be known by him
to have a material adverse effect on the Companys business
or materially interfere with the Companys relationship
with that person/entity.
|
(6)
|
|
In the event the successor company
in a Change of Control does not offer Mr. Holster
post-termination health benefits, then at the time of the
closing of such transaction and subject to certain conditions,
we will make a lump sum payment to Mr. Holster equal to
135% of the COBRA cost for 18 months of family health plan
continuation, plus 135% of the cost of premiums for six months
of a non-group family health plan benefits.
|
(7)
|
|
In the event Mr. Hosp is
involuntarily terminated or involuntarily terminated upon a
Change of Control of the Company, he will be entitled to salary
and benefits continuation for twelve months.
|
(8)
|
|
In the event Mr. Schmid is
involuntarily terminated, he will be entitled to salary and
benefits continuation for six months.
|
Executive
Employment Agreements
Robert M.
Holster Chairman
On March 1, 2009, in connection with
Mr. Holsters resignation as our Chief Executive
Officer, we amended and restated his employment agreement to
reflect his continued employment with the Company as the
Non-Executive Chairman of the Board of Directors. Unless
extended or earlier terminated (as described in more detail
below), this agreement will terminate on February 28, 2011.
Under the terms of this agreement, Mr. Holster is required
to devote at least 50% of his business time to the performances
of services under the agreement. Mr. Holsters current
annualized base salary is $250,000. Mr. Holster is eligible
to receive bonus compensation from the Company in respect of
each fiscal year (or portion thereof) during the term of the
agreement, in each case as may be determined by the Board of
Directors in its sole discretion, on the basis of
performance-based or such other criteria as may be established
from time to time by our Board of Directors.
40
Mr. Holsters target bonus is 65% of his base salary.
For 2009, Mr. Holster received a performance bonus of
$276,288.
Under the terms of our agreement with Mr. Holster, if we
terminate Mr. Holsters employment without
Cause or if his employment ceases because of his
death or disability or if he terminates his employment within
45 days of a Change of Control of us, then provided he
complies with certain restrictive covenants contained in the
agreement, Mr. Holster will be entitled to receive, through
February 11, 2011 (i) severance equal to his base
salary, and (ii) continued health insurance coverage.
In the event of a change of control transaction, if the
successor company does not offer Mr. Holster
post-termination health benefits, then at the time of the
closing of such transaction and subject to certain conditions,
we will make a lump sum payment to Mr. Holster equal to
135% of the COBRA cost for 18 months of family health plan
continuation, plus 135% of the cost of premiums for six months
of a non-group family health plan benefits.
William
C. Lucia President and Chief Executive
Officer
On March 1, 2009, in connection with Mr. Lucias
appointment as our Chief Executive Officer, we entered into an
amended and restated employment agreement with Mr. Lucia.
Unless extended or earlier terminated, this agreement will
terminate on February 28, 2011. For 2009,
Mr. Lucias annualized base salary was $400,000.
Effective March, 1, 2010, the Compensation Committee increased
Mr. Lucias annualized base salary to $525,000.
Mr. Lucia is eligible to receive bonus compensation from us
in respect of each fiscal year (or portion thereof) during term
of his employment, in each case as may be determined by our
Board of Directors in its sole discretion on the basis of
performance-based or such other criteria as may be established
from time to time by our Board of Directors.
Mr. Lucias target bonus is 65% of his base salary.
For 2009, Mr. Lucia received a performance bonus of
$442,060.
If we terminate Mr. Lucias employment without
Cause or if his employment ceases because of his
death or disability or if he terminates his employment within
45 days of a Change of Control, then provided
Mr. Lucia complies with certain restrictive covenants
contained in the agreement, for the 24 months following
Mr. Lucias termination, he will be entitled to
receive (i) severance equal to his base salary,
(ii) his 65% target bonus, and (iii) continued health
insurance coverage.
Walter D.
Hosp Chief Financial Officer
We have an employment letter agreement with Mr. Hosp that
has an unspecified term. Mr. Hosps current annualized
base salary, as approved by the Compensation Committee, is
$325,000. Mr. Hosp is also eligible to receive an annual
performance bonus, which depends on our performance and his
individual performance, in each case as determined by our Board
of Directors. For 2009, Mr. Hosps target bonus was
40% of his base salary. In February 2010, the Compensation
Committee increased Mr. Hosps target bonus to 50% of
his base salary. For 2009, Mr. Hosp received a performance
bonus of $221,030. Upon his commencement of employment with us,
Mr. Hosp was granted a stock option to purchase
60,000 shares of our common stock at an exercise price of
$19.12 per share (the then current market price), with options
covering 15,000 shares vesting on the first anniversary of
the grant, and options covering the remaining 45,000 shares
vesting thereafter in three equal annual installments. These
options were not granted pursuant to our 2006 Stock Plan.
In the event Mr. Hosp is involuntarily terminated or
involuntarily terminated upon a change in control of the
Company, he will be entitled to salary and benefits continuation
for twelve months.
41
John D.
Schmid Vice President of Human Resources
We have an employment letter agreement with Mr. Schmid that
has an unspecified term. Mr. Schmids current
annualized base salary, as approved by the Compensation
Committee, is $220,000. He is also eligible to receive an annual
performance bonus, which depends on our performance and his
individual and department performance, in each case as
determined by our Board of Directors. Mr. Schmids
target bonus is 40% of his base salary. For 2009,
Mr. Schmid received a performance bonus of $149,620. Upon
his commencement of employment with us, Mr. Schmid received
a sign-on bonus of $25,000. In addition, Mr. Schmid was
granted a stock option to purchase 25,000 shares of our
common stock at an exercise price of $21.86 per share (the then
current market price), with options covering 6,250 shares
vesting on the first anniversary of the grant, and options
covering the remaining 18,750 shares vesting thereafter in
three equal annual installments. These options were granted
pursuant to our 2006 Stock Plan.
In the event Mr. Schmid is involuntarily terminated, he
will be entitled to salary and benefits continuation for six
months.
42
DIRECTOR
COMPENSATION
General
A director who is one of our employees receives no additional
cash compensation for his or her services as a director or as a
member of a committee of our Board of Directors. A director who
is not one of our employees (a non-employee director) receives
cash compensation for his or her services as described below.
All directors are reimbursed for reasonable expenses incurred in
connection with attendance at meetings of the Board of Directors
or its committees.
Quarterly
Retainer
Each non-employee director receives a quarterly retainer for
service as a director, which is paid at the end of each quarter.
The amount of the retainer is fixed from time to time by
resolution of the Board. The quarterly retainer is currently
$8,750 per quarter, or $35,000 annually.
Audit
Committee Chair Retainer
The Audit Committee Chair, Ms. Rudnick, receives an
additional $5,000 per year in the form of a quarterly retainer
of $1,250, which is also paid at the end of each quarter.
Stock
Option Grants
Each of our non-employee directors is eligible to receive an
annual award of stock options, the value of which is fixed from
time to time by resolution of the Board. In September 2009, the
Board adopted the 2009 Long Term Incentive Plan provided that
for 2009 each of our non-employee directors, and
Mr. Holster would receive a stock option grant valued at
approximately $50,000, with the actual number of stock options
to be calculated based on the grant date fair value computed in
accordance with FASB ASC Topic 718, except that no assumption
for forfeitures would be included. On October 1, 2009,
under the terms of the 2009 Long Term Incentive Plan, each of
our non-employee directors, and Mr. Holster, was granted a
stock option to purchase 3,100 shares of our common stock,
which vests quarterly over a one year period commencing
December 31, 2009.
2009
Non-Employee Director Compensation
The following table sets forth compensation earned and paid to
each non-employee director for service as a director during 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Option
|
|
|
Name(1)
|
|
Paid in Cash
|
|
Awards(2)
|
|
Total
|
|
James T. Kelly
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
William F. Miller III
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
William S. Mosakowski
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
William W. Neal
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
Galen D. Powers
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
Ellen A Rudnick
|
|
$
|
40,000
|
|
|
$
|
44,900
|
|
|
$
|
84,900
|
|
Michael A. Stocker, M.D.
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
Richard H. Stowe
|
|
$
|
35,000
|
|
|
$
|
44,900
|
|
|
$
|
79,900
|
|
|
|
|
(1)
|
|
The number of stock options
outstanding as of December 31, 2009 held by the directors
named in the above table was as follows: Mr. Kelly
(35,100), Mr. Miller (20,100), Mr. Mosakowski
(18,850), Mr. Neal (16,774), Mr. Powers (20,100),
Ms. Rudnick (85,100), Dr. Stocker (18,850) and
Mr. Stowe (65,100).
|
43
|
|
|
(2)
|
|
On October 1, 2009, each
non-employee director, and Mr. Holster, was granted a stock
option to purchase 3,100 shares of common stock that vests
quarterly commencing on December 31, 2009. The amounts in
this column represent the grant date fair value of that stock
option grant computed in accordance with FASB ASC Topic 718. The
relevant assumptions made in the valuations may be found in
Note 11 of the Notes to Consolidated Financial Statements
in our 2009 Annual Report on
Form 10-K.
These amounts do not correspond to the actual value that may be
realized by the directors with respect to these awards.
|
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
William S. Mosakowski, a member of our Board of Directors since
December 2006, is the President, Chief Executive Officer,
controlling stockholder and a member of the board of directors
of PCG. We acquired PCGs Benefits Solutions Practice Area
(BSPA) in August 2006. Since the acquisition of BSPA in 2006, we
have entered into several subcontractor agreements with PCG,
pursuant to which we provide cost containment services. For the
year ended December 31, 2009, we recognized
$2.8 million as revenue under subcontractor agreements with
PCG. For the year ended December 31, 2009, accounts
receivable outstanding related to these subcontractor agreements
with PCG were $2.9 million.
In addition, as part of the acquisition of BSPA in 2006, we
subleased office space from PCG. For the year ended
December 31, 2009, we recognized approximately $110,000 as
expense under such sublease arrangement with PCG.
In connection with the BSPA acquisition, we entered into an
Intercompany Services Agreement (ISA) with PCG to allow each
party to perform services for the other, such as information
technology support and contractual transition services. Services
performed under the ISA are billed at pre-determined rates
specified in the ISA. For the year ended December 31, 2009,
services rendered by PCG under the ISA were valued at
approximately $122,000 and our services rendered to PCG were
valued at approximately $184,000.
Since the BSPA acquisition, amounts collected by or paid on our
behalf by PCG are reimbursed to PCG at cost. At
December 31, 2009, we owed $170,000 to PCG.
The Audit Committee has reviewed and approved these transactions.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act and the rules
issued thereunder, our executive officers and directors are
required to file with the SEC and NASDAQ reports of ownership
and changes in ownership of common stock. Copies of such reports
are required to be furnished to us.
Based solely on review of the copies of such reports furnished
to us, or written representations that no other reports were
required, we believe that during fiscal year 2009, all of our
executive officers and directors complied with the requirements
of Section 16(a), except that due to an administrative
error, Mr. Lucia, our President and Chief Executive Officer
and Director, filed one late Form 4 reporting the exercise
of a stock option and the sale of the underlying shares of
common stock pursuant to his 10b5-1 plan.
10b5-1
PLANS
Our policy regarding securities trades by our executive officers
and directors permits sales of our securities under plans
instituted pursuant to
Rule 10b5-1
under the Exchange Act. These plans allow insiders to diversify
their holdings in a manner that dispels any inference that they
are trading on the basis of material nonpublic information.
Several of our executive officers and directors have established
10b5-1 plans.
44
OTHER
BUSINESS
As of the date of this Proxy Statement, the Board of Directors
knows of no business to be presented at the Annual Meeting other
than as set forth herein. If other matters properly come before
the Annual Meeting, the persons named as proxies will vote on
such matters in their discretion.
ANNUAL
REPORT
Our 2009 Annual Report on
Form 10-K
is concurrently being mailed to shareholders. The Annual Report
contains our consolidated financial statements and the report
thereon of KPMG LLP, independent registered public accounting
firm. The Annual Report is not incorporated into this Proxy
Statement and is not considered proxy solicitation material.
BY ORDER OF THE BOARD OF DIRECTORS
Walter D. Hosp
Chief Financial Officer and
Corporate Secretary
Dated: April 30, 2010
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
THEREFORE,
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN
THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
45
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day.
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INTERNET |
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http://www.proxyvoting.com/hmsy |
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HMS Holdings
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Use the Internet to vote your proxy.
Have your proxy card in hand when you
access the web site.
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OR |
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TELEPHONE |
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1-866-540-5760 |
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Use any touch-tone telephone to vote
your proxy. Have your proxy card in
hand when you call.
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If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card. |
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To vote by mail, mark, sign and date your proxy card
and return it in the enclosed postage-paid envelope.
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Your Internet or telephone vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card. |
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WO#
72833
6 FOLD AND DETACH HERE 6
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Please mark your votes as indicated in this example |
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WITHHOLD AUTHORITY |
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FOR all nominees |
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to vote for all |
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listed |
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nominees listed |
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*FOR ALL EXCEPT |
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FOR
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AGAINST
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ABSTAIN
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1.
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ELECTION OF DIRECTORS
Nominees:
01 Robert M. Holster 02 James T. Kelly 03 William C. Lucia 04 William S. Mosakowski
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2.
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Ratification of the selection of KPMG LLP as
the Companys independent registered public
accounting firm for the fiscal year ending
December 31, 2010.
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3.
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To transact such other business as may properly come before the meeting or any adjournment thereof.
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INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the FOR ALL EXCEPT box and write that nominees name in the space provided below. |
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*Exceptions |
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Mark Here for
Address Change or
Comments
SEE REVERSE
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NOTE: Please sign as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
HMS HOLDINGS CORP.
Annual Meeting of Shareholders
June 9, 2010
401 Park Avenue South
10th Floor
New York, NY 10016
Choose MLinkSM for fast, easy and secure 24/7 online access to your
future proxy materials, investment plan statements, tax documents and more.
Simply log on to Investor ServiceDirect® at
www.bnymellon.com/shareowner/isd where step-by-step instructions will
prompt you through enrollment.
Important
notice regarding the Internet availability of proxy materials for the
Annual Meeting of shareholders: The Proxy Statement and the 2009
Annual Report to Stockholders are available
at: http://bnymellon.mobular.net/bnymellon/hmsy
6 FOLD AND DETACH HERE 6
HMS HOLDINGS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints
William C. Lucia and Walter D. Hosp, and any one of them, as proxies, to vote all shares of Common Stock of HMS Holdings
Corp. (the Company) held of record by the undersigned as of April 30, 2010, the record date with respect to this solicitation, at the Annual Meeting of Shareholders of the Company to be held at 401 Park Avenue South, 10th Floor,
New York, New York 10016 on Wednesday, June 9, 2010, at 10:00 A.M. and any adjournments thereof, upon the following matters:
THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2 ON THE REVERSE HEREOF. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED TO VOTE UPON
SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. IF ANY NOMINEE DECLINES OR IS UNABLE TO SERVE AS
A DIRECTOR, THEN THE PROXIES SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY THE BOARD OF DIRECTORS.
(Continued and to be signed on the reverse side)
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
WO #
72833