Enhabit’s proxy statement on Schedule 14A, form of proxy card, and 2022 Annual Report (including the 2022 Annual Report on Form 10-K) are available at
www.proxydoc.com/EHAB.
We will mail a notice of internet availability of proxy materials, which contains instructions on how to access these materials and vote online.
Your vote is important. Please exercise your stockholder right to vote by submitting your proxy or voting instructions as soon as possible.
As used in this report, the terms “Enhabit,”“we,”“us,”“our,” and the “Company” refer to Enhabit, Inc. and its consolidated subsidiaries, unless otherwise stated or indicated by context.
This proxy statement contains historical information, as well as forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that involve known and unknown risks and relate to, among other things, future events, projections, financial guidance, legislative or regulatory developments, strategy or growth opportunities, our future financial performance, our projected business results, or our projected capital expenditures. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, the reader can identify forward-looking statements by terminology such as “may,”“will,”“should,”“could,”“expects,”“plans,”“anticipates,”“believes,”“estimates,”“predicts,”“targets,”“potential,” or “continue” or the negative of these terms or other comparable terminology. Any forward-looking statement speaks only as of the date of this report, and the Company undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties, many of which are beyond our control. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. Our Annual Report on Form 10-K for the year ended December 31, 2022 dated April
14, 2023, which can be found on the Company’s website at http://investors.ehab.com, discusses risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statement in this report.
This proxy statement contains references to Enhabit’s website. Our
website is not and shall not be deemed to be a part of this proxy statement by reference or otherwise incorporated into any other filings we make with the SEC.
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ENHABIT, INC.
PROXY STATEMENT
PROXY SUMMARY
This summary highlights selected information about the items to be voted on at our annual meeting and information contained elsewhere in this proxy statement. This summary does not contain all of the information
that you should consider in deciding how to vote, so you should read the entire proxy statement carefully before voting.
On July 1, 2022, we became a publicly traded company when our former parent company, Encompass Health Corporation (“Encompass”), separated its home health and hospice business from its inpatient rehabilitation business and made a distribution of all of our outstanding common stock to Encompass’s stockholders (the “Separation”). The 2023 annual meeting is our first annual meeting following the Separation.
Our corporate predecessor was formed in 2014 to hold Encompass’s home health and hospice business. As a stand-alone company, Enhabit, Inc. is a leading provider of home health and hospice services in the United States
with a footprint of 253 home health and 107 hospice locations across 34 states. The Separation is discussed in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022, including Amendment No. 1 (the “2022 Form 10-K”). In addition, our 2022 Form 10-K describes our Company and the assets and liabilities that comprise the home health and hospice services business that we now own following completion of the Separation.
Proposals That Require Your Vote
Enhabit’s board of directors (our “Board”) recommends the following votes for each proposal:
Proposals
Board
Recommendation
Votes Required for Approval
More Information
1. Election of 13 directors to serve until our 2024 annual meeting
FOR each nominee
Votes for a director nominee exceed 50% of the number of votes cast with respect to that nominee
We have implemented the following best practices related to executive compensation:
ü
Emphasis
on performance-based variable compensation
X
No significant perquisites
ü
Majority of long-term incentive awards are performance-based
X
No “single-trigger” vesting for equity awards in the event of a change in control
ü
Short-term incentive plan includes both financial and quality of care (ESG) metrics
X
No hedging or pledging of Company stock
ü
Robust
stock ownership requirements for officers and directors implemented in 2022
X
No tax gross-ups on termination payments related to a change in control
ü
Conduct annual review of peer group and competitiveness of executive compensation
X
No dividends paid out on unvested restricted or performance shares
ü
Cash severance provisions aligned with market practices
X
No
defined benefit pension plans for executives
ü
“Double-trigger” vesting for equity awards in the event of a change in control
X
No option repricing
ü
Compensation recoupment, or “claw-back,” policy applies to both cash and equity incentives and covers misconduct in some cases where a financial restatement has not occurred
ü
Compensation Committee comprised solely of independent directors
ü
Independent
compensation consultant
Governance Highlights
ü
Independent, non-executive chairman of the board
ü
12 of 13 directors standing for re-election are independent
ü
All
standing board committees are fully independent
ü
Declassified board with annual elections
ü
None of the directors serve on more than three outside public company boards
ü
Focus on board diversity- five female directors and three directors identify as members of underrepresented groups
ü
Annual board and committee performance evaluations and periodic involvement of outside advisors in such evaluations
ü
Stockholders
may amend our bylaws by simple majority vote
Proxy reimbursement bylaw for stockholder proxy solicitation expenses
ü
Stockholders may act by written consent
ü
Enterprise risk management, including cybersecurity, oversight by
full board and designated committees on regular schedule
ü
Organizational focus on a strong culture that values inclusion, diversity, and equity and employee development and engagement
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COMMONLY ASKED QUESTIONS
Why did I receive these proxy materials?
We are furnishing this proxy statement in connection with the solicitation by our Board of proxies to be voted at our
2023 annual meeting of stockholders and at any adjournment or postponement. At our annual meeting, stockholders will act upon the following proposals:
(1)to elect 13 directors to the Board to serve until our 2024 annual meeting of stockholders;
(2)to ratify the appointment by the Audit Committee of our Board of PricewaterhouseCoopers LLP as our independent registered public accounting firm;
(3)to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement;
(4)to vote, on an advisory basis, as to whether the above “say-on-pay” advisory vote should occur every one, two, or three years; and
(5)to
transact such other business as may properly come before the 2023 annual meeting of stockholders and any adjournment or postponement.
These proxy solicitation materials are being sent to our stockholders on or about May 19, 2023 and summarize the purposes of the meeting and the information you need to know to vote at the annual meeting.
What do I need to attend the virtual meeting?
In order to attend the annual meeting, you must register in advance at www.proxypush.com/EHAB prior to the deadline of June 27, 2023 at 5:00 p.m. (CDT). The Control Number provided on your voting
information form or proxy card is necessary to register. Upon completing registration, you will receive a confirmation e-mail, which will contain further instructions about when you will receive a unique link to allow you access to the annual meeting and instructions for submitting questions in advance of the annual meeting. Approximately one hour prior to the meeting start time, all pre-registered stockholders will receive an e-mail containing a unique link to allow them access to the meeting— as well as a link giving them the ability to vote during the meeting. Please be sure to review and follow the instructions found on your proxy card and/or voting instruction form, as well as the instructions that will be delivered to you via e-mail after you register.
Enter the control number on your proxy card, voting instruction form, or Notice of Internet Availability
⇒
A unique link will be emailed to you to access the Annual Meeting
Who is entitled to vote at the meeting?
The Board has determined that those stockholders who are recorded in the books of our transfer agent as owning shares of our common stock as of the close of business on May 10, 2023,
are entitled to receive notice of and to vote at the annual meeting. As of May 10, 2023, there were 50,099,817 shares of our common stock issued and outstanding. Your shares may be (1) held directly in your name as the stockholder of record or (2) held for you as the beneficial owner through a stock brokerage account, bank or other nominee, or both. Each share of common stock owned as of the close of business on May 10, 2023 is entitled to one vote on each matter properly brought before the annual meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most of our stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between
shares held of record and those owned beneficially.
Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting.
Beneficial Owner. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or nominee which is considered, with respect to those shares, the stockholder of record. As the beneficial owner of shares, you are invited to
attend the virtual annual meeting; however, you may not vote your shares at the annual meeting unless you obtain a written proxy from your broker.
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If I am a beneficial owner stockholder, how do I vote?
You are considered a beneficial owner of shares held in “street name” if your shares are held by a broker, bank or other nominee on your behalf. If you are a beneficial owner of shares, you will receive instructions from your broker describing how to vote your shares. As a beneficial owner of your shares, you are entitled to direct your broker how to vote your shares. You may instruct your broker on how to vote by completing the voting instruction form provided to you by your broker. You may also vote by telephone or via the
Internet if your broker makes such methods available, in which case applicable instructions will be provided to you by your broker. If you do not timely instruct your broker on how to vote your shares, your broker may vote your shares as it decides with respect to Proposal Two (the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm). There are also non-discretionary matters for which your broker does not have discretionary authority to vote unless it receives timely instructions from you: Proposal One (the election of directors), Proposal Three (the non-binding, advisory approval of named executive officer compensation) and Proposal Four (the advisory vote on the frequency of the stockholder vote to approve named executive officer compensation). A “broker non-vote” results when a broker does not have discretion to vote on a particular matter, you have not given timely instructions on how the broker
should vote your shares and the broker indicates it does not have authority to vote such shares on its proxy. Please review the materials provided to you and vote as soon as possible.
If I am a stockholder of record, how do I vote?
You are a stockholder of record if your shares are directly held by you and registered in your name with our transfer agent, Computershare Trust Company, N.A. If you are a stockholder of record, you may vote your shares via the Internet at www.proxypush.com/EHAB. You may also vote by touch-tone telephone from the United States by calling 1-866-569-2033, or by completing,
signing and dating the proxy card and returning the proxy card in the prepaid envelope. In order to be valid and acted upon at the annual meeting, your proxy must be received before 11:59 p.m. (CDT) on June 27, 2023. Shares represented by proxy will be voted at the annual meeting unless the proxy is revoked at any time prior to the time at which the shares covered by proxy are voted by: (i) timely submitting a proxy with new voting instructions via the Internet or telephone; (ii) timely delivering a valid, later-dated executed proxy card; (iii) delivering a written notice of revocation that is received by our Corporate Secretary at 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206,
by 11:59 p.m. (CDT) on June 27, 2023; or (iv) voting at the virtual annual meeting by completing a ballot. The Control Number provided on your voting information form or proxy card is necessary to vote. Please review the materials provided to you and vote as soon as possible.
How may I submit questions at the annual meeting?
To submit questions at the annual meeting, you must register in advance at ww.proxypush.com/EHAB prior to the deadline of June 27, 2023 at 5:00 p.m. (CDT). Upon completing your registration, you will receive further instructions via e-mail, including your unique link that will allow you access to the meeting and will also permit you to submit questions.
Appropriate,
pre-submitted questions related to the business of the annual meeting (the proposals being voted upon) will be answered during the annual meeting, subject to time constraints. Any such questions that cannot be answered during the annual meeting due to time constraints will be posted and answered on the Investor Relations section of our website as soon as practical after the annual meeting.
What if during the check-in time or during the annual meeting I have technical difficulties or trouble accessing the virtual meeting website?
We will have technicians ready to assist you with any technical difficulties you may have accessing the
virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the annual meeting login page and included in the meeting access e-mail. Registration support is also available by directing your question(s) to the e-mail address displayed on the registration page.
Can I access the proxy statement and annual report on the internet?
Yes. This proxy statement, the form of proxy card and our 2022 Form 10-K are available at www.proxydocs.com/EHAB.
If you received a paper copy of the proxy materials, you have made a previous election to that effect. If you are a stockholder of record and would like to access future proxy materials electronically instead of receiving paper copies in the mail, there are several ways to do this. You can mark the appropriate box on your proxy card or follow the instructions if you vote by telephone or the internet. If you have internet access, we hope you make this choice. Receiving future annual reports and proxy statements via the internet will be simpler for you, will save the Company money and is friendlier to the environment.
A copy of our 2022 Form 10-K and the proxy materials are also available without charge from the “Investors” section of our website
at https://investors.ehab.com. The 2022 Form 10-K and the proxy materials are also available in print to stockholders without charge and upon request, addressed to Enhabit, Inc., 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206, Attention: Corporate Secretary.
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Are you planning on making the proxy materials only available by internet this year,
unless paper copies are requested?
No. Although many public companies mail a notice to their stockholders so they can provide proxy materials through the internet, we have elected to use the “full set delivery” option and are providing paper copies of proxy materials to all of our stockholders, unless otherwise previously requested by the stockholder. Our proxy materials and 2022 Form 10-K comprising our Annual Report are also available via the internet. See “Can I access the proxy statement and report on the internet?” directly above. We may decide not to use the “full set delivery” option in the future; however, you will still have the right to request a free set of proxy materials by mail.
What is “householding” and how does it affect me?
We are sending only one notice or one proxy statement and annual report
to the address of multiple stockholders having the same address unless we have received contrary instructions from any stockholder. This practice, known as “householding,” saves paper and reduces printing and mailing costs. If any stockholder residing at such an address wishes to receive an individual copy of the materials, please contact our Corporate Secretary at 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206, or call 1-887-330-7657. Conversely, if you are receiving multiple copies of these disclosure documents and wish to receive only one copy, you should contact your bank or broker for information regarding householding of disclosure documents and to request a change in delivery status.
What
constitutes a quorum to transact business at the meeting?
Before any business may be transacted at the annual meeting, a quorum must be present. The presence at the annual meeting, in person or by proxy, of the holders of a majority of the shares of all of our capital stock outstanding and entitled to vote on the record date will constitute a quorum. At the close of business on May 10, 2023, 50,099,817 shares of our common stock were issued and outstanding. Proxies received but marked as withholds, abstentions, and broker non-votes will be included in the calculation of the number of shares considered to be present at the annual meeting for purposes of a quorum.
If a quorum is not present or if we decide that more time is necessary for the solicitation of proxies, we may adjourn the annual meeting. We may do this with or without a
stockholder vote. If the stockholders vote to adjourn the annual meeting in accordance with our Bylaws, the named proxies will vote all shares of common stock for which they have voting authority in favor of adjournment.
What vote is required to approve each item?
The vote requirements for Proposals One and Two are as follows:
•Each nominee for director named in Proposal One will be elected if the votes for the nominee exceed the number of votes against with respect to such nominee. Votes cast with respect to a nominee will exclude abstentions and broker non-votes.
•The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered
public accounting firm will be approved if the votes cast for the proposal exceed those cast against the proposal. Broker non-votes will not be counted as votes cast for or against.
Please note that “say-on-pay,” Proposal Three, and “say-on-frequency,” Proposal Four, are only advisory in nature and have no binding effect on the Company or our Board. For Proposal Three, our Board will consider the proposal approved if the votes cast in favor of the proposal exceed the votes cast against it. For Proposal Four, our Board will consider the preferred option to be the one receiving the most votes cast for it. Broker non-votes will not be counted as votes cast for or against these proposals.
A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for
a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. If you are a beneficial owner, your bank, broker or other holder of record is permitted to vote your shares on the ratification of the independent registered public accounting firm even if the record holder does not receive voting instructions from you. Absent instructions from you, the record holder may not vote on any “nondiscretionary” matter including a director election, an equity compensation plan, a matter relating to executive compensation, certain corporate governance changes, or any stockholder proposal. In that case, without your voting instructions, a broker non-vote will occur. An “abstention” will occur at the annual meeting if your shares are deemed to be present at the annual meeting because you attend the annual meeting but you do not
vote on any proposal or other matter which is required to be voted on at the annual meeting. You should consult your broker if you have questions about this.
The affirmative vote of at least a majority of our issued and outstanding shares present, in person or by proxy, and entitled to vote at the annual meeting will be required to approve any stockholder proposal validly presented at a meeting of stockholders. Under applicable Delaware law, in determining whether any stockholder proposal has received the requisite number of affirmative votes, abstentions will have the same effect as a vote against any stockholder proposal. Broker non-votes will be ignored. There are no dissenters’ rights of appraisal in connection with any stockholder vote to be taken at the annual meeting.
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What
does it mean if I receive more than one proxy or voting instruction card?
It means your shares of common stock are registered differently or are in more than one account. Please return each proxy and voting instruction card you receive. Please submit your vote for each control number you have been assigned.
Where can I find the voting results of the meeting?
We will announce preliminary voting results at the meeting. We will publish the voting results in a Current Report on Form 8-K to be filed with the SEC no later than four business days following the end of the annual meeting.
Who will count the votes?
A representative of Mediant Communications, acting as the inspector of election, will tabulate and certify the votes.
Who
will pay for the cost of this proxy solicitation?
We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials. If you choose to access the proxy materials or vote over the internet, however, you are responsible for internet access charges you may incur. 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, who will not receive any additional compensation for such solicitation activities. We will request banks, brokers, nominees, custodians, and other fiduciaries who hold shares of our stock in street name, to forward these proxy solicitation materials to the beneficial owners of those shares and we will reimburse the reasonable out-of-pocket expenses they incur in doing so.
Who
should I contact if I have questions?
If you hold our common stock through a brokerage account and you have any questions or need assistance in voting your shares, you should contact the broker or bank where you hold the account. If you are a record holder of our common stock and you have any questions or need assistance in voting your shares, please contact our Investor Relations department at investorrelations@ehab.com.
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ITEMS OF BUSINESS REQUIRING YOUR VOTE
Proposal
1 – Election of Directors
Director Nominees
The Board of Enhabit currently consists of 13 members. All nominees currently serve on our Board and their current terms will expire at the 2023 annual meeting. Our Board has determined that all of our Board members are independent, except Ms. Jacobsmeyer, our President and Chief Executive Officer. Based on the recommendation of the Nominating/Corporate Governance Committee, our Board proposes that each of the 13 nominees listed below be elected as directors at this annual meeting and serve until our 2024 annual meeting of stockholders.
Each director nominee named in Proposal One will be elected if the votes for that nominee exceed 50% of the number of votes cast with respect to that nominee.
Votes cast with respect to a nominee will exclude abstentions and broker non-votes. If a nominee becomes unable or unwilling to accept the nomination or election, the persons designated as proxies will be entitled to vote for any other person designated as a substitute nominee by our Board. We have no reason to believe that any of the following nominees will be unable to serve. Below we have provided information relating to each of the director nominees proposed for election by our Board, including a brief description of why he or she was nominated.
Name
of Nominee
Age
Current Roles
Leo I. Higdon, Jr.
77
Chairman of the Board, Member of Finance Committee and Audit Committee
Jeffrey W. Bolton
67
Member of Audit Committee and Compliance/Quality of Care Committee
Tina
L. Brown-Stevenson
66
Member of Nominating/Corporate Governance Committee and Compliance/Quality of Care Committee
Yvonne Curl
68
Member of Compensation and Human Capital Committee (Chair) and Nominating/Corporate Governance Committee
Charles M. Elson
63
Member of Finance Committee (Chair)
and Nominating/Corporate Governance Committee
Erin P. Hoeflinger
57
Member of Compensation and Human Capital Committee and Compliance/Quality of Care Committee
Barbara A. Jacobsmeyer
57
President and Chief Executive Officer
Susan La Monica
62
Member
of Finance Committee and Compensation and Human Capital Committee
John E. Maupin, Jr.
76
Member of Compliance and Quality of Care Committee (Chair) and Audit Committee
Stuart M. McGuigan
64
Member of Compliance/Quality of Care Committee and Nominating/Corporate Governance Committee
Gregory S. Rush
55
Member
of Finance Committee and Audit Committee (Chair)
Barry Schochet
72
Member of Compliance/Quality of Care Committee and Nominating/Corporate Governance Committee
L. Edward Shaw, Jr.
78
Member of Nominating/Corporate Governance Committee (Chair) and Compensation and Human Capital Committee
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The
following matrix is intended to summarize the primary skills and expertise qualifications of the nominees. Each nominee’s individual experiences and qualifications are described in more detail in the biographies below.
Mr. Higdon
served as President of Connecticut College from July 1, 2006, to December 31, 2013. He served as the President of the College of Charleston from October 2001 to June 2006. Between 1997 and 2001, Mr. Higdon served as President of Babson College in Wellesley, Massachusetts. He also served as Dean of the Darden Graduate School of Business Administration at the University of Virginia. His financial experience includes a 20-year tenure at Salomon Brothers, where he became Vice Chairman and Member of the Executive Committee, managing the Global Investment Banking Division. Mr Higdon served as a Director of Encompass from 2004 and served as its Chairman from 2014 until May 5, 2022. Mr. Higdon also served as a Director of Citizens Financial Group, Inc. As a result of his 20 years of experience in the financial services industry
combined with his strategic management skills gained through various senior executive positions, including in academia, and service on numerous boards of directors, Mr. Higdon has extensive experience with strategic and financial planning and the operations of public companies.
Leo I. Higdon, Jr.
Committees: Chairman of the Board, Member of Finance Committee and Audit Committee
Age: 77
Director Since: 2022
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Mr.
Bolton has more than 40 years of experience in a variety of sectors, including healthcare, higher education, and local government. Throughout his career, Mr. Bolton has developed a deep knowledge of acute care hospitals and integrated health networks. Most recently, Mr. Bolton served as the Chief Administrative Officer and Vice President for Administration (the most senior non-physician executive) at Mayo Clinic. While holding this position, Mr. Bolton managed strategic alliances and business development, corporate accounting and external reporting, and financial planning and analysis. Mr. Bolton co-led the development of the organization’s new strategic plan and substantially transformed the leadership team, bringing in high-profile executives from outside the system for key roles, such as Chief Financial Officer and Chief Human Resources Officer, that had traditionally been filled from within. Prior to serving as the Chief Administrative Officer and Vice President,
Mr. Bolton was the Chief Financial Officer and Chair of the Department of Finance at Mayo Clinic. Prior to joining Mayo Clinic, Mr. Bolton worked at Carnegie Mellon University where he held various finance and planning positions, including Chief Financial Officer. Previously, Mr. Bolton worked as a Planning and Financial Analyst at the University of Pittsburgh. He began his career as a Contract Administrator in the City of Pittsburgh. Mr. Bolton currently serves on the Board of Resoundant, Inc., a privately held medical technology company. He was recently elected to serve on the Board of Directors of HMN Financial, Inc. a publicly traded stock savings bank holding company. As discussed above, Mr. Bolton brings to the board accounting, finance, and strategic planning skills and qualifications through his extensive experience in a variety of industries, including healthcare.
Jeffrey
W. Bolton
Committees: Audit Committee, Compliance/Quality of Care Committee
Age: 67
Director Since: 2022
Ms.
Brown-Stevenson is a retired executive who brings nearly three decades of experience in the national healthcare payor industry where she developed an expertise in health system analytics and data. Ms. Brown-Stevenson joined UnitedHealth Group in 2008 as the Executive Vice President of Healthcare Innovation and Information Group before being promoted to the Chief Data and Analytics Officer of OptumInsight. In 2012, Ms. Brown-Stevenson rose to the role of Senior Vice President of Health System Analytics and Decision Support, where she oversaw the analysis and management of provider and patient data to validate UnitedHealth Group’s strategy and product offerings, before her retirement in 2019. Prior to joining UnitedHealth Group, Ms. Brown-Stevenson previously held senior leadership positions at several other insurance companies, including Aetna, Cigna, and Partners Healthcare. In addition to her healthcare company experience, Ms. Brown-Stevenson currently serves on the
boards of directors of several organizations, including Connecticut Children’s Medical Center and Kyruus Inc., a technology company that provides provider search and scheduling solutions to healthcare organizations. She also serves on the Advisory Board of the Commonwealth Honors College at the University of Massachusetts, Amherst. Ms. Brown-Stevenson has demonstrated her leadership and character through involvement on board roles in community and civic organizations. Ms. Brown-Stevenson also provided patient care for many years as a Registered Nurse. As a result of her leadership roles at several large national payors in the rapidly evolving field of healthcare data and analytics and her various private board memberships, Ms. Brown-Stevenson is in a unique position to draw on her extensive experience to advise on opportunities to improve the quality of care for our patients.
Tina L. Brown-Stevenson
Committees: Nominating/Corporate
Governance Committee, Compliance/Quality of Care Committee
Age: 66
Director Since: 2022
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Ms.
Curl is a former Vice President and Chief Marketing Officer of Avaya, Inc., a global provider of next-generation business collaboration and communications solutions, which position she held from October 2000 through April 2004. Before joining Avaya, Ms. Curl was employed by Xerox Corporation beginning in 1976, where she held a number of middle and senior management positions in sales, marketing and field operations, culminating with her appointment to Corporate Vice President. Ms. Curl currently serves as a Director/Trustee of VALIC Companies I & II, a mutual fund complex sponsored by American International Group, Inc., and as a Director on the board of the Hilton Head Community Foundation. Ms. Curl served as a Director on Encompass’s Board of Directors from 2004 until May 5, 2022. In the past five years, she has served as a Director of Nationwide Mutual Insurance Company and the Hilton Head Humane Association. Ms.
Curl has proven senior executive experience with broad operational experience in sales, marketing, and general management through her previous roles with large public companies as described above. Having served on and chaired several compensation committees on the board of directors of public companies, she has experience in the development and oversight of compensation programs and policies.
Yvonne M. Curl
Committees: Compensation and Human Capital Committee (Chair), Nominating/Corporate Governance Committee
Age: 68
Director Since: 2022
Mr.
Elson is a retired professor of Finance and the retired Edgar S. Woolard, Jr. Chair in Corporate Governance at the University of Delaware’s Alfred Lerner College of Business and Economics. Since 2020, he has served as Executive Editor-at-Large of Directors & Boards magazine. From 2000 to 2020, he served as the Founding Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. Mr. Elson has also served on the National Association of Corporate Directors’ Commissions on Director Compensation, Executive Compensation and the Role of the Compensation Committee, Director Professionalism, CEO Succession, Audit Committees, Governance Committee, Strategic Planning, Director Evaluation, Talent Development, Risk Governance, Role of Lead Director, Strategy Development, Board Diversity, Board and Long-term Value Creation, and Building the Strategic Asset Board. Mr. Elson served as a Director on Encompass’s Board of Directors from 2004 until
May 5, 2022. Additionally, he has served as a member of the National Association of Corporate Directors’ Best Practices Council on Coping with Fraud and Other Illegal Activity and of that organization’s Advisory Council. Mr. Elson serves on the board of Blue Bell Creameries U.S.A., Inc., a privately held company. He recently served as a Director of Bob Evans Farms, Inc. In addition, Mr. Elson serves as Vice Chairman of the American Bar Association’s Committee on Corporate Governance. Mr. Elson has been Of Counsel/Consultant to the law firm of Holland & Knight LLP from 1995 to the present. Mr. Elson has extensive knowledge of and experience in matters of corporate governance through his leadership roles with professional organizations dedicated to the topics as described above. Mr. Elson’s academic, professional and board experiences allows him to effectively address the range of issues facing public companies.
Ms.
Hoeflinger brings over two decades of experience and expertise in the healthcare payor industry and has played key roles in strategy, operations, and general management throughout her career. Ms. Hoeflinger joined Aetna Inc. in 2018 and rose to the role of Senior Vice President of Specialty and Strategic Solutions where she led the strategy to unite CVS and Aetna assets post-merger (one of the largest health insurance acquisitions in history). Prior to her time at Aetna, Ms. Hoeflinger held several positions at Anthem, including the Senior Vice President and President for Local Commercial Business, Senior Vice President and President of the Commercial and Specialty Business Division, the President of Anthem Blue Cross and Blue Shield of Ohio, and the President of Anthem Blue Cross and Blue Shield of Maine. Throughout her career, Ms. Hoeflinger has developed an extensive skill set in implementing and leading complex transformations and integrations. In addition to her
healthcare company experience, Ms. Hoeflinger presently serves on the Board of Directors and the Nominating and Governance Committee of Midmark Corporation, a privately held company that manufactures and supplies medical, dental, and animal healthcare products. She previously served on the Board of Directors and the Compensation Committee of First Financial Bancorp, a publicly traded banking and financial services company. Ms. Hoeflinger also served on the Board of Directors and Compensation Committee of MainSource Financial Group, Inc. and MainSource Bank. Ms. Hoeflinger served as a Member of The Ohio State University Board of Trustees, including on its Audit, Compliance, and Finance committee, and also served on the board of the Wexner Medical Center, an academic medical center on The Ohio State University campus. She has also served in various local and national nonprofit board leadership roles. As a result of her 20 years of experience in the healthcare industry
where she developed strategic acquisition and management experience as well as her experience serving on a public company board, Ms. Hoeflinger brings both strong strategic planning and corporate governance skills to the board, having led complex transformations and integrations several times throughout her career.
Erin P. Hoeflinger
Committees: Compensation and Human Capital Committee, Compliance/Quality of Care Committee
Age: 57
Director Since: 2022
Ms.
Jacobsmeyer has served as President and Chief Executive Officer of Enhabit since June 2021. Prior to that, she served as Encompass’s Executive Vice President of Operations beginning in December 2016. Ms. Jacobsmeyer joined Encompass in 2007 as Chief Executive Officer of the Rehabilitation Hospital of St. Louis, a partnership of BJC HealthCare and Encompass, and then as President of Encompass’s Central Region from 2012 to 2016. Prior to joining Encompass, Ms. Jacobsmeyer served as Chief Operating Officer for Des Peres Hospital in St. Louis, Missouri. She received her bachelor’s degree in physical therapy from St. Louis University and her master’s degree in health services management from Webster University. Ms. Jacobsmeyer, as our President and Chief Executive Officer, directs the strategic, financial and operational management of the Company and, in this capacity, provides unique insights
into its detailed operations. She also has the benefit of more than 30 years of experience in healthcare operations and management.
Barbara A. Jacobsmeyer
President and CEO
Age: 57
Director Since: 2022
11
Ms.
La Monica is the Chief Human Resources Officer for Citizens Financial Group, a publicly traded banking and financial services company, where she is responsible for developing human resource strategies to support the company’s business plan. She is a member of the bank’s ESG steering committee and also jointly oversees the Corporate Affairs and Communications functions for the organization. Additionally, Ms. La Monica played a key role in the separation of Citizens Financial Group from the Royal Bank of Scotland in 2014. Prior to joining Royal Bank of Scotland in 2011, Ms. La Monica held several senior human resources leadership roles at JP Morgan Chase. In addition to her human resources experience, Ms. La Monica has demonstrated her leadership and character through over a decade of involvement on board roles in numerous community and civic organizations. As a result of her diverse
leadership roles, Ms. La Monica is well positioned to address a full range of human capital issues, including compensation and benefits, talent acquisition and development, organizational development, and ESG matters.
Susan A. La Monica
Committees: Compensation and Human Capital Committee, Finance Committee
Age: 62
Director Since: 2022
Dr.
Maupin is a retired healthcare executive with over 40 years of diverse executive leadership experience in academic medicine, public health, ambulatory care and government relations. He served as President and Chief Executive Officer of Morehouse School of Medicine for eight years until his retirement in July 2014. Prior to that, he was the President and Chief Executive Officer of Meharry Medical College for 12 years. His other executive leadership positions have included Chief Administrative Officer of the Morehouse School of Medicine, Chief Executive Officer of Southside Healthcare, Inc., and Deputy Commissioner Medical Services, Baltimore City Health Department. Dr. Maupin currently serves as the Chair of the Board of Directors for VALIC Company I, a mutual fund complex sponsored by Corebridge Financial, Inc. Dr. Maupin served as a Director on Encompass’s Board of Directors from 2004 until May 2022. Additionally, in the past 10 years, he has served as a Director
on the boards of LifePoint Health, Inc. and Regions Financial Corp. Dr. Maupin has a distinguished record as a health policy expert, having served on numerous national public health and scientific advisory boards and panels. He also has extensive experience working with the legislative and executive branches of federal and state government and agencies within the U.S. Department of Health and Human Services. Additionally, he has demonstrated his leadership and character through involvement in board roles in community and civic organizations as well as his 20 year career as a Dental Officer in the U.S. Army Reserves. Dr. Maupin brings to the board executive leadership and management skills through his extensive healthcare executive experience as well as his tenure on several boards.
John E. Maupin, Jr.
Committees: Audit
Committee, Compliance/Quality of Care Committee (Chair)
Age: 76
Director Since: 2022
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Mr.
McGuigan currently serves as a Senior Advisor at McKinsey & Company, a position he has held since 2021. Prior to this position, he served as Chief Information Officer (“CIO”) of the U.S. Department of State from 2019 to 2021. As CIO, he established technology strategic direction and provided oversight for $2.4 billion of technology programs across the Department. Mr. McGuigan joined the Department of State from Johnson & Johnson (NYSE: JNJ), where he served as CIO from 2012 to 2019 and was responsible for Global Information Technology Strategy and Operations for an organization with 130,000 employees at over 170 overseas and domestic locations. Prior to Johnson & Johnson, Mr. McGuigan served as Senior Vice President and CIO of CVS Caremark, Senior Vice President and CIO of Liberty Mutual and Senior Vice President of Information Services for Medco Health Solutions. He currently serves as a director of Posit PBC and M2GEN.
Stuart
M. McGuigan
Committees: Nominating/Corporate Governance Committee and Compliance/Quality of Care Committee
Age: 64
Director Since: 2023
Mr.
Rush brings more than 30 years of financial experience and expertise within the clinical research organization (CRO), biopharmaceutical, technology and professional services industries. He joined Parexel International Corporation, a global CRO, as Executive Vice President and Chief Financial Officer in 2018. Prior to joining Parexel, Mr. Rush served from 2013 to 2018 as Executive Vice President and Chief Financial Officer of Syneos Health, Inc., a publicly traded biopharmaceutical services organization. Mr. Rush also was Senior Vice President and Chief Financial Officer of Tekelec, Inc., a leading developer of telecommunications products and services acquired by Oracle. Mr. Rush is a certified public accountant. Mr. Rush’s experience also includes serving in various roles at Siebel Systems, Inc., Quintiles Transnational Corporation, PricewaterhouseCoopers and Ernst & Young, where he developed extensive knowledge in financial operations, capital market transactions,
financial reporting, and acquisitions.
Mr.
Schochet serves as a Healthcare Operating Partner at CIC Partners, an investment firm with an investment record spanning more than 30 years and representing greater than $1 billion in aggregate realized proceeds, a position he has held since 2007. Previously, Mr. Schochet served as the President and CEO of BPS Health Ventures, a healthcare consulting and investment firm from 2005 to 2017. In addition, Mr. Schochet served as Vice Chairman and a number of other senior executive positions, including President of the Hospital Division, at Tenet Healthcare (NYSE: THC) and its predecessor National Medical Enterprises from 1979 to 2004. During his tenure, Tenet reached revenues of over $13 billion. Mr. Schochet has previously served as a Director for several health care companies, including Omnicare (NYSE:OCR), until it was acquired by CVS (NYSE: CVS), and Universal Hospital Services, which became Agiliti (NYSE: AGTI). Mr. Schochet currently serves as a Director of BroadJump
LLC.
Barry P. Schochet
Committees: Nominating/Corporate Governance Committee, Compliance/Quality of Care Committee
Age: 72
Director Since: 2023
Mr.
Shaw practiced law at Milbank LLP for 14 years, retiring as a partner in 1983. He also served as General Counsel of The Chase Manhattan Bank from 1983 to 1996 and Aetna, Inc. from 1999 to 2003. In addition to his legal role, his responsibilities at both institutions included a wide range of strategic planning, risk management, compliance and public policy issues. From 1996 to 1999, he served as Chief Corporate Officer of the Americas for National Westminster Bank PLC. In 2004, Mr. Shaw was appointed Independent Counsel to the Board of Directors of the New York Stock Exchange dealing with regulatory matters. From March 2006 to July 2010, he served on a part-time basis as a Senior Managing Director of Richard C. Breeden & Co., and Affiliated Companies engaged in investment management, strategic consulting, and governance matters. Mr. Shaw served as a Director on Encompass’s Board of Directors from 2005 until May 5, 2022.
Additionally, in the past five years, Mr. Shaw has served as a Director of MSA Safety Inc. (NYSE: MSA). He currently serves as a Director and Former Chairman of Covenant House, the nation’s largest privately funded provider of crisis care to children. Mr. Shaw has a wide ranging legal and business background, including senior leadership roles, in the context of large public companies as described above with particular experience in corporate governance, risk management and compliance matters. He also has significant experience relating to the healthcare industry.
L Edward Shaw, Jr.
Committees: Compensation and Human Capital Committee, Nominating/Corporate Governance Committee (Chair)
Age: 78
Director
Since: 2022
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Board Succession Planning
The Nominating/Corporate Governance Committee oversees and plans for director succession and refreshment of our Board to ensure a mix of skills, perspectives, experience, tenure, and diversity that promote and support our long-term strategy. In connection with the Separation five Encompass Board members resigned from the Encompass Board and joined the Enhabit Board (the “Transitioning Directors”). The Transitioning Directors were joined by five new non-employee directors and Ms. Jacobsmeyer, our President and CEO. The Board believes that the public company experience, industry knowledge, historic Company perspective,
and individual skill sets of the Transitioning Directors are a valuable resource to the Company, management and new directors during our transition to a standalone public company.
As previously disclosed, since the Separation, the Nominating/Corporate Governance Committee has been committed to a thoughtful, orderly and gradual transition of the Transitioning Directors (the “Transition Plan”). As part of the Transition Plan, at least four of the five Transitioning Directors will step down from our Board at or before our 2024 annual meeting of stockholders, and new directors will be appointed to the Board during this period. The Board believes the temporary expansion of Board size is necessary to maintain robust Board oversight while onboarding and integrating new directors prior to the departures.
Following the Separation, the Nominating/Corporate Governance Committee directed a search firm to identify and provide for consideration of a diverse pool of candidates to fill skill and expertise gaps that will be created by the Transition Plan. In March of 2023 two directors were appointed to the Board. At this time the Board consists of 13 members with four Transitioning Directors committed to stepping down at or before the 2024 annual meeting of stockholders. The Nominating/Corporate Governance Committee has remained steadfast in identifying additional director nominees with the skills, perspectives, experience, tenure, and diversity to complete the Transition Plan successfully. For a discussion of the individual experiences and qualifications of our Board members, please refer to the section entitled “Items of Business Requiring Your Vote - Proposal 1: Election of Directors”
in this proxy statement.
Cooperation Agreement
On March 30, 2023, our Board appointed Stuart McGuigan and Barry Schochet as a members of our Board to serve until our 2023 annual meeting. Mr. McGuigan and Mr. Schochet joined our Board as reflected in the the Cooperation Agreement (the “Cooperation Agreement”), dated March 30, 2023, by and among Enhabit, Cruiser Capital Master Fund LP and Cruiser Capital Advisors, LLC (collectively with their affiliates, “Cruiser”) and Harbour Point Capital Management LP (collectively with its affiliates, “Harbour Point”, and collectively with Cruiser, the “Investor Group”).
The Cooperation Agreement includes various terms, conditions and provisions,
including that Enhabit would include Mr. McGuigan and Mr. Schochet in our Board recommended director slate of candidates to stand for election at the 2023 annual meeting. Under the Cooperation Agreement, the Investor Group will support the Board’s full slate of directors at our 2023 annual meeting and will abide by customary standstill, voting and other provisions. The provisions of the Cooperation Agreement described above generally apply until the earlier of (i) thirty days prior to the nomination deadline under our Bylaws for the nomination of director candidates for election to the Board at the 2024 annual meeting and (ii) in the event that a party materially breaches its obligations or representations and warranties under the Cooperation Agreement, ten days following written notice from the non-breaching party if such breach has not been cured by that date, or, if impossible
to cure within ten days, such party has not taken substantive action to correct by that date.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF DIRECTOR NOMINEES.
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Proposal
2 – Ratification of Appointment of Independent Registered Public Accounting Firm
Appointment of PricewaterhouseCoopers LLP
In accordance with its charter, the Audit Committee of our Board selected the firm of PricewaterhouseCoopers LLP to be our independent registered public accounting firm for the 2023 audit period, and with the endorsement of the Board, recommends to our stockholders that they ratify that appointment. The Audit Committee will reconsider the appointment of PricewaterhouseCoopers LLP for the next audit period if such appointment is not ratified. Representatives of PricewaterhouseCoopers LLP are expected to attend the annual meeting and will have the opportunity to make a statement if they desire, and are expected to be available to respond to appropriate questions.
The Audit Committee recognizes the
importance of maintaining the independence of our independent registered public accounting firm, both in fact and appearance. Consistent with its charter, the Audit Committee has evaluated PricewaterhouseCoopers LLP’s qualifications, performance, and independence, including that of the lead audit partner. The Audit Committee reviews and approves, in advance, the audit scope, the types of non-audit services, if any, and the estimated fees for each category for the coming year. For each category of proposed service, PricewaterhouseCoopers LLP is required to confirm that the provision of such services does not impair their independence. Before selecting PricewaterhouseCoopers LLP, the Audit Committee carefully considered that firm’s qualifications as an independent registered public accounting firm for the Company. This included a review of prior performance, as well as its reputation
for integrity and competence in the fields of accounting and auditing. The Audit Committee has expressed its satisfaction with PricewaterhouseCoopers LLP in all of these respects. The Audit Committee’s review included inquiry concerning any litigation involving PricewaterhouseCoopers LLP and any proceedings by the SEC against the firm. The Audit Committee concluded that the ability of PricewaterhouseCoopers LLP to perform services for us is in no way adversely affected by any such investigation or litigation.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFYING THE APPOINTMENT PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2023 FISCAL YEAR.
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Pre-Approval
of Principal Accountant Services
The Audit Committee is responsible for the appointment, oversight, and evaluation of our independent registered public accounting firm. In accordance with our Audit Committee’s charter, our Audit Committee must approve, in advance of the service, all audit and permissible non-audit services provided by our independent registered public accounting firm. Our independent registered public accounting firm may not be retained to perform the non-audit services specified in Section 10A(g) of the Securities Exchange Act of 1934, as amended. The Audit Committee has concluded that provision of the non-audit services described in that section is not compatible with maintaining the independence of PricewaterhouseCoopers LLP.
The Audit Committee has established a policy regarding pre-approval of audit and permissible non-audit services provided by our independent
registered public accounting firm, as well as all engagement fees and terms for our independent registered public accounting firm. Under the policy, the Audit Committee must approve the services to be rendered and fees to be charged by our independent registered public accounting firm. Typically, the Audit Committee approves services up to a specific amount of fees. The Audit Committee must then approve, in advance, any services or fees exceeding those pre-approved levels. The Audit Committee may delegate general pre-approval authority to a subcommittee of which the chairman of the Audit Committee is a member, provided that any delegated approval is limited to services with fees of no more than 5% of previously approved amounts.
Principal Accountant Fees and Services
With respect to the audits for the year ended December 31, 2022,
the Audit Committee approved the audit services to be performed by PricewaterhouseCoopers LLP, as well as certain categories and types of audit-related and permitted non-audit services. In 2022, the Audit Committee approved all audit, audit-related, and other fees in accordance with SEC pre-approval rules. The following table shows the aggregate fees paid or accrued for professional services rendered by PricewaterhouseCoopers LLP for the years ended December 31, 2022, with respect to various services provided to us and our subsidiaries.
(1)Audit fees – Represents aggregate fees paid or accrued for professional services rendered for the review of financial statements included in our Form 10-Q filing for the third quarter of 2022 and the audit of our consolidated financial statements.
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AUDIT
COMMITTEE REPORT
The Board has the ultimate authority for effective corporate governance, including the role of oversight of the management of the Company. The Audit Committee’s purpose is to assist the Board in fulfilling its responsibilities to the Company and its stockholders by overseeing the accounting and financial reporting processes, the qualifications and selection of the independent registered public accounting firm engaged by the Company, and the performance of the Company’s Director of Internal Audit, internal auditors and independent registered public accounting firm. The
Audit Committee members’ functions are not intended to duplicate or to certify the activities of management or the Company’s independent registered public accounting firm.
In its oversight role, the Audit Committee relies on the expertise, knowledge and assurances of management, the internal auditors, and the independent registered public accounting firm. Management has the primary responsibility for establishing and maintaining effective systems of internal and disclosure controls (including internal control over financial reporting), for preparing financial statements, and for the public reporting process. PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, is responsible for
performing an independent audit of the Company’s consolidated financial statements, for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles in the United States. In this context, the Audit Committee:
•reviewed and discussed with management and PricewaterhouseCoopers LLP the fair and complete presentation of the Company’s consolidated financial statements and related periodic reports filed with the SEC (including the audited consolidated financial statements for the year ended December
31, 2022);
•discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the Securities and Exchange Commission (the “SEC”); and
•received the written disclosures and the letter from PricewaterhouseCoopers LLP required by PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence) and discussed with PricewaterhouseCoopers LLP its independence from the Company and its management.
The Audit Committee also discussed with the
Company’s internal auditors and PricewaterhouseCoopers LLP the overall scope and plans for their respective audits; reviewed and discussed with management, the internal auditors, and PricewaterhouseCoopers LLP the significant accounting policies applied by the Company in its financial statements, as well as alternative treatments and risk assessment; and met periodically in executive sessions with each of management, the internal auditors, and PricewaterhouseCoopers LLP.
The Audit Committee was kept apprised of the progress of management’s assessment of the Company’s internal control over financial reporting and provided oversight to management during the process.
Based
on the reviews and discussions described above, the Audit Committee recommended to the Board, and the Board approved, that the audited consolidated financial statements for the year ended December 31, 2022, for filing with the SEC. The Audit Committee has selected PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2023.
Audit Committee
Gregory S. Rush (Chairperson)
Jeffrey W. Bolton
Leo I. Higdon, Jr
John E.
Maupin, Jr.
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Proposal 3 – Advisory Vote on Executive Compensation
We seek your advisory vote on our executive compensation programs and ask that you support the compensation
of our named executive officers, most of which was determined by Encompass prior to the Separation, as disclosed under the heading “Executive Compensation,” including the “Executive Summary” section, beginning on page 32 and the accompanying tables and related narrative disclosure. This proposal, commonly referred to as a “say-on-pay” proposal, gives stockholders the opportunity to express their views on the named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather
the overall compensation of the named executive officers and the philosophy, policies, and practices described in this proxy statement.
As described under the heading “Compensation Discussion and Analysis” on page 32, the Company provides annual and long-term compensation programs, as well as other benefit plans, to attract, motivate, and retain the named executive officers and to create a remuneration and incentive program that aligns the interests of the named executive officers with those of stockholders. The Board believes the program strikes the appropriate balance between utilizing responsible,
measured pay practices and effectively incentivizing the named executive officers to dedicate themselves fully to value creation for our stockholders.
You are encouraged to read the information detailed under the heading “Executive Compensation” beginning on page 32 for additional details about the Company’s executive compensation programs.
The Board strongly endorses the
Company’s executive compensation programs and recommends that the stockholders vote in favor of the following resolution:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers for 2022, as discussed and disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2022 Summary Compensation Table and the other related tables and disclosure in this proxy statement.”
This say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation and Human
Capital Committee or the Board. Our Board and its Compensation and Human Capital Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider stockholders’ concerns, and the Compensation and Human Capital Committee will evaluate whether any actions are necessary to address those concerns.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NEOs AS DISCLOSED IN THIS PROXY STATEMENT.
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Proposal
4 – Advisory Vote on the Frequency of the “Say-on-Pay”
As described in Proposal No. 3, we are asking our stockholders to approve, on an advisory basis, executive compensation, otherwise known as “say-on-pay.” This Proposal No. 4 solicits input from our stockholders on how frequently we should hold such a vote in the future. You may vote for a say-on-pay vote to be held every one, two or three years, or you may abstain from voting.
Our Board concluded that we should seek stockholder input through an annual advisory vote. In formulating its recommendation, our Board concluded that regular input on the Company’s compensation philosophy, policies and practices is an important part of a comprehensive corporate governance program.
An annual vote will provide meaningful and timely communication from our stockholders to the Compensation and Human Capital Committee and the Board, which reviews elements of our compensation program periodically and adjusts executive compensation as appropriate, each year.
The frequency of the “say-on-pay” vote is advisory, and therefore not binding on the Company, the Compensation and Human Capital Committee, or the Board. However, the Board and the Compensation and Human Capital Committee value the opinions of the Company’s stockholders and will consider the outcome of the recommendation in determining how frequently to ask our stockholders to vote on the compensation of our named executive officers.
You
may cast your vote for your preference as to the frequency of holding stockholder advisory votes on executive compensation, by selecting every one year, two years, or three years, or you may abstain from voting.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE OPTION OF “ONE YEAR” AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.
20
CORPORATE GOVERNANCE AND BOARD STRUCTURE
Corporate
Governance
Corporate Governance Guidelines
Our Board has developed corporate governance policies and practices in order to help fulfill its responsibilities to stockholders and provide a flexible framework for it to review, evaluate, and oversee the Company’s business operations and management. Our Corporate Governance Guidelines provide, among other things, that each member of the Board will:
•dedicate sufficient time, energy, and attention to ensure the diligent performance of his or her duties;
•comply with the duties and responsibilities set
forth in the guidelines and in our Bylaws;
•comply with all duties of care, loyalty, and confidentiality applicable to directors of publicly traded Delaware corporations; and
•adhere to our Standards of Business Ethics and Conduct, including the policies on conflicts of interest.
Our Nominating/Corporate Governance Committee oversees and periodically reviews the Guidelines, and recommends any proposed changes to the Board for approval.
Code of Ethics
We have adopted the Standards
of Business Ethics and Conduct, our “code of ethics,” that applies to all employees, directors and officers, including our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The purpose of the code of ethics is to promote:
•honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
•full, fair, accurate, timely, and understandable disclosure in periodic reports required to be filed by us;
•compliance with all applicable rules and regulations that apply to us and our employees, officers, and directors;
•prompt
internal reporting of violations of the code to an appropriate person or persons identified in the code; and
•accountability for adherence to the code.
We disclose any amendments to, or waivers from, the code of ethics for executive officers and directors on our website promptly following the date of the amendment or waiver. Upon written request to our corporate secretary, we will also provide a copy of the code of ethics free of charge.
We
maintain a comprehensive enterprise risk management program designed to identify potential events and conditions that may affect the Company and to manage risks to avoid materially adverse effects on the Company. Our management, including an executive risk committee, is responsible for the design and implementation of the enterprise risk management, or ERM, program. The Audit Committee of the Board, pursuant to its charter, is responsible for reviewing and evaluating our policies and procedures relating to risk assessment and management. The full Board monitors the ERM program by way of regular reports from our senior executives on management’s risk assessments and risk status as well as our risk response and mitigation activities. Individual committees monitor, by way of regular reports, the material
risks that relate to the responsibilities of that committee and report to the Board appropriate information. For example, the Compliance/Quality of Care Committee oversees assessment and management of several risk-related topics, such as cybersecurity, privacy, Medicare claims audits, patient satisfaction data, quality of care data, and compliance program administration.
We design our compensation program with the understanding that while some degree of risk is necessary and appropriate, our compensation program should not encourage excessive or inappropriate risk. The Compensation and Human Capital Committee regularly monitors and evaluates our compensation policies and practices to ensure they align with good governance practices. Additionally, the Compensation and Human Capital Committee oversees assessment and management of human capital-related risks, such as those involving recruitment, retention, inclusion and diversity,
employee engagement, and employment litigation. For further
21
discussion of our human capital management, see Item 1, Business, of our Annual Report on Form 10-K for the year ended December 31, 2022.
The Compensation and Human Capital Committee annually undertakes a compensation risk assessment to establish whether our compensation program is successfully achieving these objectives, while aligning pay with performance. The 2022 review concluded that our compensation program, particularly our cash incentive plans and long-term incentives, appropriately balance risk, pay-for-performance, and the desire to focus executives on specific financial and operational measures. The Compensation
and Human Capital Committee believes our program does not encourage unnecessary or excessive risk-taking, nor does it create risks that are reasonably likely to have a material adverse effect on the Company.
Board Oversight of the Company’s Cybersecurity Program and Patient Privacy Matters
The proper function, availability, and security of our information systems are critical to our business. We have structured our cybersecurity program around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, which provides best practices to identify, protect from, respond
to, and recover from cyberattacks. The cybersecurity program consists of dedicated internal IT employees, including the staff of a security operations center, and long-term third-party security vendors. Quarterly reports on our cybersecurity program are provided to the Compliance and Quality of Care Committee and at least annually to our full Board. The reports to the committee and the full Board include details and metrics on, among other things, our routine vulnerability assessments, internal and external threat intelligence, quarterly NIST framework assessments, quarterly company-wide phishing exercises and training, device encryption, routine resilience efforts including quarterly disaster recovery exercises, tabletop incident response exercise, business continuity exercise and cyber penetration tests.
Similarly, our chief compliance officer provides quarterly reports to the Compliance and Quality of Care Committee on patient
privacy compliance efforts and related matters. We also maintain an inter-departmental privacy and security committee that oversees our programs and initiatives that seek to protect and secure patient information as well as our data and systems. For example, this committee is responsible for our IT-security incident response plan and various training and awareness programs that promote good patient privacy and system security practices by employees.
Board Oversight of ESG Matters
As one of the largest home health providers in the nation, we recognize our responsibility to identify and implement sustainable practices throughout our operations. Providing high-quality, compassionate care to our patients where they most prefer it–in their homes–is the foundation for our
business. Our Board and senior management are focused on implementing policies and practices that uphold our values and support our business sustainability, which focuses not only on how we care for our patients but also for our employees and the communities where we live and serve.
In the context of our ERM program, our Nominating/Corporate Governance Committee has oversight responsibility for those matters commonly referred to as environmental, social and governance (ESG) matters and priorities that have the potential to be material to our business, investors and other stakeholders. The Nominating/Corporate Governance Committee has delegated some of that oversight to other Board committees. For example, “Employee Recruitment, Development, and Retention,” which has been identified as a material ESG matter by management, employees, and investors, is overseen by the Compensation and Human Capital Committee. Similarly,
“Patient Privacy and Electronic Health Records,” an ESG matter material to our patients, is overseen by the Compliance and Quality of Care Committee.
Our approach to our ESG initiative is to be systematic and thorough. In the coming year, the Nominating/Corporate Governance Committee, with collaboration from management and other stakeholders, intends to formalize our ESG material matter list, with consideration of ESG priorities issued by reporting frameworks like the Global Reporting Initiative and Sustainability Accounting Standards Board. The Nominating/Corporate Governance Committee will also develop a reporting and oversight structure for our material ESG matters, including those overseen by other Board committees.
We are developing our ESG disclosures, and in 2023 we intend to issue our first sustainability report.
Annual
Evaluation of the Performance of the Board and Its Committees
On an annual basis, members of our Board complete an evaluation of the performance of the Board as well as each committee on which they serve. The initial evaluations were conducted in early 2023. The evaluations are intended to assist in determining whether the Board and its committees are functioning effectively and fulfilling the requirements set forth in the Corporate Governance Guidelines and the committee charters, as applicable. The evaluations provide the members of the Board and its committees with an opportunity to reflect upon and improve processes and effectiveness. Specific questions also elicit feedback on topics reviewed by the Board, including the substance of materials on the subjects, the time dedicated to various topics, and access to management and external advisors. The Board may on occasion obtain the advice and assistance of outside advisors
in performing the evaluation, including conducting private interviews to provide for unattributed feedback. Results are reviewed by the Nominating/Corporate Governance Committee which then shares those results and any follow up recommendations with all members of the Board.
We maintain a “Governance” section on our website at https://investors.ehab.com
where you can find copies of our principal governance documents, including:
•Charters of each of the standing committees of the Board;
•Standards of Business Conduct and Ethics;
•Corporate Governance Guidelines; and
•Insider Trading Policy.
23
Stockholder
Engagement and Communications to Directors
We believe thoughtful stockholder engagement is important, and we have an active engagement program in which we meet regularly with stockholders to discuss our business, strategy, operational initiatives, and corporate governance, as well as other topics of interest to them. Our stockholder engagement efforts allow us to better understand our stockholders’ priorities, perspectives, and concerns, and enable the Company to effectively address issues that matter most to our stockholders. For example, in setting 2023 executive compensation, we proactively engaged with stockholders to elicit feedback regarding performance-based financial metrics used in our equity awards to ensure appropriate alignment with our business strategy.
Members of management attend
several investor conferences throughout the year. From time to time, we host investor days to give a broad base of our stockholders the opportunity to engage in person with members of our senior management. Our Board receives regular reports on feedback given by investors to management.
Stockholders and other parties interested in communicating directly to the Board, any committee, or any non-employee director or group of directors may do so by emailing board@ehab.com or by writing to:
ENHABIT, INC. BOARD OF DIRECTORS 6688 N. CENTRAL EXPWY, SUITE 1300 DALLAS, TEXAS75206 ATTENTION: [Addressee*] c/o General Counsel
* Including the name of the specific addressee(s) will allow us to direct the communication to the intended recipient.
All electronic and written communications will be opened by the office of our general counsel for the sole purpose of determining whether the contents represent a message to our directors. Correspondence appropriately directed to the Board that is not in the nature of advertising, promotions of a product or service, or offensive material will be forwarded promptly to the addressee(s). In the case of communications to the Board or any group or committee of directors, sufficient
copies of the contents will be made for all of the addressees.
24
Board Structure and Committees
Board Structure and Meetings
Our business, property, and affairs are managed under the direction of our Board. Our Corporate Governance Guidelines provide for an independent director to serve as the non-executive chairman of the Board who sets the agenda for, and presides over, Board
meetings, coordinates the work of the committees of our Board, oversees the distribution of materials to members of the Board and performs other duties delegated to the chairman by the Board. The non-executive chairman also presides over independent sessions generally held at each Board meeting. The Board adopted this structure to promote decision-making and governance independent of that of our management and to better perform the Board’s monitoring and evaluation functions. Members of the Board are kept informed of our business through discussions with our chief executive officer and other officers, by reviewing materials provided to them, by visiting our offices and facilities, and by participating in meetings of the Board and its committees.
The Board has the five standing committees set out in the table below, each of which is governed by a charter and reports its actions and recommendations to the full Board. Each committee
has the authority to retain, at the expense of the Company, outside advisors, including consultants and legal and accounting advisors. The following table shows the membership of each Board committee as of May 19, 2023.
Director
Audit
Compensation
and Human Capital
Compliance/ Quality of Care
Finance
Nominating/ Corporate Governance
Jeffrey W. Bolton
X
X
Tina L. Brown-Stevenson
X
X
Yvonne
M. Curl
Chair
X
Charles M. Elson
Chair
X
Leo I. Higdon, Jr.
X
X
Erin
P. Hoeflinger
X
X
John E. Maupin, Jr.
X
Chair
Susan A. La Monica
X
X
Stuart
M. McGuigan
X
X
Gregory S. Rush
Chair
X
Barry P. Schochet
X
X
L.
Edward Shaw, Jr.
X
Chair
The Board and each committee met the following number of times in second half 2022 after the Separation.
Board
Audit
Compensation
and Human Capital
Compliance/ Quality of Care
Finance
Nominating/ Corporate Governance
Meetings
3
4
3
3
4
3
Audit
Committee
The Audit Committee’s purpose, per the terms of its charter, is to assist the Board in fulfilling its responsibilities to the Company and its stockholders, particularly with respect to the oversight of the accounting, auditing, financial reporting, and internal control and compliance practices of the Company. The specific responsibilities of the Audit Committee are, among others, to:
•assist the Board in the oversight of the integrity of our financial statements and compliance with legal and regulatory requirements, the qualifications and independence of our independent auditor, and the performance of our internal audit function and our independent auditor;
•appoint,
compensate, replace, retain, and oversee the work of our independent auditor;
•at least annually, review a report by our independent auditor regarding its internal quality control procedures, material issues raised by certain reviews, inquiries or investigations relating to independent audits within the last five years, and relationships between the independent auditor and the Company;
•review and evaluate our quarterly and annual financial statements with management and our independent auditor, including management’s assessment of and the independent auditor’s opinion regarding the effectiveness of our internal control over financial reporting;
•discuss earnings press
releases as well as financial information and earnings guidance provided to analysts and rating agencies with management;
25
•discuss policies with respect to risk assessment and risk management; and
•appoint and oversee the activities of our Director of Internal Audit who has the responsibility to identify violations of Company policy and law relating to accounting or public financial reporting.
The Board has also determined that each Audit Committee member is “financially literate” as defined by the New York Stock Exchange (“NYSE”) and has accounting or related financial management expertise, and that Mr. Rush is an audit
committee “financial expert” as defined by the SEC.
Compensation and Human Capital Committee
The Compensation and Human Capital Committee’s purpose and objectives are to attract and retain high-quality personnel to better ensure the long-term success of the Company and the creation of long-term shareholder value. Accordingly, this committee oversees our compensation and employee benefit objectives, plans and policies and approves, or recommends to the independent members of the Board for approval, the individual compensation of our executive officers. This committee also reviews our human capital strategy and management activities, such as employee and management recruiting,
retention and development initiatives as well as diversity, equity and inclusion initiatives. For further discussion of our human capital management, see Item 1, Business, of our Annual Report on Form 10-K for the year ended December 31, 2022.
The specific responsibilities of this committee are, among others, to:
•review and approve our compensation programs and policies, including our benefit plans, incentive compensation plans and equity-based plans and administer those plans as may be required;
•review and approve (or recommend to the Board in the case of the chief executive officer) goals and objectives relevant to the compensation of the executive officers and evaluate their performances in light of those goals and objectives;
•determine
and approve (together with the other independent directors in the case of the chief executive officer) the compensation levels for the executive officers;
•review and discuss with management the Compensation Discussion and Analysis and recommend inclusion thereof in our annual report or proxy statement;
•review and approve (or recommend to the Board in the case of the chief executive officer) employment arrangements, severance arrangements and termination arrangements and change in control arrangements to be made with any executive officer;
•review at least annually our management succession plan as it relates to compensation and benefits;
•oversee long-term succession plans for senior management;
•review
at least annually material compensation and human capital related risk exposures as well as management’s efforts to monitor and mitigate those exposures; and
•review and recommend to the Board the compensation for the non-employee members of the Board.
Compliance and Quality of Care Committee
The Compliance/Quality of Care Committee’s function is to assist our Board in fulfilling its fiduciary responsibilities relating to our regulatory compliance and cyber risk management activities and to ensure we deliver quality care to our patients. The committee is primarily responsible for overseeing, monitoring, and evaluating our compliance with all of its regulatory obligations other than tax and securities
law-related obligations and reviewing the quality of services provided to patients. The specific responsibilities of the Compliance/Quality of Care Committee are, among others, to:
•ensure the establishment and maintenance of a regulatory compliance program and the development of a comprehensive quality of care program designed to measure and improve the quality of care and safety furnished to patients;
•appoint and oversee the activities of a chief compliance officer and compliance office with responsibility for developing and implementing our regulatory compliance program;
•oversee the cyber risk management program designed to monitor, mitigate and respond to cyber risks, threats, and incidents, and review periodic reports from the chief information officer, including
developments in cyber threat environment and cyber risk mitigation efforts;
•review periodic reports from the chief compliance officer, including an annual regulatory compliance report summarizing compliance-related activities undertaken by us during the year, and the results of all regulatory compliance audits conducted during the year; and
•review and approve annually the quality of care program and review periodic reports from the chief medical officer regarding our efforts to advance patient safety and quality of care.
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Finance
Committee
The purpose and objectives of the Finance Committee are to assist our Board in the oversight of the use and development of our financial resources, including our financial structure, investment policies and objectives, and other matters of a financial and investment nature. The specific responsibilities of the Finance Committee are, among others, to:
•review and approve certain expenditures, contractual obligations and financial commitments per delegated authority from our Board; and
•review, evaluate, and make recommendations to the Board regarding (i) capital structure and proposed changes thereto, including significant new issuances, purchases, or redemptions of our securities, (ii) plans for allocation and disbursement of capital expenditures, (iii) credit rating, activities with
credit rating agencies, and key financial ratios, (iv) long-term financial strategy and financial needs, (v) major activities with respect to mergers, acquisition and divestitures, and (vi) plans to manage insurance and asset risk.
Nominating/Corporate Governance Committee
The purposes and objectives of the Nominating/Corporate Governance Committee are to assist our Board in fulfilling its governance duties and responsibilities to our stockholders. Specific responsibilities include, among others, to:
•oversee the emergency succession plans for the chief executive officer;
•recommend nominees for Board membership to be submitted for
stockholder vote at each annual meeting, and to recommend to the Board candidates to fill vacancies on the Board and newly-created positions on the Board;
•review and make recommendations on the size and composition of the Board and assist the Board in determining the appropriate characteristics, skills and experience for the individual directors and the Board as a whole and create a process to allow the committee to identify and evaluate individuals qualified to become Board members;
•evaluate annually and make recommendations to the Board regarding the composition of each standing committee of the Board, the policy with respect to rotation of committee memberships and chairs, and the functioning of the committees;
•review the suitability for each Board member’s continued
service as a director when his or her term expires, and recommend whether or not the director should be re-nominated;
•assist the Board in considering whether a transaction between a Board member and the Company presents an inappropriate conflict of interest and/or impairs the independence of any Board member and conduct a prior review of any such transaction; and
•develop Corporate Governance Guidelines that are consistent with applicable laws and listing standards, periodically review those guidelines, and recommend to the Board any changes the committee deems necessary or advisable.
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Director
Nomination Process
Criteria for Board Members
In evaluating the suitability of individual candidates and nominees, the Nominating/Corporate Governance Committee and our Board consider relevant factors, including, but not limited to: a general understanding of marketing, finance, corporate strategy and other elements relevant to the operation of a publicly-traded company in today’s business environment, senior leadership experience, an understanding of our business, educational and professional background, diversity of skills, perspectives and experiences, character, and whether the candidate would satisfy the independence standards of NYSE. The Nominating/Corporate Governance Committee also considers the following attributes or qualities in evaluating the suitability
of candidates and nominees to the Board:
•Integrity: Candidates should demonstrate high ethical standards and integrity in their personal and professional dealings.
•Accountability: Candidates should be willing to be accountable for their decisions as directors.
•Judgment: Candidates should possess the ability to provide wise and thoughtful counsel on a broad range of issues.
•Responsibility: Candidates should interact with each other in a manner which encourages responsible, open, challenging and inspired discussion. Directors must be able to comply with all duties of care, loyalty, and confidentiality.
•High
Performance Standards: Candidates should have a history of achievements which reflects high standards for themselves and others.
•Commitment and Enthusiasm: Candidates should be committed to, and enthusiastic about, their performance for the Company as directors, both in absolute terms and relative to their peers. Directors should be free from conflicts of interest and be able to devote sufficient time to satisfy their Board responsibilities.
•Financial Literacy: Candidates should be able to read and understand fundamental financial statements and understand the use of financial ratios and information in evaluating financial performance.
•Courage:
Candidates should possess the courage to express views openly, even in the face of opposition.
Process for Identifying and Evaluating Candidates
The Nominating/Corporate Governance Committee has two primary methods for identifying director nominees. First, on a periodic basis, the committee solicits ideas for possible candidates from members of the Board and senior level executives. Second, the committee may from time to time use its authority under its charter to retain, at the Company’s expense, one or more search firms to identify candidates.
The Nominating/Corporate Governance Committee considers all candidates duly identified and will
evaluate each of them based on the same criteria. The Nominating/Corporate Governance Committee’s process includes meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating/Corporate Governance Committee, other members of the Board and senior management. The committee emphasizes creating a pool of candidates diverse in race, gender and ethnicity. The candidates recommended for the Board’s consideration will be those individuals from that pool who the Nominating/Corporate Governance Committee believes will create a Board that is, as a whole, strong in its collective knowledge of, and diverse in skills, perspectives, and experience, including with respect to: (i) accounting and finance, (ii) sales, marketing and digital branding, (iii) public company and governance, (iv) industry and operations, (v) mergers and acquisitions and investment banking,
(vi) compliance and risk management, (vii) public policy, governmental affairs and regulatory, (viii) information technology and cybersecurity, (ix) human capital management, (x) strategic planning and innovation, and (xi) payor industry.
Director Nominees Proposed by Stockholders
The Nominating/Corporate Governance Committee also considers written proposals from stockholders for director nominees. The Nominating/Corporate Governance Committee takes into consideration the needs of the Board and the qualifications of the candidate. In accordance with our Bylaws, any such nominations must be received by the Nominating/Corporate Governance Committee, c/o the corporate secretary,
not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event the annual meeting is called for a date that is not within 30 days before or after such anniversary date, a nomination, in order to be timely, must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. Pursuant to our Bylaws, stockholder nominations for our 2024 annual meeting of stockholders must be received at our principal executive offices on or after March 1, 2024 and not later than March 30, 2024. All stockholder nominations
must be sent by mail or courier service and addressed to Enhabit, Inc., 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206, Attention: Corporate Secretary. Other electronic mail and facsimile delivery are not monitored routinely for stockholder submissions or may change from time to time, so timely delivery cannot be ensured.
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Stockholder nominations must include the information set forth in Section 3.4(b) of our Bylaws
and be accompanied by a written consent of each proposed nominee to being named as a nominee and to serving as a director if elected. A stockholder providing notice of a nomination must update and supplement the notice so that the information in the notice is true and correct as of the record date(s) for determining the stockholders entitled to receive notice of and to vote at the annual meeting. Any stockholder that intends to submit a nomination for the Board should read the entirety of the requirements in Section 3.4 of our Bylaws which can be found in the “Corporate Governance” section of our website at https://investors.ehab.com.
The chairperson of the meeting shall have the power to determine and declare to the meeting whether or not a nomination was made in accordance with the procedures set forth in our Bylaws and, if the chairman determines that a nomination is not in accordance with the procedures set forth in the Bylaws, to declare to the meeting that the defective nomination will be disregarded. In addition to satisfying the requirements under our Bylaws, if a stockholder intends to comply with the universal proxy rules and to solicit proxies in support of director nominees other than the Company’s nominees, the stockholder must provide
a notice that sets forth the information required by Rule 14a-19 under the Exchange Act, which notice must be postmarked to the Corporate Secretary no later than April 29, 2024 (60 calendar days prior to the one-year anniversary date of the 2023 Annual Meeting).
Finally, our Bylaws provide for reimbursement of certain reasonable expenses incurred by a stockholder or a group of stockholders in connection with a proxy solicitation campaign for the election of one nominee to the Board. This reimbursement right is subject to conditions including the board’s determination that reimbursement is consistent with its fiduciary duties. We will reimburse certain expenses that a nominating stockholder, or group of nominating stockholders, has incurred in connection
with nominating a candidate for election to our Board if the conditions set out in Section 3.4(c) of our Bylaws are met. If those conditions are met and the proponent’s nominee is elected, we will reimburse the actual costs of printing and mailing the proxy materials and the fees and expenses of one law firm for reviewing the proxy materials and one proxy solicitor for conducting the related proxy solicitation (in each case, only such costs, fees, and expenses that are reasonably incurred by a nominating stockholder). If those conditions are met and the proponent’s nominee is not elected but receives 40% or more of all votes cast, we will reimburse the proportion of those qualified expenses equal to the proportion of votes that the nominee received in favor of his or her election to the total votes cast. For additional detail including the conditions to which any potential reimbursement
is subject, please read Section 3.4(c) of our Bylaws which can be found in the “Governance” section of our website at https://investors.ehab.com.
Director Independence
The NYSE listing standards require that the Company have a majority of independent directors and provide that no director will qualify
as “independent” for these purposes unless the Board affirmatively determines that the director has no material relationship with the Company. Additionally, the listing standards set forth a list of relationships and transactions that would prevent a finding of independence if a director or an immediate family member of that director were a party. Other than Ms. Jacobsmeyer, our President and CEO, the Board is entirely independent.
On an annual basis, the Board undertakes a review of the independence of the directors. In accordance with the NYSE listing standards, we do not consider a director to be independent unless the Board determines (i) the director meets all NYSE independence requirements and (ii) the director has no material relationship with the
Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). Members of the Audit, Compensation and Human Capital, and Nominating/Corporate Governance Committees must also meet applicable independence tests of the NYSE and the SEC. In connection with this determination, each director and executive officer completes a questionnaire which requires disclosure of, among other topics: any transactions or relationships between any director or any member of his or her immediate family and the Company and its subsidiaries, affiliates, our independent registered public accounting firm or any advisors to the Compensation and Human Capital Committee;
any transactions or relationships between any director or any member of his or her immediate family and members of the senior management of the Company or their affiliates; and any charitable contributions to not-for-profit organizations for which our directors or immediate family members serve as executive officers.
Our Board has determined that all 12 of our non-employee directors are independent in accordance with our Corporate Governance Guidelines and the NYSE listing standards. All of the members of the Audit, Compensation and Human Capital, Nominating/Corporate Governance, Compliance/Quality of Care, and Finance Committees satisfy those independence tests.
29
Compensation
of Directors
Pursuant to its charter, the Compensation and Human Capital Committee evaluates the compensation of our non-employee directors, including the respective chairperson fees, and recommends any changes it deems advisable to the Board, which is responsible for adopting the final form and amount of non-employee director compensation. As part of its annual review, the Compensation and Human Capital Committee receives comparative peer and industry data and recommendations from its independent compensation consultant, Pay Governance.
In connection with the Separation, the Company granted founder RSU awards to Messrs. Higdon, Elson, Maupin, and Shaw, and Ms. Curl with a grant date fair value of $187,500. In addition the
Company granted each non-employee director an RSU award with a grant date fair value of $150,000 as annual compensation. The RSUs held by each director vest upon grant and will be settled in shares of our common stock following the director’s departure from the Board.
In 2022, we provided the following compensation to our non-employee directors:
Name(1)
Fees Earned or
Paid in Cash
($)(2)
Stock Awards ($)(3)
All Other Compensation ($)
Total ($)
Leo I. Higdon, Jr.
131,250
337,530
—
468,750
Jeffrey W. Bolton
56,250
150,016
—
206,250
Tina
L. Brown-Stevenson
56,250
150,000
—
206,250
Yvonne M. Curl
71,250
337,530
—
408,780
Charles M. Elson
67,500
337,530
—
405,030
Erin
P. Hoeflinger
56,250
150,016
—
206,266
John E. Maupin, Jr.
67,500
337,530
—
405,030
Susan A. La Monica
56,250
150,000
—
206,250
Gregory
S. Rush
56,250
150,016
—
206,266
L. Edward Shaw, Jr.
71,250
337,530
—
408,780
(1)Mr. McGuigan and Mr. Schochet joined the Board on March
30, 2023.
(2)The amounts reflected in this column include the retainer and chairperson fees earned for service as a director for third and fourth quarters of 2022 following the Separation. Additionally, at the end of December 2022, first quarter 2023 retainer and chairperson fees were paid as follows and are included in this column: Mr. Higdon ($43,750); Mr. Shaw, and Ms. Curl ($23,750); Messrs. Maupin and Elson ($22,500); Messrs. Bolton and Rush, and Mses. Brown-Stevenson, Hoeflinger, and La Monica ($18,750).
(3)Each non-employee director received awards of restricted stock units, or RSUs, with a grant date fair value computed in accordance with Accounting Standards Codification 718, Compensation - Stock Compensation. The number of Enhabit RSUs was calculated by dividing the grant date value by the closing trading price of Enhabit
common stock on the NYSE on the date of grant.
Award
Grant Date
Price per Share ($)
Number of Shares (#)
Grant
Date Value ($)
Founders Award(a)
7/1/2022
22.74
8,246
187,514
Annual Retention Award(b)
7/1/2022
22.74
6,597
150,016
Annual Retention
Award(c)
7/15/2022
18.53
8,095
150,000
a.Messrs. Higdon, Elson, Maupin, and Shaw and Ms. Curl received a founders award on July 1, 2022.
b.Messrs. Higdon, Bolton, Elson, Maupin, Rush and Shaw, and Mses. Curl and Hoeflinger received annual retention award on July 1, 2022.
c.Mses. La Monica and Brown-Stevenson
received annual retention award on July 15, 2022.
Our non-employee directors received an annual base cash retainer of $75,000. We also paid the following chairperson fees to compensate for the enhanced responsibilities and time commitments associated with those positions:
Chair Position
Chairperson Fees ($)
Chairman of the Board
75,000
Audit
Committee
25,000
Compensation and Human Capital Committee
20,000
Compliance/Quality of Care Committee
15,000
Finance Committee
15,000
Nominating/Corporate Governance Committee
20,000
It
is expected that each non-employee member of the Board will receive an annual grant of restricted stock units valued at approximately $150,000. The restricted stock units held by each director will be settled in shares of our common stock following the director’s departure from the Board.
Ms. Jacobsmeyer received no additional compensation for serving on the Board.
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COMPENSATION AND HUMAN CAPITAL COMMITTEE MATTERS
Compensation Committee Interlocks and
Insider Participation
No member of our Compensation and Human Capital Committee is an officer or employee of the Company. None of our current executive officers serves or has served as a member of the Board or compensation committee of any other company that had one or more executive officers serving as a member of our Board or Compensation and Human Capital Committee.
Compensation and Human Capital Committee Report
The Compensation and Human Capital Committee reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and, based upon such review and discussions, the Compensation
and Human Capital Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and this proxy statement.
Compensation and Human Capital Committee
Yvonne M. Curl (Chairperson)
Erin P. Hoeflinger
Susan A. La Monica
L. Edward Shaw, Jr.
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EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) describes the objectives, principles and components of the material elements of compensation for the Company’s Named Executive Officers (“NEOs”). Prior to the Separation, we operated as a wholly-owned subsidiary of Encompass.As a result, because the Separation did not occur until July 1, 2022, the 2022 compensation structure for our NEOs was determined prior to the Separation under the historical compensation philosophy, programs and practices of Encompass. This CD&A addresses
the pre-Separation decisions made by Encompass as well as the impact of the Employee Matters Agreement on NEO compensation. In addition, this CD&A describes certain decisions made by our newly formed Compensation and Human Capital Committee following the Separation that impacts both 2022 and 2023 compensation. Our NEOs for 2022 are:
Name
Title
Barbara A. Jacobsmeyer
President and Chief Executive Officer
Crissy
B. Carlisle
Executive Vice President and Chief Financial Officer
Jeanne Kalvaitis
Executive Vice President, Hospice Operations
Julie Jolley
Executive Vice President, Home Health Operations
Tanya Marion
Chief Human Resources Officer
Chad K. Knight1
General
Counsel and Secretary
(1) Mr. Knight resigned from his position as General Counsel effective as of November 4, 2022.
The NEOs received compensation for their services only from, prior to the Separation, Encompass, and following the Separation, the Company. This proxy statement sets forth the combined compensation paid by both Encompass and the Company to each of the NEOs with respect to compensation earned in 2022.
The Compensation and Human Capital Committee of the Board of Directors of Encompass (the “Encompass Compensation Committee”) reviewed and approved the
compensation programs and policies, including incentive compensation plans and equity-based plans, applicable to our NEOs in 2022. The Encompass Compensation Committee also specifically reviewed and determined the compensation of Ms. Jacobsmeyer, who was an executive officer of Encompass in 2022 prior to the Separation. Because Ms. Carlisle, Ms. Jolley, Ms. Kalvaitis, Ms. Marion and Mr. Knight were not executive officers of Encompass in 2022, their compensation was determined by Encompass’s senior management consistent with Encompass’s compensation philosophy and reviewed by the Encompass Compensation Committee in anticipation of the Separation.
Executive Summary
During 2022, the
Company addressed many challenges as it transitioned from a business unit of Encompass Health Corporation to a standalone public company. These challenges included continuing shifts in the payor mix, increasing labor costs, and other effects of inflation. Despite these challenges, the Company remained focused on continuing to provide high quality service to our patients.
2022 Operational Achievements:
•Separation from Encompass Health Corporation on July 1, 2022
•Established a payor innovation team and increased our focus on profitable relationships with Medicare Advantage plans
•Made
strategic changes in hospice
•Strategically reinvested for growth
•Realigned field sales and operations teams
•Revised human capital policies and added the Company’s first Chief Human Resources Officer
2022 Financial Performance:
•Delivered 2022 consolidated net revenue of $1,071.1 million
•Delivered 2022 Adjusted EBITDA of $149.3 million
2022 Incentive Compensation Plan Outcomes
•The annual
short-term senior management bonus plan performance achievement was 38.6% of target
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Executive Compensation Philosophy
The 2022 compensation programs were designed by Encompass pursuant to Encompass's compensation philosophy. Accordingly, the following discussion is largely a review of those programs implemented and compensation decisions made prior to the Separation.
Encompass’s stated executive compensation philosophy used in determining the compensation of our NEOs is to:
•provide a competitive rewards
program for senior management that aligns management’s interests with those of its long-term stockholders;
•correlate compensation with corporate, regional and business unit outcomes by recognizing performance with appropriate levels and forms of awards;
•establish financial and operational goals to sustain strong performance over time;
•place 100% of annual cash incentives and a majority of equity incentive awards at risk by directly linking those incentive payments and awards to the Company’s performance; and
•provide limited executive benefits to members of senior management.
Encompass
has stated that it believes this philosophy enables it to attract, motivate, and retain talented and engaged executives who will enhance long-term stockholder value.
In connection with the Separation, the Enhabit Board formed the Company’s Compensation and Human Capital Committee (the “Enhabit Compensation Committee”). The Enhabit Compensation Committee, in consultation with its independent advisor and management, revised the compensation philosophy and programs for 2023 to match the Company’s objectives as a stand-alone public company. Certain of these changes are described below under “Executive Compensation Program Details and Changes for 2023”.
Target
Pay Opportunities for NEOs
The Company’s executive compensation program is designed to provide a strong correlation between pay and performance. “Pay” refers to the value of an executive’s total direct compensation, or “TDC,” calculated as follows:
Base
Salary
+
Target Annual Incentives
+
Target Long-Term Equity Incentives
=
Target Total Direct Compensation
NEO
Target Total Direct Compensation
Named Executive Officer
Base Salary ($)
Target Annual Cash Incentive ($)
Target Long-Term Equity Incentive ($)
Target Total Direct Compensation ($)
Barbara A. Jacobsmeyer(1)
800,000
892,500
1,875,000
3,567,500
Crissy
B. Carlisle
400,001
280,001
500,001
1,180,003
Julie Jolley(1)
382,500
273,000
187,500
843,000
Jeanne Kalvaitis(2)
160,427
80,214
—
240,641
Tanya
Marion
350,002
175,001
262,502
787,505
Chad K. Knight(1)
327,500
245,000
152,500
725,000
(1) As described below, in anticipation of the Separation
from Encompass increases were approved to the base salary and the target annual cash incentive opportunity for Ms. Jacobsmeyer, Ms. Jolly, and Mr. Knight. The table above reflects the impact of these increases for 2022.
(2) Ms. Kalvaitis joined the Company in June 2022. The amount shown as “Base Salary” and “Target Annual Cash Incentive” is pro-rated to account for 7 months of employment in 2022. Ms. Kalvaitis was not granted an LTI award in 2022.
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In 2022, all cash incentive target amounts and a substantial portion of NEO equity award
values were dependent on performance measured against predetermined objectives approved by the Encompass Compensation Committee prior to the Separation. The graphs below reflect: (i) the portion of our NEOs’ 2022 target TDC that is performance-based and (ii) the time frame (i.e., annual vs. long-term) for our NEOs to realize value under our various TDC components.
President & Chief Executive Officer (Jacobsmeyer)
67% Performance-Based
Base
Pay
Annual Cash Incentive
Options
PSU
RSA
22%
25%
11%
32%
11%
53% Long-Term
Average
for Other NEOs(1)
46% Performance-Based
Base Pay
Annual Cash Incentive
PSU
RSA
41%
28%
19%
12%
31%
Long Term
(1) Excludes Ms. Kalvaitis.
Note: Numbers may not add to 100% due to rounding.
Compensation
Best Practices
To ensure the Company has strong corporate governance and risk mitigation, the Enhabit Board also adopted the following best practices related to executive compensation:
ü
Emphasis on performance-based variable compensation
X
No significant perquisites
ü
Majority
of long-term incentive awards are performance-based
X
No “single-trigger” vesting for equity awards in the event of a change in control
ü
Short-term incentive plan includes both financial and quality of care (ESG) metrics
X
No hedging or pledging of Company stock
ü
Robust stock ownership requirements for officers and directors implemented in 2022
X
No
tax gross-ups on termination payments related to a change in control
ü
Conduct annual review of peer group and competitiveness of executive compensation
X
No dividends paid out on unvested restricted or performance shares
ü
Cash severance provisions aligned with market practices
X
No defined benefit pension plans for executives
ü
“Double-trigger” vesting for equity
awards in the event of a change in control
X
No option repricing
ü
Compensation recoupment, or “claw-back,” policy applies to both cash and equity incentives and covers misconduct in some cases where a financial restatement has not occurred
ü
Compensation Committee comprised solely of independent directors
ü
Proactive stockholder
engagement
ü
Independent compensation consultant
Say-on-Pay Vote
The Compensation and Human Capital Committee and management of the Company will consider stockholder input, including the advisory Say-on-Pay vote, as it evaluates the design of executive compensation programs and the specific compensation decisions for each NEO. As a new
publicly-traded company as of July 1, 2022, the first Say-on-Pay vote will be held at our 2023 annual meeting.
34
Determination of Compensation
Compensation Objectives
Prior to the Separation, the Encompass Compensation Committee’s objectives were to provide competitive target compensation to attract and retain the kind of executive talent necessary to achieve the Company’s strategic objectives and to ensure incentive plan (annual and
long term) outcomes are aligned with Company performance. Executives may achieve above-target actual compensation for exceptional performance relative to these target performance goals and below-target levels of compensation for performance that is not as strong as expected.
Use of Compensation Consultants
Prior to the Separation, in making compensation decisions for 2022, the Encompass Compensation Committee received recommendations from Encompass’s chief executive officer and support from Encompass’s human resources staff. Additionally, for 2022, the Encompass Compensation Committee engaged Pay Governance as its independent executive compensation consultant. Encompass management separately engaged Mercer (US) Inc. (“Mercer”) to provide data and analysis on competitive executive and non-executive compensation practices. Mercer data on executive compensation practices was
provided to the Encompass Compensation Committee, subject to review by, and input from, Pay Governance.
Following the Separation, the Company’s Compensation Committee separately engaged Pay Governance to serve as its independent compensation consultant. Pay Governance provided independent executive compensation advice and support to our Compensation Committee during 2022 and assisted with developing our compensation programs for 2023.
Assessment of Competitive Compensation Practices
Prior to the Separation, a number of factors were considered by Encompass and, with respect to Ms. Jacobsmeyer, the Encompass Compensation Committee, in determining the base salaries, annual incentive opportunities, and long-term incentive awards of our NEOs for 2022,
including the executive’s responsibilities, aspects of the role that are unique to Encompass and the Company, the executive’s experience, internal equity within senior management, the executive’s performance, and competitive market data.
With respect to Ms. Jacobsmeyer’s compensation as an executive officer of the Company, the Encompass Compensation Committee reviewed the compensation data from the surveys noted below. The compensation survey data provided the Encompass Compensation Committee a significant sample size, included information for management positions below senior executives, and included companies in healthcare and other industries from which we might recruit for executive positions. In addition, prior to the Separation, the Encompass Compensation
Committee approved a compensation peer group specific for Enhabit, which differed from the peer group used for Encompass. The Encompass Compensation Committee reviewed compensation peer group data assembled by Pay Governance from the peer group companies listed below.
Compensation Survey Sources
s
Mercer Benchmark Database
s
Aon
Hewitt Executive
s
Mercer Integrated Health Networks
s
Willis Towers Watson Executive
2022 Compensation Peer Group
s
Acadia
Healthcare
s
DaVita
s
Quest Diagnostics
s
Amedisys
s
Ensign Group
s
ModivCare
s
AMN Healthcare
s
LHC Group
s
Select
Medical Holdings
s
Brookdale Senior Living
s
Mednax
s
Surgery Partners
s
Chemed
s
Premier
s
Universal Health Systems
The Encompass Compensation Committee reviewed competitive data on base salary levels, annual
incentives, and long-term incentives for each executive and the NEO group as a whole. In preparation for 2022 compensation decisions for Ms. Jacobsmeyer, the Encompass Compensation Committee reviewed total direct compensation opportunities at the 25th, 50th and 75th percentiles of the survey data and the compensation peer group data (“market data”) and established target total direct compensation that was within a competitive range of the market median. It is important to note the Encompass Compensation Committee, with input from its advisor, recognizes the benchmark data changes from year to year, so the comparison against those benchmarks places emphasis on sustained compensation trends to avoid short-term anomalies. In general, the Encompass Compensation Committee views compensation 10% above or below the 50th percentile to be within a competitive range given year to year variability in the data.
With respect to
Ms. Carlisle’s, Ms. Jolley’s, Ms. Marion’s, and Mr. Knight’s compensation, Encompass senior management established the target total direct compensation using a framework similar to the one used above by the Encompass Compensation
35
Committee, with reference to individual and company performance, compensation survey data and, as available, peer group compensation data.
Elements of Executive Compensation
Component
Purpose
Base
Salary
Provide our executives with a competitive level of fixed pay.
Annual Incentives
Intended to drive Company performance during the applicable year.
Long-Term Equity Incentives
Intended to focus executive attention on longer-term strength of the business and align their interests with our stockholders over a multiyear period.
Health and Welfare Benefits
Provide our
executives with programs that promote health and financial security, which all eligible employees receive.
The primary elements of our executive compensation program are:
Base Salary
+
Annual Incentives
+
Long-Term Equity
Incentives
Base Salary
We provide officers and other employees with base salaries to compensate them with regular income at competitive levels. The Encompass Compensation Committee reviews base salaries annually for its executive officers, including Ms. Jacobsmeyer. Base salaries for our other NEOs were set annually by Encompass senior management. The table below shows base salaries in effect on January 1, 2022. In connection with our Separation from Encompass, the Encompass Compensation Committee increased the base salaries of Ms. Jacobsmeyer, Ms. Jolly, and Mr. Knight to better align their total target compensation with the market considering their experience and the increased responsibilities of their positions at a public company.
Executive
Vice President and Chief Financial Officer
400,001
400,001
Julie Jolley
Executive Vice President, Home Health Operations
375,000
390,000
Jeanne Kalvaitis(1)
Executive Vice President, Hospice Operations
275,018
275,018
Tanya
Marion(2)
Chief Human Resources Officer
350,002
350,002
Chad K. Knight(3)
General Counsel and Secretary
305,000
350,000
(1) Ms. Kalvaitis was hired in June 2022. Upon hire, Ms. Kalvaitis’s base salary was $275,018.
(2) Ms. Marion was hired in January
2022. Upon hire, Ms. Marion’s base salary was $350,002.
(3) Mr. Knight resigned from his position as General Counsel effective as of November 4, 2022.
Annual Incentives
Establishing the Target Annual Incentive Opportunity
The Encompass 2022 Senior Management Bonus Plan (the “Encompass SMBP”) was designed to incentivize and reward our NEOs and others for annual performance as measured against predetermined corporate and business segment quantitative objectives intended to improve company performance and promote stockholder value. Under the SMBP, a target annual incentive opportunity, which is a percentage of base
salary, is determined for each participant.
In connection with our Separation, and pursuant to the Employee Matters Agreement, the short-term incentive awards previously granted to the Company’s employees under the Encompass SMBP remained in place for the first half of 2022. At the time of Separation, target incentive opportunities for certain NEOs were adjusted by the Encompass Compensation Committee to align such NEOs’ target TDC with the market considering their experience and the increased responsibilities of their positions at a public company and the metrics were adjusted to apply to the Company’s results for the second half of 2022. These 2022 awards are paid in cash and were paid by the
Company in 2023 upon approval of the performance results.
For 2022, the Encompass Compensation Committee approved two quantitative objectives: Adjusted EBITDA and a “Quality Scorecard” objective to focus on quality-of-care metrics.
In connection with the Separation, the Enhabit Compensation Committee approved a bifurcated approach with respect to the Enhabit SMBP, such that the 2022 performance period was divided into two periods (i.e., pre and post Separation). The first performance period, relating to the first half of the year, continued to be based on the quantitative objectives of Adjusted EBITDA on a consolidated basis, Adjusted EBITDA of the home health and hospice (“HHH”) Segment EBITDA and the Quality Scorecard, while the second performance period, relating to the second half of the year, was based on the
HHH Segment EBITDA (i.e., did not take into account the Adjusted EBITDA on a consolidated basis) and the Quality Scorecard, which did not change from the first performance period. The final payments were based on the average of the weighted average results for both performance periods. The table below sets forth the quantitative objectives under the plan.
The Encompass Compensation Committee then assigned relative weightings (as a percentage of total annual incentive opportunity) to the objectives as noted below. The relative weightings of the quantitative objectives were the same for all our NEOs in 2022.
To reward exceptional company performance, the NEOs have the opportunity to receive a maximum payout in the event actual results reach a predetermined level for each objective. Conversely, if results are less than threshold for an
objective, then no payout is awarded for that objectives. It is important to note the following:
•performance measures can be achieved independently of each other; and
•as results increase above the threshold, a corresponding percentage of the target cash incentive will be awarded. (In other words, levels listed are on a continuum, and straight-line interpolation is used to determine the payout multiple between two payout levels shown in the table above.)
37
2022
SMBP Quantitative Objectives
Award Range
Not Eligible
Threshold
Target
Maximum
Objective
Weight
Sub-Weight
0%
50%
100%
200%
First
Half of Year
EHC Adjusted EBITDA
20%
< $486,827,499
$486,827,500
$526,300,000
$
565,772,500
HHH
Segment
80%
Adjusted EBITDA
70%
<
$108,872,499
$108,872,499
$117,700,000
$126,527,500
Quality Scorecard*
30%
Second Half of Year
HHH
Segment
100%
Adjusted EBITDA
70%
< $97,957,499
$97,957,499
$105,900,000
$113,842,500
Quality
Scorecard*
30%
* HHH Quality Scorecard Sub-
Objective
Sub-Weight
Consolidated
Star/Hospice Rating
Home Health Quality Stars
25%
<3.2
3.2
3.6
4.0
Home Health Patient Satisfaction Stars
25%
<3.0
3.0
3.5
4.0
Hospice
HIS Measures
25%
<3.0
3.0
4.0
5.0
Hospice CAHPS
25%
<3.0
3.0
4.0
5.0
Assessing
and Rewarding 2022 Achievement of Objectives
After the close of the year, the Encompass Compensation Committee assessed performance against the quantitative objectives to determine a weighted average result, or the percentage of each NEOs’ target incentive that has been achieved, for each objective. The Enhabit Compensation committee also reviewed the recommendation. The results of Actual 2022 SMBP Plan are as follows:
2022 EBITDA Results
Objective
% of Target Individual Objective Achievement
Weighted
Achievement
EHC Adjusted EBITDA
72.3%
7.2%
Enhabit Adjust EBITDA (First Half)
—%
—%
Enhabit Adjust EBITDA (Second Half)
—%
—%
Combined
7.2%
2022
HHH Quality Scorecard Results
Objective
% of Target Individual Objective Achievement
Weight
Weighted Metric Achievement
Weighted Achievement
Home Health Quality Stars
125.0%
25%
31.3%
Home
Health Patient Satisfaction Stars
140.0%
25%
35.0%
Hospice HIS Measures
200.0%
25%
50.0%
Hospice CAHPS
—%
25%
—%
Combined
116.3%
31.4%
38
2022
SMBP - Amounts Earned
Named Executive Officer
Base Salary ($)
Target Annual Incentive Opportunity (%)
Target Annual Incentive ($)
Amount of 2022 SMBP Earned (38.6%) ($)
Barbara A. Jacobsmeyer
850,000
105%
892,500
344,505
Crissy
B. Carlisle
400,001
70%
280,001
108,080
Julie Jolley
390,000
70%
273,000
105,378
Jeanne Kalvaitis
275,018
50%
137,509
29,811
Tanya
Marion
350,002
50%
175,001
67,550
Chad K. Knight(1)
350,000
70%
245,000
79,488
(1) Mr. Knight resigned from his position as General Counsel effective as of November
4, 2022. His payout was pro-rata for 2022.
Long-Term Incentives
To further align management’s interests with the interests of stockholders, Encompass reported that a significant portion of each NEOs’ total direct compensation for 2022 was in the form of long-term equity awards. For 2022, Encompass’s equity incentive plan provided participants at all officer levels with the opportunity to earn performance-based restricted stock, or “PSUs,” time-based restricted stock, or “RSAs” and, for executive vice presidents of Encompass like Ms. Jacobsmeyer, stock options.
The following table summarizes the 2022 target equity award opportunity levels and forms of equity compensation for each of our NEOs. These amounts
differ from the equity award values reported in the Summary Compensation Table (shown on page 46) due to the utilization of a 20-day average stock price to determine the number of shares granted as opposed to the grant date values used for accounting and reporting purposes.
2022
Equity Incentive Plan Structure
Named Executive Officer(1)
Total Target Equity Award Opportunity ($)
Options as % of the Award
PSUs as a % of the Award
RSAs as a % of the Award
Barbara A. Jacobsmeyer
1,875,000
20%
60%
20%
Crissy
B. Carlisle
500,001
—%
60%
40%
Julie Jolley
187,500
—%
60%
40%
Tanya Marion
262,502
—%
60%
40%
Chad
K. Knight
152,500
—%
60%
40%
(1) Ms. Kalvaitis joined the Company in June 2022 and was not granted an LTI award in 2022.
PSU Awards in 2022
Encompass reported that the Encompass Compensation Committee determined that performance-based vesting conditions for the majority of stock awards in 2022 were appropriate to further align leadership with the interests of stockholders and promote
specific performance objectives while facilitating executive stock ownership. The PSUs entitled the NEOs to receive a predetermined range of shares upon achievement of specified performance objectives. Dividends accrue when paid on unvested shares, but the holders of PSUs do not receive the cash payments related to accrued dividends until the resulting shares, if any, fully vest. If shares are earned at the end of the two-year performance period, the participant must remain employed until the end of the following year at which time the shares fully vest.
For the 2022 PSU awards, the number of shares earned will be determined at the end of a two-year performance period based on the level of achievement of normalized earnings per share and return on invested capital as defined and determined by Encompass. The weighting of these metrics
is outlined below.
39
Time-Based Restricted Stock Awards in 2022
Encompass reported that a portion of 2022 long-term incentive award value was provided in RSAs to provide retention incentives to executives and facilitate stock ownership. The recipients of RSA awards have voting rights and rights to receive dividends. Dividends accrue when paid on outstanding shares, but the holders of RSAs will not receive the cash payments related to these accrued dividends until the restricted shares fully vest. For the 2022 RSA award, one-third of the shares awarded vest on the first
anniversary of the award, one-third of the shares vest on the second anniversary of the award, and the final third vest on the third anniversary.
Stock Option Awards in 2022
The Encompass Compensation Committee believes nonqualified stock options also are an appropriate means to align the interests of its most senior executives with its stockholders since they provide an incentive to grow stock price. Each stock option permits the holder, for a period of ten years, to purchase one share of common stock at the exercise price, which is the closing market price on the date of issuance. Options generally vest ratably in equal annual increments over three years from the award date. Ms. Jacobsmeyer was our only NEO to receive a stock option grant from Encompass in 2022.
Conversion
of Encompass Equity Awards at Separation
Prior to the Separation, the Encompass Compensation Committee reviewed the 2022 value of the long-term incentive awards to the NEOs. Each Encompass award held by an individual who was an employee of Enhabit following the Separation was converted into an Enhabit equity award. The number of shares subject to each such award were adjusted in a manner intended to preserve the aggregate intrinsic value of the original Encompass award as measured immediately before and immediately after the Separation (in each case, as calculated based on the applicable stock price measurements specified in the Employee Matters Agreement), subject to rounding. Such adjusted award is otherwise subject to the same terms and conditions that applied to the original Encompass award immediately prior to the Separation. However, Enhabit does not pay dividends and consequently there is no dividend accrual on any
awards following conversion.
Conversion of PSUs
Each award of Encompass PSUs held by an individual who was an employee of Enhabit following the Separation was converted into an Enhabit common stock RSU on a 1 to 2.4648197 basis based on a truncated performance period. At the time of Separation the two year performance period for the Encompass 2021 and 2022 PSUs had not been completed. Consequently, the Encompass Compensation Committee determined the achievement level as of the time of Separation considering performance prior to the date of Separation. The achievement level for the 2020 PSUs had been determined at the time of Separation. The following table reflects the corresponding performance achievement levels for the 2020, 2021 and, 2022 PSU awards. The Outstanding Equity Awards at December
31, 2022 Table includes such awards for our NEOs considering the achievement levels and on as converted basis.
2020 PSU Award
2021 PSU Award
2022 PSU Award
Performance
Period 2020-2021
Performance Period 2021-2022
Performance Period 2022-2023
PSU Metric
Achievement
Achievement
Achievement
EPS
95.2%
118.30%
95.4%
ROIC
81.5%
142.7%
91.1%
Conversion
of RSAs
Each award of Encompass RSAs held by an individual who is an employee of Enhabit following the Separation was converted into an Enhabit common stock RSA on a 1 to 2.4648197 basis. The Outstanding Equity Awards at December 31, 2022 Table includes such awards for our NEOs on a converted basis.
Conversion of Options
Ms. Jacobsmeyer was the only Enhabit employee awarded Encompass options prior to Separation. Following the Separation each option was converted into an Enhabit common stock option on a 1 to 2.4648197 basis. The Outstanding Equity Awards at December 31, 2022 Table includes such awards for Ms. Jacobsmeyer
on a converted basis.
40
Benefits
In 2022, prior to our Separation from Encompass, our NEOs employed by Encompass were eligible for the same benefits offered to other Encompass employees, except that Ms. Jacobsmeyer participated in Encompasses’ nonqualified 401(k) plan, a benefit offered to Encompass senior management. Following our Separation from Encompass, our NEOs were eligible for the same benefits offered to all eligible Enhabit employees.
Perquisite Practices
For 2022, we did not have any perquisite plans or policies in place for our executive officers. We
also did not provide tax payment reimbursements, gross ups, or any other tax payments to any of our executive officers. Encompass offered reimbursement of relocation expenses when a senior officer is asked to move for business purposes. Ms. Jacobsmeyer and Ms. Carlisle received this benefit in 2022 from Encompass.
41
Other 2022 NEO Compensation
2022 Enhabit Founder Awards
In connection with the separation and distribution, the Company granted
founder RSU awards to non-employee directors (as described above under “Director Compensation”) and founder RSAs to certain NEOs, in each case under our 2022 Omnibus Performance Incentive Plan (a description of which is included below). Ms. Jacobsmeyer, Ms. Carlisle, Ms. Jolley, Ms. Marion and Mr. Knight each received a founder award on the date of separation with a grant date value of $3,000,000, $500,000, $390,000, $262,500 and $350,000, respectively. The number of Enhabit RSAs was calculated by dividing the grant date value by the closing trading price of Enhabit common stock on the NYSE on the date of Separation. The founder award granted to Ms. Jacobsmeyer vests in installments, with 50% vesting on the third anniversary of the grant date and 50% vesting on the fourth anniversary of the grant date, subject to continued employment through the applicable vesting date. The founder awards granted to the other NEOs vest in installments, with 25% vesting on the
first anniversary of the grant date, 25% vesting on the second anniversary of the grant date, and 50% on the third anniversary of the grant date, in each case, subject to continued employment through the applicable vesting date.
In addition, Ms. Jacobsmeyer received an additional grant on the date of the Separation with a grant date value of $1,087,500 to recognize Ms. Jacobsmeyer’s increased responsibilities as the CEO of a standalone public company. The number of Enhabit RSAs was calculated by dividing the grant date value by the closing trading price of Enhabit common stock on the NYSE on the date of Separation. These RSAs vest in three equal installments on each of February 25, 2023, February 25, 2024 and February 25, 2025, subject to
continued employment through the applicable vesting date.
2021 Encompass Home Health and Hospice Retention Bonus Plan
On April 7, 2021, certain of Encompass’s senior officers other than Ms. Jacobsmeyer and Ms. Carlisle were included as participants in the 2021 Encompass Home Health and Hospice Retention Bonus Plan. The purpose of this plan was to retain key members of home health and hospice leadership until the Separation was complete. The plan offered a bonus equal to 50% of their then base salary, with one-half to be paid on the completion of the Separation and one-half to be paid on the 90th day following the Separation. The plan also provided that if the Separation did not occur by March 15, 2022,
then each outstanding award awarded pursuant to the plan would immediately vest in full on March 15, 2022. As the separation did not occur prior to March 15, 2022, these awards vested in full on March 15, 2022 and were paid by Encompass in March of 2022. The bonuses for our NEOs under this plan are as follows:
Named Executive Officer
2021 Home Health and Hospice Retention Bonus Plan Value
Barbara A. Jacobsmeyer
N/A
Crissy
B. Carlisle
N/A
Julie Jolley
$152,495
Jeanne Kalvaitis(1)
N/A
Tanya Marion(1)
N/A
Chad K. Knight
$127,504
(1) Ms. Kalvaitis and Ms. Marion were not hired until 2022 and therefore did not receive a 2021
retention bonus.
Knight Separation and Release Agreement
In September 2022, Mr. Knight and the Company entered into a Separation and Release Agreement effective as of November 4, 2022 at which time Mr. Knight resigned from his position as General Counsel. Pursuant to this agreement, Mr. Knight (i) will receive his base salary for 15 months following his resignation (approximately $437,500) and the Company’s
payment of the employer portion of his health and welfare benefit premiums for a period of up to 15 months (approximately $25,144) and (ii) agrees to release the Company from any and all claims to the fullest extent permissible by law (as described in the agreement). Mr. Knight also received a pro-rated bonus under the Enhabit senior management bonus plan for 2022. This amount ($79,448) was paid in March 2023. Mr. Knight will remain subject to the terms of his restrictive covenants agreement, including nonsolicitation and noncompete provisions for 12 months after his resignation.
42
Other
Compensation Policies & Practices
Equity Ownership Guidelines for Management and Non-Employee Directors
To further align the interests of our management and non-employee directors with those of our stockholders, we have adopted equity ownership guidelines for senior management and members of our Board.
Executive officers and non-employee directors have five years to reach their ownership level. As a new public company, each of our NEOs and non-employee directors currently satisfies the equity ownership guidelines or is within the five-year grace period. We expect that each of our NEOs and non-employee directors who do not currently satisfy the guidelines will satisfy them prior to the expiration of the five-year grace period.Outlined
in the table below are the ownership guidelines:
Position
Required Value of Equity Owned
Chief Executive Officer
5 times annual base salary
Executive Management
3 times annual base salary
Non-Employee Directors
$375,000
Compensation
Recoupment Policy
Our Board has approved and adopted a senior management compensation recoupment policy. The policy provides that if the Board has, in its sole discretion, determined that any fraud, illegal conduct, intentional misconduct, or gross neglect by any officer was a significant contributing factor to our having to restate all or a portion of our financial statements, the Board may:
•require reimbursement of any incentive compensation paid to that officer,
•cause the cancellation of that officer’s restricted or deferred stock awards and outstanding stock options, and
•require reimbursement of any gains realized on the exercise of stock options attributable to incentive awards,
if and to the extent (i) the amount of that compensation was calculated based upon the achievement of the financial results that were subsequently reduced due to that restatement and (ii) the amount of the compensation that would have been awarded to that officer had the financial results been properly reported would have been lower than the amount actually awarded.
Additionally, if an officer is found to have committed fraud or engaged in intentional misconduct in the performance of his or her duties, as determined by a final, non-appealable judgment of a court of competent jurisdiction, and the Board determines the action caused substantial harm to the Company, the Board may, in its sole discretion, utilize the remedies described above.
Anti-Hedging and
Pledging
The Company’s Insider Trading Policy prohibits the following transactions and positions for all employees, officers and directors, and their immediate family members:
•short sales of our securities;
•hedging or monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts or similar arrangements with respect to Enhabit stock, including the purchase or sale of puts or calls or the use of any other derivative instruments; and
•holding Enhabit stock in a margin
account or pledging Enhabit stock as collateral for a loan.
Severance Arrangements
To provide senior executives with additional certainty as a retention tool, potential benefits were provided by Encompass to its senior executives under its change of control and severance plans. The Encompass Compensation Committee determined the value of benefits were reasonable, appropriate, and competitive with those of Encompass’s healthcare provider peer group. As a condition to receipt of any payment or benefits under either plan, participating employees must enter into a noncompetition, nonsolicitation, nondisclosure, nondisparagement and release agreement. The duration of the restrictive covenants would be equal to the benefit continuation periods described below for
each plan. As a matter of policy, payments under either plan do not include “gross ups” for taxes payable on amounts paid. Definitions of “cause,”“retirement,”“change in control,” and “good reason” are provided on page 54.
43
Executive Severance Plan
Effective upon the Separation, the Company adopted an Executive
Severance Plan to help retain qualified, senior officers whose employment is subject to termination under circumstances beyond their control. Each of our NEOs became participants in the plan.The Enhabit Executive Severance Plan was based upon, and substantially similar to, the terms and conditions of the Encompass Executive Severance Plan. The terms of the plan, including the payment triggering events, were determined by the Encompass Compensation Committee to be consistent with healthcare industry market data. Only Ms. Jacobsmeyer and Ms. Carlisle participated in the Encompass Executive Severance Plan prior to the Separation.
In February 2023, the Enhabit Compensation Committee adopted amendments to the Executive Severance Plan that reduced the cash severance and health and welfare benefits to better align the
benefit with peers’ severance benefits. The description below describes the Enhabit Executive Severance Plan in effect on December 31, 2022. Certain changes to the plan adopted in February 2023 are described below under “Executive Compensation Program Details and Changes for 2023.”
Under the plan, if a participant’s employment is terminated by the participant for good reason or by the Company other than for cause (as defined in the plan), then the participant is entitled to receive a cash severance payment, health benefits, and the other benefits described below. Voluntary retirement, death, and disability are not payment triggering events.
The cash severance
payment is the annual base salary in effect at the time of the event plus any accrued, but unused, paid time off, and accrued, but unpaid, salary multiplied by a cash severance multiplier. This amount is to be paid in a lump sum within 60 days following the participant’s termination date. In addition, except in the event of termination for cause or resignation for lack of good reason, the participant would continue to be covered by all Enhabit life, healthcare, medical and dental insurance plans and programs, excluding disability, for the periods noted below.
Named
Executive Officer
Severance as Multiple of Annual Base Salary
Benefit Plan Continuation Period
Barbara A. Jacobsmeyer
2.99x
36 months
Crissy B. Carlisle Julie D. Jolley Chad K. Knight
2.00x
24 months
Jeanne
Kalvaitis Tanya Marion
1.00x
12 months
Amounts paid under the plan are in lieu of, and not in addition to, any other severance or termination payments under any other plan or agreement with Encompass or the Company. As a condition to receipt of any payment under the plan, the participant must waive any entitlement to any other severance or termination payment.
Upon termination of a participant without cause, or his or her resignation for good reason, a prorated portion of any equity award subject to time-based vesting only that
is unvested as of the effective date of the termination or resignation will automatically vest. If any restricted stock awards are performance-based, the Committee will determine the extent to which the performance goals for such restricted stock have been met and what awards have been earned.
Change in Control Benefits Plan
Effective upon the Separation, the Company adopted a Change in Control Benefits Plan to help retain certain qualified senior officers, maintain a stable work environment, and encourage officers to act in the best interest of stockholders if presented with decisions regarding change in control transactions. Each of our NEOs became participants in the plan. The Enhabit Change in Control Benefits Plan was based upon, and substantially similar
to, the terms and conditions of the Encompass Change in Control Benefits Plan. The terms of the plan, including the definition of a change in control event, were reviewed and determined to be consistent with healthcare industry market data. Only Ms. Jacobsmeyer and Ms. Carlisle participated in the Encompass Change in Control Benefits Plan prior to the Separation.
In February 2023, the Enhabit Compensation Committee adopted amendments to the Change in Control Benefits Plan that reduced the cash severance and health and welfare benefits to better align the benefit with peers’ severance benefits. The description below describes the Enhabit Change in Control Benefits Plan in effect on December 31, 2022. Certain changes to plan adopted in February 2023 are described below under “Executive
Compensation Program Details and Changes for 2023.”
Under the Change in Control Benefits Plan, participants are divided into tiers as designated by the Enhabit Compensation Committee. Ms. Jacobsmeyer is a Tier 1 participant, and each of the other NEOs is a Tier 2 participant.
44
If a participant’s employment with the Company is terminated within 24 months following a change in control or during a potential change in control, either by the participant for good reason (as defined in the plan) or by the
Company without cause, then the participant shall receive a lump sum severance payment. Voluntary retirement is not a payment triggering event. For Tier 1 and 2 participants, the lump sum severance is 2.99 times and 2.0 times, respectively, the sum of the highest base salary in the prior three years and the average of actual annual incentives for the prior three years for the participant, plus a prorated annual incentive award for any incomplete performance period. In addition, except in the event of termination for cause or resignation for lack of good reason, the participant and the participant’s dependents continue to be covered by all Enhabit life, healthcare, medical and dental insurance plans and programs, excluding disability, for a period of 36 months for Tier 1 participants and 24 months for Tier 2 participants.
If a change in control of Enhabit occurs as defined in the plan,
outstanding Enhabit equity awards vest as follows:
Stock Options
Restricted Stock
Outstanding options to purchase common stock will only vest if the participant is terminated for good reason or without cause within 24 months of a change in control of Enhabit or if not assumed or substituted and all options will remain exercisable for three years.
Restricted stock will only vest if the participant is terminated for good reason or without cause within 24 months of a change in control
of Enhabit or if not assumed or substituted.
Note: For performance-based restricted stock, the Committee will determine the extent to which the performance goals have been met and vesting of the resulting restricted stock will only accelerate as provided above.
The Compensation and Human Capital Committee has the authority to cancel an award in exchange for a cash payment in an amount equal to the excess of the fair market value of the same number of shares of common stock subject to the award immediately prior to the change in control of Enhabit over the aggregate exercise or base price (if any) of the award.
Tax Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), generally limits
to $1 million per year income tax deductions available to publicly held corporations for compensation paid in years beginning after December 31, 2017 to the corporation’s CEO, CFO, certain other NEOs, and certain former NEOs (each a “Covered Executive”). As a result, most compensation in excess of $1 million paid to our Covered Executives is not deductible.
The Committee considers the effect of Section 162(m) on the Company’s executive compensation program. The Compensation Committee exercises discretion in setting base salaries, structuring incentive compensation awards and in determining payments in relation to levels of achievement of performance goals. The Compensation Committee believes that the total compensation program for Covered Executives
should be managed in accordance with the objectives outlined in the Company’s compensation philosophy and in the best overall interests of the Company’s stockholders. Accordingly, compensation paid by the Company may not be deductible because such compensation exceeds the limitations for deductibility under Section 162(m).
Executive Compensation Program Details and Changes in 2023
Annual Incentive - SMBP. We maintained use of Adjusted EBITDA
as a financial metric but revised metrics under the Quality Scorecard to align with our 2023 performance objectives.
Long-Term Performance Awards. The Enhabit Compensation Committee and senior management focused on choosing metrics that closely aligned to the long-term strength of the business and stockholder interests. After consultation with various stockholders and input from our compensation consultant we selected Adjusted Free Cash Flow per Share and Relative Total Shareholder Return as performance metrics of our performance-based equity grants.
Executive Severance Plans. In February 2023, the Enhabit Compensation
Committee adopted amendments to the Executive Severance Plan and Change in Control Benefits Plan.
The amended Executive Severance Plan includes the following changes from the original Executive Severance Plan:
•reduces the cash severance amount payable to a participant on a termination of employment without Cause or for Good Reason (a “Qualifying Termination”) (a) from 2.99 times base salary to 2.5 times base salary for “Tier 1 Participants” (currently, Ms. Jacobsmeyer) and (b) from two times base salary to 1.75 times base salary for “Tier 2 Participants” (which includes our other NEOs);
•reduces the period during which continued medical, dental and vision coverage will be provided following a Qualifying Termination (a) from 36 months
to 18 months for Tier 1 Participants and (b) from 24 months to 12 months for Tier 2 Participants;
45
•makes the definition of “Cause” more Company-protective by including certain misdemeanors and certain willful or gross misconduct as “Cause” triggers; and
•with respect to the pro-rata vesting of equity awards upon a qualifying termination, changes the treatment of performance-based awards so that they will be earned based on actual achievement for the full performance period, rather than based on a discretionary determination by the Committee.
The amended Change in Control Benefits Plan includes the following changes from the original
Change in Control Plan:
•reduces the cash severance amount payable on a qualifying termination during the pre-change in control period or within two years after a change in control (a) for Tier 1 participants (currently, Ms. Jacobsmeyer), from 2.99 times base salary plus average bonus to 2.5 times base salary plus average bonus, and (b) for Tier 2 participants (including our other NEOs), from two times base salary plus average bonus to 1.75 times base salary plus average bonus;
•changes the period in which continued medical, dental and vision coverage will be provided following a qualifying termination during the pre-change in control period or within two years after a change in control (a) from 36 months to 18 months for Tier 1 participants, and (b) from 24 months to 12 months for Tier 2 participants;
•makes
the definition of “Cause” more Company-protective by including certain misdemeanors and certain willful or gross misconduct as “Cause” triggers; and
•continues to provide that performance-based equity awards will be converted into time-based awards in the event of a change in control, but such conversion will be based on the value of the award at the time of the change in control.
Equity Award Timing. Encompass’s practice was to have the independent members on its Board of Directors approve, based on recommendations of the Encompass Compensation Committee, equity awards at the February Board of Directors’ meeting which allows time to review and consider its prior year’s performance. We have currently adopted the same process.
46
Executive
Compensation Tables
The tables below shows the compensation of our NEOs. The information set forth below with respect to the period prior to the Separation and years ended December 31, 2021 and 2020 is historical Encompass compensation. The historical Encompass compensation, which was approved by Encompass, has been provided by, or derived from information provided by, Encompass and reflects compensation earned during 2022 prior to the Separation and for the years ended December 31, 2021 and 2020 based upon services performed during such periods. The Company provided the compensation information for periods following the Separation, most of which
was attributable to the Encompass program assumed by the Company as a result of the Separation.
Summary Compensation Table
The table below sets forth the compensation earned by or paid to our NEOs during the fiscal years ended December 31, 2022, 2021, and 2020.
Name
and Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards ($)(1)
Option Awards ($)(2)
Non-Equity Incentive Plan Compensation ($)(3)
All Other Compensation ($)(4)
Total ($)
Barbara
A. Jacobsmeyer
2022
873,462
—
5,668,103
382,718
344,505
37,643
7,306,431
President and
Chief Executive Officer
2021
703,846
—
1,303,548
319,295
871,386
143,320
3,341,395
2020
620,000
—
1,211,485
266,742
497,250
26,963
2,622,440
Crissy
B. Carlisle
2022
437,970
—
1,026,906
—
108,080
65,614
1,638,570
Executive Vice President and Chief Financial
Officer
2021
319,849
—
173,834
—
318,939
40,410
853,032
Julie Jolley
2022
382,491
152,495
811,574
—
105,378
2,288
1,454,226
Executive
Vice President, Home Health Operations
2021
318,893
—
353,385
—
225,019
2,822
900,119
Jeanne Kalvaitis
2022
150,202
—
—
—
29,811
1,127
181,140
Executive
Vice President, Hospice Operations
Tanya Marion
2022
323,078
30,000
499,726
—
67,550
2,288
922,642
Chief
Human Resources Officer
Chad K. Knight(5)
2022
280,391
127,504
671,461
—
79,488
462,644
1,621,488
General
Counsel and Secretary
2021
256,345
—
97,421
—
183,031
2,288
539,085
(1)The
stock awards for each year consist of performance-based restricted stock, or “PSUs,” and time-based restricted stock, or “RSAs,” as part of the long-term incentive plan for the given year. The amounts shown in this column are the grant date fair values computed in accordance with Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“ASC 718”), assuming the most probable outcome of the performance conditions as of the grant dates (i.e., target performance). All of the values in this column are consistent with the estimate of aggregate compensation expense to be recognized over the applicable vesting period, excluding any adjustment for forfeitures. The assumptions used in the valuations are discussed in Note 10, Stock-Based Payments, to the consolidated financial statements in our
2022 Form 10-K.
The values of the PSU awards at the varying performance levels for our current NEOs are set forth in the table below.
Name
Year
Threshold
Performance Value ($)
Target Performance Value ($)
Maximum Performance Value ($)
Barbara A. Jacobsmeyer
2022
592,704
1,185,407
2,370,814
2021
488,810
977,620
1,955,240
2020
454,287
908,573
1,817,146
Crissy
B. Carlisle
2022
158,077
316,153
632,306
2021
52,158
104,317
208,634
Julie Jolley
2022
126,482
252,963
505,926
2021
46,010
92,001
184,001
Jeanne
Kalvaitis
2022
—
—
—
Tanya Marion
2022
71,165
142,329
284,658
Chad K. Knight
2022
96,428
192,855
385,710
2021
34,097
68,195
136,389
(2)The
values of option awards listed in this column are the grant date fair values computed in accordance with ASC 718 as of the grant date. All of the values in this column are consistent with the estimate of aggregate compensation expense to be recognized over the three-year vesting period, excluding any adjustment for forfeitures. The assumptions used in the valuations are discussed in Note 10, Stock-Based Payments, to the consolidated financial statements in our 2022 Form 10-K.
(3)The amounts shown in this column are bonuses earned under the senior management bonus plan in the corresponding year but paid in the first quarter of the following year.
47
(4)The
items reported in this column for 2022 are described as set forth below. The amount included in the “Other” column below is for relocation taxes paid by Encompass for Ms. Jacobsmeyer and Carlisle in 2022 and estimated total payments to Mr. Knight pursuant to the terms of the Separation and Release Agreement between Mr. Knight and the Company.
Name
Qualified
401(k) Match ($)
Nonqualified 401(k) Match ($)
Other ($)
Barbara A. Jacobsmeyer
7,942
21,661
8,040
Crissy B. Carlisle
5,885
462
59,267
Julie
Jolley
2,287
—
—
Jeanne Kalvaitis
1,127
—
—
Tanya Marion
2,287
—
—
Chad
K. Knight
—
—
462,644
(5) In September 2022, Mr. Knight and the Company entered into a Separation and Release Agreement effective as of November 4, 2022 at which time Mr. Knight resigned from his position as General Counsel. Pursuant to this agreement, Mr. Knight (i) will receive his base salary for 15 months following his resignation (approximately
$437,500) and the Company’s payment of the employer portion of his health and welfare benefit premiums for a period of up to 15 months (approximately $25,144) and (ii) agrees to release the Company from any and all claims to the fullest extent permissible by law (as described in the agreement). Mr. Knight also received a pro-rated bonus under the Enhabit senior management bonus plan for 2022. This amount ($79,448) was paid in March 2023 and is reflected above under “Non-Equity Incentive Plan Compensation.” Mr. Knight will remain subject to the terms of his restrictive covenants agreement, including nonsolicitation and noncompete provisions for 12 months after his resignation.
48
Grants
of Plan-Based Awards During 2022
The following table sets forth grants of plan-based awards to the NEOs during the fiscal year that ended December 31, 2022, including equity and non-equity awards granted to our NEOs by Encompass prior to the Separation. Equity awards originally granted by Encompass in February and March of 2022 under Encompass’s equity compensation plan were converted to Enhabit awards under the 2022 Omnibus Performance Incentive Plan in connection with the Separation with vesting dates consistent with the original awards from Encompass and are presented on an as-converted basis. The Founder’s RSA were granted by Enhabit under the 2022 Omnibus Performance Incentive Plan at the time of the Separation in July 2022.
All
Other Stock Awards: Number of Shares of Stock or Unit (#)
All Other Option Awards: Number of Securities Underlying Options (#)
Exercise or Base Price of Option Awards ($/SH)
Grant Date Fair Value of Stock and Option Awards ($)
Date of Board Approval of Grant
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
Estimated Future Payouts Under Equity Incentive Plan Awards(2)
Name
Grant Date
Threshold ($)
Target ($)
Maximum ($)
Threshold (#)
Target (#)
Maximum (#)
Barbara
A. Jacobsmeyer
Annual Incentive
446,250
892,500
1,785,000
—
—
—
—
—
—
—
PSU
2/25/2022
2/25/2022
—
—
—
21,802
43,603
87,208
—
—
—
1,185,407
Stock
options
3/1/2022
2/25/2022
—
—
—
—
—
—
—
54,562
26.94
382,718
RSA
2/25/2022
2/25/2022
—
—
—
—
—
—
14,535
—
—
395,158
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
47,824
—
—
1,087,518
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
131,927
—
—
3,000,020
Crissy
B. Carlisle
Annual Incentive
140,001
280,001
560,002
—
—
—
—
—
—
—
PSU
2/25/2022
2/25/2022
—
—
—
5,815
11,629
23,258
—
—
—
316,153
RSA
2/25/2022
2/25/2022
—
—
—
—
—
—
7,754
—
—
210,746
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
21,988
—
—
500,007
Julie
Jolley
Annual Incentive
136,500
273,000
546,000
—
—
—
—
—
—
—
PSU
2/25/2022
2/25/2022
—
—
—
4,652
9,305
18,609
—
—
—
252,963
RSA
2/25/2022
2/25/2022
—
—
—
—
—
—
6,202
—
—
168,597
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
17,151
—
—
390,014
Jeanne
Kalvaitis
Annual Incentive
40,107
80,214
160,427
—
—
—
—
—
—
—
Tanya
Marion
Annual Incentive
87,501
175,001
35,002
—
—
—
—
—
—
—
PSU
2/25/2022
2/25/2022
—
—
—
2,618
5,235
10,471
—
—
—
142,329
RSA
2/25/2022
2/25/2022
—
—
—
—
—
—
3,490
—
—
94,886
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
11,544
—
—
262,511
Chad
K. Knight
Annual Incentive
122,500
245,000
490,000
—
—
—
—
—
—
—
PSU
2/25/2022
2/25/2022
—
—
—
3,547
7,094
14,188
—
—
—
192,855
RSA
2/25/2022
2/25/2022
—
—
—
—
—
—
4,732
—
—
128,592
Founder’s
RSA
7/1/2022
6/15/2022
—
—
—
—
—
—
15,392
—
—
350,014
Footnotes
found on next page.
49
(1)The possible payments described in these three columns are cash amounts provided for by the senior management bonus plan as discussed under “Annual Incentives” beginning on page 36. Final payments under the senior management bonus plan were calculated and paid in the first quarter of 2023 by Enhabit and are reflected in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.”
(2)Reflects the PSU awards granted to the NEOs by Encompass.
The PSUs were converted to Enhabit RSUs in connection with the Separation.
Number of Securities Underlying Unexercised Options (#)
Number of Securities Underlying Unexercised Options (#)
Option Exercise Price ($)
Option Expiration Date(3)
Number of Shares or Units of Stock That Have Not Vested (#)(4)
Market Value
of Shares or Units of Stock That Have Not Vested ($)(5)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Name
Exercisable
Unexercisable
Barbara
A. Jacobsmeyer
19,204
—
17.13
2/25/2027
—
—
—
—
29,948
—
21.83
3/1/2028
—
—
—
—
35,091
—
25.88
3/1/2029
—
—
—
—
28,307
14,152
31.06
3/2/2030
—
—
—
—
13,655
27,310
32.62
3/2/2031
—
—
—
—
54,562
26.94
3/1/2032
—
—
—
—
306,304
4,030,961
—
—
Crissy
B. Carlisle
—
—
—
—
49,127
646,511
—
—
Julie
Jolley
—
—
—
—
46,380
610,361
—
—
Jeanne
Kalvaitis
—
—
—
—
—
—
—
—
Tanya
Marion
—
—
—
—
19,942
262,437
—
—
Chad
K. Knight
—
—
—
—
—
—
—
—
(1)Equity
awards originally granted by Encompass under Encompass’s equity compensation plan were converted to Enhabit awards under the Enhabit 2022 Omnibus Performance Incentive Plan in connection with the Separation with vesting dates consistent with the original awards from Encompass and are presented on an as-converted basis.
(2)All options shown above vest in three equal annual installments beginning on the first anniversary of the grant date.
(3)The expiration date of each option occurs 10 years after the grant date of each option.
(4)The amount shown in this column are RSUs resulting from the attainment of the Encompass PSU awards and converted pursuant to footnote (1) above, RSAs converted pursuant to footnote (1) above, and RSAs granted by Enhabit in 2022. Vesting
dates are detailed below.
(5)The market value reported was calculated by multiplying the closing price of our common stock on the last trading day of 2022, $13.16, by the number of shares set forth in the preceding column.
Name
RSA
Vestings after 12/31/2022
2/20/23
2/24/23
2/25/23
7/1/23
10/4/23
2/24/24
2/25/24
7/1/24
2/25/25
7/1/2025
7/1/2026
Barbara A Jacobsmeyer
3,015
3,239
20,785
—
—
3,239
20,787
—
20,788
65,963
65,964
Crissy
B. Carlisle
619
691
2,584
5,497
—
691
2,584
5,497
2,586
10,994
—
Julie Jolley
567
609
2,066
4,287
6,715
609
2,068
4,288
2,068
8,576
Tanya
Marion
—
—
1,161
2,886
—
—
1,164
2,886
1,166
5,772
—
Name
RSU
Vestings after 12/31/2022
1/2/23
1/1/24
1/1/25
Barbara A Jacobsmeyer
24,341
37,334
40,849
Crissy B. Carlisle
2,503
3,985
10,896
Julie
Jolley
2,294
3,515
8,718
Tanya Marion
—
—
4,907
51
Options
Exercised and Stock Vested in 2022
The following table sets forth information regarding the exercise of options and the vesting of shares held by our NEOs in 2022.
Option Awards
Stock Awards
Name
Number
of Shares Acquired on Exercise (1) (#)
Value Realized on Exercise ($)
Number of Shares Acquired on Vesting (2) (#)
Value Realized on Vesting ($)
Barbara A Jacobsmeyer
PSUs
—
—
7,536
491,799
RSAs
—
—
3,675
241,706
Crissy
B. Carlisle
PSUs
—
—
935
61,018
RSAs
—
—
814
53,541
Julie
Jolley
PSUs
—
—
1,012
66,043
RSAs
—
—
478
31,408
Jeanne
Kalvaitis
—
—
—
—
Tanya Marion
—
—
—
—
Chad K. Knight
PSUs
—
—
—
—
RSAs
—
—
341
22,404
(1)
No stock option exercises in 2022.
(2) Amounts shown are equity awards granted by Encompass under Encompass’s equity compensation plan with vesting in 2022 prior to the Separation.
Potential Payments upon Termination of Employment
The following tables describe the potential payments and benefits under the Company’s compensation and benefit plans and arrangements to which the NEOs would be entitled upon termination of employment by us without “cause” or by the executive for “good reason” or “retirement,”
as those terms are defined below. Mr. Knight is not included in the table below due to his separation from Company in 2022, which is discussed on page 42.
There are no payments or benefits due in the event of a termination of employment by us for cause. As previously discussed, our Change in Control Benefits Plan does not provide cash benefits unless there is an associated termination of employment. Due to the numerous factors involved in estimating these amounts, the actual value of benefits
and amounts to be paid can only be determined upon termination of employment. In the event an NEO breaches or violates the restrictive covenants contained in the awards under the 2022 Omnibus Performance Incentive Plan, Executive Severance Plan, or the Change in Control Benefits Plan certain of the amounts described below may be subject to forfeiture and/or repayment.
For additional discussion of the material terms and conditions, including payment triggers, see “Severance Arrangements” beginning on page 43. An executive cannot receive termination
benefits under more than one of the plans or arrangements identified below. Retirement benefits are governed by the terms of the awards under our 2022 Omnibus Performance Incentive Plans. The following table assumes the listed triggering events occurred on December 31, 2022.
52
Name/Triggering
Event
Lump Sum Payments ($)(1)
Continuation of Insurance Benefits ($)
Accelerated Vesting of Equity Awards ($)(2)
Total Termination Benefits ($)
Barbara A. Jacobsmeyer
Executive
Severance Plan
Without Cause/For Good Reason
2,550,000
0
1,304,796
3,854,796
Disability
0
0
4,030,961
4,030,961
Death
0
0
4,030,961
4,030,961
For
Cause
0
0
0
0
Change in Control Benefits Plan
4,567,012
0
4,030,961
8,597,973
Crissy B. Carlisle
Executive
Severance Plan
Without Cause/For Good Reason
800,000
0
211,078
1,011,078
Disability
0
0
646,511
646,511
Death
0
0
646,511
646,511
For
Cause
0
0
0
0
Change in Control Benefits Plan
1,214,010
0
646,511
1,860,521
Julie Jolley
Executive
Severance Plan
Without Cause/For Good Reason
780,000
0
231,633
1,011,633
Disability
0
0
610,361
610,361
Death
0
0
610,361
610,361
For
Cause
0
0
0
0
Change in Control Benefits Plan
1,201,013
0
610,361
2,231,000
Jeanne Kalvaitis
Executive
Severance Plan
Without Cause/For Good Reason
275,018
0
0
275,018
Disability
0
0
0
0
Death
0
0
0
0
For
Cause
0
0
0
0
Change in Control Benefits Plan
579,827
0
0
579,827
Tanya Marion
Executive
Severance Plan
Without Cause For Good Reason
350,000
0
59,607
409,607
Disability
0
0
262,437
262,437
Death
0
0
262,437
262,437
For
Cause
0
0
0
0
Change in Control Benefits Plan
767,550
0
262,437
1,029,987
(1)The Company
automatically reduces payments under the Change in Control Benefits Plan to the extent necessary to prevent such payments being subject to “golden parachute” excise tax under Section 280G and Section 4999 of the Internal Revenue Code, but only to the extent the after-tax benefit of the reduced payments exceeds the after-tax benefit if such reduction were not made (“best payment method”). The lump sum payments shown may be subject to reduction under this best payment method.
(2)The amounts reported in this column reflect outstanding equity awards, the grant date values of which along with accrued dividends and dividend equivalents have been reported as compensation in 2022 or prior years. The value of the accelerated vesting of equity awards listed in this column has been determined based on the $13.16 closing price of our common stock on the last trading day of 2022. The Committee may,
in its discretion, provide that upon a change in control: (x) equity awards be canceled in exchange for a payment in an amount equal to the fair market value of our stock immediately prior to the change in control over the exercise or base price (if any) per share of the award, and (y) each award be canceled without payment therefore if the fair market value of our stock is less than the exercise or purchase price (if any) of the award.
The amounts shown in the preceding table do not include payments and benefits to the extent they are provided on a nondiscriminatory basis to salaried employees generally upon termination of employment. The “Lump Sum Payments” column in the above table includes the estimated payments provided for under the plans described under “Severance Arrangements” beginning on page
43. Additionally, the Executive Severance Plan and the Change in Control Benefits Plan provide that as a condition to receipt of any payment or benefits all participants must enter into a nonsolicitation, noncompete, nondisclosure, nondisparagement and release agreement.
The table below provides the potential equity value accelerated upon retirement for each NEO had she been retirement eligible on December 31, 2022. As of December 31, 2022, Ms. Kalvaitis is the only NEO eligible for retirement as defined below.
Named Executive Officer
Accelerated Vesting of Equity Awards Due to Retirement (Assuming Retirement Eligible)($)
Barbara
A. Jacobsmeyer
1,304,796
Crissy B. Carlisle
211,078
Julie Jolley
231,633
Jeanne Kalvaitis
—
Tanya Marion
59,607
53
Definitions
“Cause”
means, in general terms:
(i)evidence of fraud or similar offenses affecting the Company;
(ii)indictment for, conviction of, or plea of guilty or no contest to, any felony;
(iii)suspension or debarment from participation in any federal or state health care program;
(iv)an admission of liability, or finding, of a violation of any securities laws, excluding any that are noncriminal;
(v)a formal indication that the person is a target or the subject of any investigation or proceeding for a violation of any securities laws in connection with his employment
by the Company, excluding any that are noncriminal; and
(vi)breach of any material provision of any employment agreement or other duties.
“Change in Control” means, in general terms:
(i)the acquisition of 30% or more of either the then-outstanding shares of common stock or the combined voting power of the Company’s then-outstanding voting securities; or
(ii)the individuals who currently constitute the Board, or the “Incumbent Board,” cease for any reason to constitute at least a majority of the Board
(any person becoming a director in the future whose election, or nomination for election, was approved by a vote of at least a majority of the directors then constituting the Incumbent Board shall be considered as though such person were a member of the Incumbent Board); or
(iii)a consummation of a reorganization, merger, consolidation or share exchange, where persons who were the stockholders of the Company immediately prior to such reorganization, merger, consolidation or share exchange do not own at least 50% of the combined voting power; or
(iv)a liquidation or dissolution of the Company or the sale of all or substantially all of its assets.
“Good
Reason” means, in general terms:
(i)an assignment of a position that is of a lesser rank and that results in a material adverse change in reporting position, duties or responsibilities or title or elected or appointed offices as in effect immediately prior to the change, or in the case of a Change in Control ceasing to be an executive officer of a company with registered securities;
(ii)a material reduction in compensation from that in effect immediately prior to the Change in Control; or
(iii)any change in benefit level under a benefit plan if such change in status occurs during the period beginning 6 months prior to a Change in Control and ending 24 months after it; or
(iv)any
change of more than 50 miles in the location of the principal place of employment.
“Retirement” means the voluntary termination of employment after attaining (a) age 65 or (b) in the event that person has been employed for 10 or more years on the date of termination, age 60.
54
Nonqualified Deferred Compensation Plan
Encompass maintains a nonqualified deferred compensation plan, the Encompass Health Corporation Nonqualified Retirement Plan, or the “NQ Plan,” in order to allow deferrals
above what is limited by the IRS. Mses. Jacobsmeyer and Carlisle participated in the NQ Plan in 2022 prior to the Separation, the provisions of which follow Encompass’ 401(k) Plan. Participants may request, on a daily basis, to have amounts credited to their NQ Plan accounts track the rate of return based on one or more benchmark mutual funds, which are substantially the same funds as those offered under our 401(k) Plan.
NQ Plan participants may elect to defer from 1% to 100% of compensation (W-2 compensation excluding certain reimbursements, stock awards, and perquisites) to the NQ Plan. Encompass makes an employer matching contribution to the NQ Plan equal to 50% of the participant’s deferral contributions, up to 6% of such participant’s total compensation, less any employer matching contributions made on the participant’s behalf to the 401(k) Plan. In addition, Encompass may elect to make a discretionary contribution to
the NQ Plan with respect to any participant. Encompass did not elect to make any discretionary contributions to the NQ Plan for 2022. All deferral contributions made to the NQ Plan are fully vested when made and are credited to a separate bookkeeping account on behalf of each participant. Employer matching contributions vest once the participant has completed three years of service.
Deferral contributions will generally be distributed, as directed by the participant, upon either a termination of service or the occurrence of a specified date. Matching and discretionary contributions are distributed upon termination of service. Distributions may also be elected by a participant in the event of an unforeseen emergency in which case participation in the NQ Plan will be suspended. Distributions will be made in cash in the form of a lump sum payment or annual installments over a two to fifteen year period, as elected by the participant.
Any amounts that are payable from the NQ Plan upon a termination of employment are subject to the six month delay applicable to specified employees under section 409A of the Code.
Name
Executive
Contributions
in
Last
Fiscal Year
($)(1)
Registrant
Contributions
in Last
Fiscal Year
($)(2)
Aggregate Earnings/(Losses) in Last Fiscal Year ($)(3)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance at Last Fiscal Year-End ($)(4)
Barbara A. Jacobsmeyer
130,708
21,661
(79,431)
—
599,272
Crissy B. Carlisle
5,077
462
(15,923)
—
72,235
(1)
All amounts in this column are included in the 2022 amounts represented as “Salary” and “Non-Equity Incentive Plan Compensation,” except $130,708 for Ms. Jacobsmeyer is included in the 2021 amounts, in the Summary Compensation Table. (2) Represents contributions made by Encompass. All amounts in this column are included in the 2022 amounts represented as “All Other Compensation” except $21,661 for Ms. Jacobsmeyer is included in the 2021 amounts, in the Summary Compensation Table. (3) No amounts in this column are included or are required to be included in the Summary Compensation Table. (4) Other than the amounts reported in this table for 2022, the balances in this column were previously reported as “Salary,”“Non-Equity Incentive Plan Compensation” and “All Other Compensation” in our Summary Compensation Tables in previous years, except for the following amounts which represent the aggregate earnings, all of which
are non-preferential and not required to be reported in the Summary Compensation Table: $86,941 for Ms. Jacobsmeyer and $18,966 for Ms. Carlisle.
55
Equity Compensation Plans
The following table sets forth, as of December 31, 2022, information concerning compensation plans under which our securities are authorized for issuance. The table does not reflect grants, awards, exercises, terminations, or expirations since that date. All share amounts
and exercise prices have been adjusted to reflect stock splits that occurred after the date on which any particular underlying plan was adopted, to the extent applicable.
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
Weighted Average Exercise
Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(a)(#)
(b)($)
(c)(#)
Equity compensation plans approved by security holders
584,252
27.07
5,961,543
Equity
compensation plans not approved by security holders
—
—
Total
584,252
27.07
5,961,543
2022 Omnibus Performance Incentive Plan
Our stockholders approved the 2022 Omnibus Performance Incentive Plan, or the “2022 Plan,” to provide for the grant of stock options, restricted stock, stock appreciation rights, deferred stock, other stock-based awards and cash-settled awards, including our SMBP awards, to our directors, executives and other key employees as determined by our Board or Compensation and Human Capital Committee in accordance with the terms of the plan and evidenced by an award agreement with each participant. The 2022 Plan has an expiration date of July 1, 2032. Any awards outstanding under the 2022 Plan at the time of its termination will remain in effect in accordance with their terms. The aggregate number of shares of common stock available for issuance in connection with new awards under the 2022 Plan shown above is subject to equitable adjustment upon a change in capitalization of
the Company or the occurrence of certain transactions affecting the common stock reserved for issuance under the plan. Any awards under the 2022 Plan must have a purchase price or an exercise price not less than the fair market value of such shares of common stock on the date of grant.
Pay Versus Performance (PVP)
iAs
required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between compensation actually paid (“CAP”) to our named executive officers (“NEOs”) and certain financial performance metrics of the Company using a methodology that has been prescribed by the SEC. As permitted by Item 402(v) of Regulation S-K, we are providing such disclosure for only 2022, because we were not required to report pursuant to Section 13(a) or 15(d) of the Exchange Act prior to such year. You should refer to the “Compensation Discussion and Analysis” in this proxy statement for a complete description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions.
56
i
Fiscal
Year(1)
Summary
Compensation Table Total for PEO(2)
Compensation Actually Paid to PEO(3)
Average Summary Compensation Table Total for non-PEO NEOs(2)
Average Compensation Actually Paid to non-PEO NEOs(3)
Value of Initial Fixed $100 Investment Based On:(4)
Net Income (Loss)
($ millions)(6)
Adjusted
EBITDA
($ millions)(7)
Total Shareholder Return
Peer Group Total Shareholder Return(5)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
2022
$i7,306,431
$i3,576,015
$i1,163,613
$i709,649
$i57.87
$i99.72
$(i38.3)
$i149.3
/
(1)
iiMs. Jacobsmeyer served as our Principal Executive Officer (PEO) for 2022. Our non-PEO NEOs for 2022 were Mses. Carlisle, Jolley, Kalvaitis, and Marion and Mr. Knight./
(2) Amounts reported represent (i) the total compensation
reported in the Summary Compensation Table (“SCT”) for 2022 in the case of our PEO and (ii) the average of the total compensation reported in the Summary Compensation Table for 2022 for our non-PEO NEOs.
(3) iiThe
following amounts were deducted from / added to the SCT total compensation in accordance with the SEC-mandated adjustments to calculate CAP to our PEO and average CAP to our non-PEO NEOs. The fair value of equity awards was determined using methodologies and assumptions developed in a manner substantively consistent with those used to determine the grant date fair value of such awards./
PEO SCT Total to CAP Reconciliation
Fiscal Year
2022
SCT
Total
$i7,306,431
- Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year
($i6,050,821)
±
Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year
$i3,336,679
± Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years
($i1,176,687)
±
Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year
$i0
± Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year
$i146,037
-
Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
$i0
+ Dividends or Other Earnings Paid on Stock Awards in the Fiscal Year Prior to the Vesting Date that are not otherwise included in the Total Compensation for the Fiscal Year
$i14,376
Compensation
Actually Paid (column (c))
$i3,576,015
Non-PEO NEO Average SCT Total to Average CAP Reconciliation
Fiscal Year
2022
Average
SCT Total
$i1,163,613
- Grant Date Fair Value of Option Awards and Stock Awards Granted in Fiscal Year
($i601,933)
±
Fair Value at Fiscal Year-End of Outstanding and Unvested Option Awards and Stock Awards Granted in Fiscal Year
$i243,857
± Change in Fair Value of Outstanding and Unvested Option Awards and Stock Awards Granted in Prior Fiscal Years
($i66,596)
±
Fair Value at Vesting of Option Awards and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year
$i0
± Change in Fair Value as of Vesting Date of Option Awards and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year
$i458
-
Fair Value as of Prior Fiscal Year-End of Option Awards and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year
($i30,527)
+ Dividends or Other Earnings Paid on Stock Awards in the Fiscal Year Prior to the Vesting Date that are not otherwise included in the Total Compensation for the Fiscal Year
$i778
Average
Compensation Actually Paid to Non-PEO NEOs (column (d))
$i709,649
(4) Pursuant to rules of the SEC, the comparison assumes $100 was invested on July 1, 2022 (i.e., the date we became a publicly traded company) in our common stock.
(5) iThe
Peer Group for which Total Shareholder Return is provided in column (g) is the S&P Health Care Services Select Industry Index, which is used for the Company’s stock performance chart in the 2022 Form 10-K.
(6) Net income (loss) for periods prior the Separation is attributable to Encompass’ home health and hospice segment.
(7) iiAdjusted
EBITDA is a non-GAAP measure and calculated as GAAP net income (loss) adjusted to exclude (1) income tax expense, (2) interest expense, (3) depreciation and amortization, (4) gains or losses on disposal or impairment of assets or goodwill, (5) stock-based compensation, (6) net income attributable to noncontrolling interest, (7) transaction costs, (8) gain on consolidation of joint venture formerly accounted for under the equity method of accounting and (9) payroll taxes on stock appreciation rights exercises./
57
Pay
Versus Performance Relationship Descriptions
ii
The chart below illustrates the relationship between the PEO and other NEO average CAP amounts and the
Company’s and Peer Group’s TSR during 2022 assuming $100 initial investment on July 1, 2022.
/
i
The charts below illustrate the relationship between the PEO and other NEO average CAP amounts
and the Company’s Net Income and Adjusted EBITDA during 2022.
i
Tabular
List of Most Important Performance Measures
The following table lists the three financial performance measures that we believe represent the most important financial performance measures the Company used to link CAP to our NEOs for fiscal 2022 to our performance as further described in our “Compensation Discussion and Analysis” in this proxy statements within the sections titled “Annual Incentives” and “Long-Term Incentives.”
i
Most
Important Performance Measures
iAdjusted EBITDA
iNormalized Earnings Per Share
iReturn
on Invested Capital
/
58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Transactions with Related Persons
For purposes of this section, a “related party” refers to any executive officer, member of our Board, or director nominee; any immediate
family member of an executive officer, Board member, or director nominee; or any beneficial owner of more than 5% of any class of the Company’s voting securities. The Nominating/Corporate Governance Committee (the “Committee”) considers, among other matters, whether a transaction between a related party and the Company presents any inappropriate conflicts of interest or impairs the “independence” of an outside director, or both. The Board has also determined that certain transactions do not constitute related party transactions. These include:
•compensation of the executive officers and Board members, including the reimbursement of reasonable business and travel expenses incurred in the
ordinary course of business;
•any transaction involving indemnification or advancement of expenses made pursuant to the Company’s certificate of incorporation, bylaws, or an agreement approved by the Board, and
•any transaction with another firm, corporation or entity at which a related party’s only relationship is as an employee of such other firm, corporation or entity, provided the aggregate amount involved does not exceed the greater of $1 million or 1% of such other company’s annual consolidated
gross revenues.
Each director, director nominee, and executive officer is responsible for providing prompt written notice to the General Counsel of any potential related party transaction. If the General Counsel determines that the proposed transaction is a related party transaction, it is submitted to the Committee for review and approval at the next Committee meeting. The Committee may determine either to permit the related party transaction or prohibit it, if such transaction is inconsistent with the interests of the Company and its stockholders.
Any member of the Committee who has an interest in the transaction under discussion must abstain from voting on the approval of the related party transaction, but may, if requested
by the chairperson of the Committee, participate in some or all of the Committee’s discussions of the related party transaction. In addition, the Committee or its chairperson may determine that a related party transaction should be brought before the Board, and the Board may in any case elect to review any such matter.
Transactions with Related Persons
Our policies regarding transactions with related persons and other matters constituting potential conflicts of interest are contained in our Corporate Governance Guidelines, Related Party Transaction Policy and Standards of Business Ethics and Conduct which can be found on our website at https://investors.ehab.com/governance.
Our relationships with Encompass are described below.
Separation and Distribution Agreement
Enhabit entered into a Separation and Distribution Agreement with Encompass, which sets forth the agreements governing the relationship between Encompass and Enhabit following the separation and distribution.
Allocation of Assets and Assumption of Liabilities
The Separation and Distribution Agreement identified the assets to be allocated, the liabilities to be assumed and the contracts to be allocated to each of Enhabit and Encompass as part of the separation of Encompass into two independent companies.
Except as expressly set forth in the Separation and Distribution Agreement or any ancillary agreement, neither of Enhabit nor Encompass made any representation or warranty as to the assets, business or liabilities transferred or assumed as part of the Separation, as to any approvals or notifications required in connection with any such transfers, as to the value of or the freedom from any security interests of any of the assets transferred, as to the absence or presence of any defenses or right of setoff or freedom from counterclaim with respect to any claim or other asset of either of Enhabit or Encompass, or as to the legal sufficiency of any document or instrument delivered to convey title to any asset or thing of value to be transferred in connection with the Separation.
Transitional Trademark License
The
Separation and Distribution Agreement provides that Encompass grants to Enhabit a non-exclusive, worldwide, royalty-free license to use the “Encompass” name, marks and related logos (the “Licensed Trademarks”) for a period beginning on the date of the
59
distribution and extending for a certain transitional period to allow for the completion of the rebranding of Enhabit. Encompass retains all right, title and interest in the Licensed Trademarks and all goodwill associated therewith. This trademark license includes certain customary quality control provisions which imposes obligations and restrictions on Enhabit’s use of the Licensed Trademarks.
Claims
In
general, each party to the Separation and Distribution Agreement assumes liability for all pending, threatened and unasserted legal matters related to its own business or its assumed or retained liabilities and will indemnify the other party for any liability to the extent arising out of or resulting from such assumed or retained legal matters.
Indemnification
In the Separation and Distribution Agreement, Enhabit agrees to indemnify, defend and hold harmless Encompass, each of Encompass’s controlled affiliates and each of their respective directors, officers and employees, from and against all liabilities to the extent relating to, arising out of or resulting from:
•certain liabilities related to the Enhabit
business or Enhabit assets (the “Enhabit Liabilities”);
•Enhabit’s failure or the failure of any other person to pay, perform or otherwise promptly discharge any of the Enhabit Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution;
•except to the extent relating to an Encompass Liability, any guarantee, indemnification or contribution obligation for the benefit of Enhabit by Encompass that survives the distribution;
•any breach by Enhabit of the Separation and Distribution Agreement or any of the ancillary agreements; and
•any untrue statement or alleged untrue statement or omission or alleged omission of material fact in the Form 10 (as amended
or supplemented), except for any such statements or omissions made explicitly in Encompass’s name.
Encompass agrees to indemnify, defend and hold harmless Enhabit, each of Enhabit’s controlled affiliates and each of their respective directors, officers and employees from and against all liabilities to the extent relating to, arising out of or resulting from:
•the Encompass Liabilities;
•the failure of Encompass or any other person to pay, perform or otherwise promptly discharge any of the Encompass Liabilities in accordance with their respective terms whether prior to, at or after the distribution;
•except to the extent relating to a Enhabit Liability, any guarantee,
indemnification or contribution obligation for the benefit of Encompass by Enhabit that survives the distribution;
•any breach by Encompass of the Separation and Distribution Agreement or any of the ancillary agreements; and
•any untrue statement or alleged untrue statement or omission or alleged omission of a material fact made explicitly in Encompass’s name in the Form 10 (as amended or supplemented).
The Separation and Distribution Agreement also establishes procedures with respect to claims subject to indemnification and related matters.
Indemnification with respect to taxes, and the procedures related thereto, is governed by the tax matters agreement.
Insurance
The
Separation and Distribution Agreement provides for the allocation between the parties of rights and obligations under existing insurance policies with respect to claims covered by Encompass’s insurance prior to the distribution and sets forth procedures for the administration of insured claims and related matters.
Further Assurances
In addition to the actions specifically provided for in the Separation and Distribution Agreement, except as otherwise set forth therein or in any ancillary agreement, Enhabit and Encompass agree in the Separation and Distribution Agreement to use reasonable best efforts, prior to, on and after the distribution date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, regulations and agreements
to consummate and make effective the transactions contemplated by the Separation and Distribution Agreement and the ancillary agreements.
Dispute Resolution
The Separation and Distribution Agreement contains provisions that govern, except as otherwise provided in any ancillary agreement, the resolution of disputes, controversies or claims that may arise between Enhabit and Encompass related to the separation
60
or distribution and that are unable to be resolved through good faith discussions between Enhabit and Encompass. These provisions contemplate that efforts will be made to resolve disputes, controversies
and claims by escalation of the matter to executives of the parties in dispute. If such efforts are not successful, one of the parties in dispute may submit the dispute, controversy or claim to binding arbitration for resolution, subject to the provisions of the Separation and Distribution Agreement.
Amendment and Termination
The Separation and Distribution Agreement may not be amended or terminated after the distribution date, except by an agreement in writing signed by both Enhabit and Encompass.
Transition Services Agreement
Enhabit entered into a transition services agreement with Encompass pursuant to which Enhabit and Encompass and Enhabit’s respective
affiliates provide each other, on an interim, transitional basis, various services to help ensure an orderly transition following the separation and the distribution, such as finance, accounting, legal, information technology, human resources, employee benefits and other services.
The services commenced on the date of the distribution and will terminate no later than 24 months following the distribution. Enhabit and Encompass have agreed to perform Enhabit’s respective services in a manner that is substantially similar in all material respects to which the same or similar services were performed by or on behalf of Enhabit or Encompass, as applicable, prior to the distribution or, if not so previously provided, then substantially similar in all material respects to which similar services are provided by or on behalf of Enhabit or Encompass to Enhabit’s or Encompass’s affiliates or other
business components, as applicable.
The transition services agreement generally provides that the applicable service recipient indemnifies the applicable service provider for liabilities that such service provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence, bad faith or willful misconduct or fraud, and that the applicable service provider indemnifies the applicable service recipient for liabilities that such service recipient incurs arising from such service provider’s gross negligence, bad faith or willful misconduct or fraud. Subject to certain exceptions, the liabilities of each party providing services under the transition services agreement is generally limited to the aggregate charges actually paid or payable to such party by the other party for services pursuant to the transition services agreement.
The transition services agreement also provides that the provider of a service will not be liable to the recipient of such service for any special, indirect, incidental, punitive or consequential or similar damages.
Tax Matters Agreement
Enhabit entered into a tax matters agreement with Encompass that governs Enhabit’s respective rights, responsibilities and obligations with respect to taxes (including responsibility for taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution to qualify as tax-free for U.S. federal income tax purposes), entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other matters.
In
addition, the tax matters agreement imposes certain restrictions on Enhabit and Enhabit’s subsidiaries until the second anniversary of the distribution (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the distribution and certain related transactions. The tax matters agreement provides special rules that allocate tax liabilities in the event the distribution or certain related transactions are not tax-free. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on Encompass or Enhabit that arise from the failure of the distribution or certain related transactions to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 of the Code, to the extent that the failure
to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant covenants made by that party in the tax matters agreement.
61
Employee Matters Agreement
Enhabit entered into an employee matters agreement with Encompass that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities relating to employees and compensation and benefit plans and programs in which Enhabit’s employees participated prior to the distribution, as well as other human resources, employment and employee benefit matters. The employee matters agreement also provides, subject to customary
exceptions, that neither Encompass nor Enhabit nor their respective subsidiaries will solicit for employment or hire any individual who is an employee at the level of director (eligible to participate in the senior management bonus plan) or above of the other party or its subsidiaries for a period of one year following the effective time of the distribution. The employee matters agreement also specifies the treatment of equity-based awards granted by Encompass prior to the distribution.
The total amount of payments under these agreements with Encompass was approximately $2.1 million for the year ended December 31, 2022.
62
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock as of May 10, 2023 by (1) each person who is known by us to own beneficially more than 5% of the outstanding shares of our common stock, (2) each of our directors, (3) each of our executive officers serving at the end of the last completed fiscal year named in the Summary Compensation Table, and (4) all of our current directors and executive officers as a group. Percentage of ownership is based on 50,099,817 shares of common stock outstanding as of May 10, 2023.
Name
Common Shares Beneficially Owned(1)
Percent of Class
Greater
Than 5% Beneficial Owners
BlackRock, Inc.
7,166,740
(2)
14.3%
Deerfield Management Company, L.P.
2,996,000
(3)
6.0%
The Vanguard Group
5,499,624
(4)
11.0%
Non-Employee
Directors(6)
Leo I. Higdon, Jr., Chairperson
25,000
(5)
*
Jeffrey W. Bolton
15,597
*
Tina L. Brown-Stevenson
9,645
*
Yvonne
M. Curl
17,608
*
Charles M. Elson
22,069
*
Erin P. Hoeflinger
13,597
*
Susan A. La Monica
23,095
*
John
E. Maupin, Jr.
17,390
*
Stuart M. McGuigan
1,897
*
Gregory S. Rush
16,597
*
Barry P. Schochet
1,897
*
L.
Edward Shaw, Jr.
28,989
*
Executive Officers(6)
Barbara A. Jacobsmeyer
549,251
(7)
1.1%
Crissy B. Carlisle
72,498
*
Julie
H. Jolley
58,838
*
Jeanne Kalvaitis
5,843
*
Tanya Marion
29,888
*
All directors and current executive officers as a group (19 total)
955,466
(5)(7)
1.9%
* Less
than 1%.
(1)According to the rules adopted by the SEC, a person is a beneficial owner of securities if the person or entity has or shares the power to vote them or to direct their investment or has the right to acquire beneficial ownership of such securities within 60 days through the exercise of an option, warrant or right, conversion of a security or otherwise. Unless otherwise indicated, each person or entity named in the table has sole voting and investment power, or shares voting and investment power, with respect to all shares of stock listed as owned by that person.
(2)Based on a Schedule 13G/A filed with the SEC on February 10, 2023, BlackRock, Inc. (parent holding company/control person) reported, as of December 31, 2022, beneficial
ownership of 7,166,740 shares, with sole voting power for 6,936,773 shares and sole investment power for 7,166,740 shares. This holder is located at 55 East 52nd Street, New York, NY10055
(3)Based on a Schedule 13G/A filed with the SEC on February 10, 2023, Deerfield Mgmt, L.P. (parent holding company/control person) reported, as of December 31, 2022, beneficial ownership of 2,996,000 shares, with shared voting and investment power for 2,996,000 shares. This holder is located at 345 Park Avenue South, 12th Floor, New
York, NY10010.
(4)Based on a Schedule 13G/A filed with the SEC on February 9, 2023, The Vanguard Group (investment adviser) reported, as of December 31, 2022, beneficial ownership of 5,499,624 shares, with shared voting power for 16,244 shares, sole investment power for 5,435,458 shares, and shared investment power for 64,166 shares. This holder is located at 100 Vanguard Blvd., Malvern, PA19355.
(5)Includes
7,926 shares indirectly beneficially owned in a family trust.
(6)The address of our directors and executive officers is c/o Enhabit, Inc., 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206.
(7)Includes 172,668 shares issuable upon exercise of options.
Section 16(a) of the Exchange Act requires our directors, executive officers, and the persons who beneficially own more than 10% of our common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to us. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have complied with all applicable filing requirements during 2022, except the following, which were not timely filed.
•Due to an unanticipated delay in acquiring EDGAR filing codes, Ms. Curl, a member of our Board filed her Form 3 late.
•As described in our Form 10
and further described onpage 40, at the time of the Separation unvested PSUs and RSAs previously issued by Encompass and held by Enhabit employees converted to Enhabit equity awards (the “Converted Awards”). Ownership of the Converted Awards was not reported for our Section 16 officers at the time of the Separation. Amended Form 4s have been filed for Mses. Jacobsmeyer, Carlisle, Jolly and Marion to include the Converted Awards.
•In
January and February of 2023 vesting occurred on certain Converted Awards. Tax withholding amounts were net settled at the time of vesting and consequently shares were surrendered by each participant to pay the participant’s withholding tax obligation. The surrendered shares were not reported for our Section 16 officers at the time of vesting. Form 4s have been filed for Mses. Jacobsmeyer, Carlisle, Jolly and Marion to report the surrender of shares.
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EXECUTIVE OFFICERS
The following table lists all of our executive officers. Each of our executive officers will hold office until his or her successor is elected
and qualified, or until his or her earlier resignation or removal.
Name
Age
Position
Since
Barbara A. Jacobsmeyer
57
President
and Chief Executive Officer; Director
6/2021
Crissy B. Carlisle
51
Executive Vice President and Chief Financial Officer
8/2021
Dylan C. Black
55
General Counsel and Secretary
1/2023
Julie Jolley
51
Executive
Vice President, Home Health Operations
1/2000
Jeanne Kalvaitis
66
Executive Vice President, Hospice Operations
6/2022
Ronald L. (Bud) Langham, Jr.
46
Executive Vice President, Clinical Excellence and Strategy
10/2008
Tanya
Marion
49
Chief Human Resources Officer
1/2022
Executive Biographies
Barbara A. Jacobsmeyer, President and CEO
Ms. Jacobsmeyer’s biography is included in “Proposal 1 - Election of Directors” section above.
Crissy B. Carlisle, Executive Vice President and Chief Financial Officer
Ms. Carlisle has served as Chief Financial
Officer of Enhabit since August 2021. Prior to that, she served as Encompass’s Chief Investor Relations Officer since September 2015. Ms. Carlisle joined Encompass in February 2005 as the director of SEC reporting and was promoted to Vice President of Financial Reporting in August 2005. Prior to joining Encompass, Ms. Carlisle served as a Director at FTI Consulting within the Corporate Recovery Division and additionally as a manager within PricewaterhouseCoopers’ audit practice. She received her bachelor’s degree in accounting from the University of Alabama and her master’s degree in business administration from Duke University’s Fuqua School of Business. Ms. Carlisle currently serves as a Vice President on the International Council of Gamma Phi Beta.
Dylan C. Black, General Counsel and Secretary
Mr. Black has served as General Counsel and Secretary of Enhabit since January 2023.
Prior to that, he was a Partner at the law firm Bradley Arant Boult Cummings LLP in Birmingham, Alabama, where he practiced from 1998 to 2022. Before his career in private practice, Mr. Black clerked for the Hon. Harry W. Wellford on the United States Court of Appeals for the Sixth Circuit in Memphis, Tennessee. Mr. Black received his bachelor's degree in government from Harvard College and his law degree from the University of Virginia School of Law.
Julie Jolley, Executive Vice President, Home Health Operations
Ms. Jolley has served as Executive Vice President of Home Health Operations of Enhabit since 2019. Prior to that, she served as Regional President of Home Health since 2016. Ms. Jolley joined Enhabit in January 2000 as a Branch Director and was promoted to several other roles before her current position. Prior to joining Enhabit, Ms. Jolley was a registered nurse with experience
in a variety of practice settings. She received her bachelor’s degree in nursing from Chamberlain University. She also has the benefit of more than 29 years of experience in healthcare.
Ms. Kalvaitis has served as Executive Vice President of Hospice Operations of Enhabit since June 9, 2022. Ms. Kalvaitis has more than 30 years of healthcare administrative experience. Prior to joining Enhabit, she served as Vice President Hospice Operations and Divisional Vice President Clinical Services for Compassus from 2019 to 2021, where she worked on the transition of Ascension at Home hospice agencies after their acquisition by Compassus. Prior to holding that position, Ms. Kalvaitis served as Enhabit’s Vice President Clinical Services from 2014 to 2019 and held numerous positions
at Vitas Healthcare Corporation from 1990 to 2014, including Vice President Operations, Vice President Business Development, and Senior General Manager. Ms. Kalvaitis is a registered nurse in Texas and Connecticut and has experience in a variety of practice settings prior to assuming the above administrative roles. She received her bachelor’s degree in nursing from the University of Texas at El Paso and her diploma in nursing from St. Vincent’s Medical Center School of Nursing in Bridgeport, Connecticut.
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Ronald L. (Bud) Langham, Jr., Executive Vice President, Clinical Excellence and Strategy
Mr. Langham has been with the company since October
2008 and currently serves as Executive Vice President of Clinical Excellence and Strategy. Prior roles at Enhabit include Chief Strategy and Innovation Officer and Chief Clinical Officer. He is a physical therapist by training and has direct patient care and leadership experience in a variety of acute and post-acute settings. Mr. Langham received his degree in physical therapy from the University of Oklahoma Health Sciences Center in 1999 and a Master’s Degree in Business Administration from the University of Oklahoma in 2005. He is an active member of the American Physical Therapy Association and has served on multiple technical expert panels (TEPs) for the Centers for Medicare and Medicaid Services (CMS).
Tanya Marion, Chief Human Resources Officer
Ms. Marion has served as Chief Human Resources Officer of Enhabit since January 24, 2022.
Prior to joining Enhabit, she served as the Chief Human Resources Officer – Operations of Mercy Health, a not-for-profit health care system in St. Louis, Missouri, from 2017 to 2022. Prior to that, she served in a variety of human resources leadership roles with increasing responsibility at Mercy Health from 2007 to 2017. She received her bachelor’s degree in business management from Missouri State University and her master’s degree in management and leadership from Western Governors University.
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GENERAL INFORMATION
Other
Business
We know of no other matters to be submitted at the annual meeting. By submitting the proxy, the stockholder authorizes the persons named on the proxy to use their discretion in voting on any matter brought before the annual meeting.
Annual Report to Stockholders
A copy of our 2022 Form 10-K is being mailed concurrently with this proxy statement to stockholders who have requested hard copies previously and are entitled to notice of and to vote at the annual meeting. Our annual report to stockholders is not incorporated into this proxy statement and will not be deemed to be solicitation material. A copy of our 2022 Form 10-K is available without charge from the “Investors” section of our website
at https://investors.ehab.com. Our 2022 Form 10-K is also available in print to stockholders without charge and upon request, addressed to Enhabit, Inc., 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206, Attention: Investor Relations.
Proposals for 2024 Annual Meeting of Stockholders
All stockholder proposals must be sent by
mail or courier service and addressed to Enhabit, Inc., 6688 N. Central Expressway, Suite 1300, Dallas, Texas75206, Attention: Corporate Secretary. Electronic mail and facsimile delivery are not monitored routinely for stockholder submissions, so timely delivery cannot be ensured.
Any proposals that our stockholders wish to have included in our proxy statement and form of proxy for the 2024 annual meeting of stockholders must be received by us no later than the close of business on January 20, 2024, and must otherwise comply with the requirements
of Rule 14a-8 of the Exchange Act in order to be considered for inclusion in the 2024 proxy statement and form of proxy.
You may also submit a proposal without having it included in our proxy statement and form of proxy, but we need not submit such a proposal for consideration at the annual meeting if it is considered untimely or does not include the information required by Section 2.9 of our Bylaws. In accordance with Section 2.9, to be timely your proposal must be delivered to or mailed and received at our principal executive offices on or after March 1, 2024 and not later than March 30, 2024; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after anniversary date of
this year’s annual meeting, your proposal, in order to be timely, must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. Section 2.9 also requires, among other things, that the proposal must set forth a brief description of the business to be brought before the annual meeting and the reasons for conducting that business. A stockholder proposing business for the annual meeting must update and supplement the notice information required by Section 2.9 of our Bylaws so that it is true and correct as of the record date(s) for determining the stockholders entitled to receive notice of and to vote at the annual meeting. Any stockholder that intends to submit a proposal should read the entirety of
the requirements in Section 2.9 of our Bylaws which can be found in the “Corporate Governance” section of our website athttps://investors.ehab.com.
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Appendix A
Reconciliations
of Non-GAAP Financial Measures to GAAP Results
Adjusted EBITDA is a non-GAAP measure of our financial performance. Management believes Adjusted EBITDA assists investors in comparing our operating performance across operating periods on a consistent basis by excluding items we do not believe are indicative of our operating performance.
We calculate Adjusted EBITDA as Net (loss) income adjusted to exclude (1) income tax expense, (2) interest expense, (3) depreciation and amortization, (4) gains or losses on disposal or impairment of assets or goodwill, (5) stock-based compensation, (6) net income attributable to noncontrolling interest, (7) transaction costs, (8) gain on consolidation of joint venture formerly accounted for under the equity method of accounting and (9) payroll taxes on stock appreciation rights (“SARs”) exercises.
Adjusted
EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (“GAAP”), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for Net (loss) income. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2022 Form 10-K.
The following table reconciles Net (loss) income to Adjusted EBITDA for the year
ended December 31, 2022 (in millions):
Reconciliation of Net (loss) Income to Adjusted EBITDA
