SIX Six Flags Entertainment Corporation

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

 

March [■], 2022

Dear Fellow Stockholders:

SIX FLAGS ENTERTAINMENT CORPORATION

1000 Ballpark Way, Suite 400, Arlington, Texas 76011

 

Only stockholders of record at the close of business on the record date, March 16, 2022, are entitled to receive notice of and to vote at the Annual Meeting or any adjournments or postponements thereof.

By Order of the Board of Directors,

DANIELLE J. BERNTHAL

Arlington, Texas

March [•], 2022

The following summary highlights information contained elsewhere in this Proxy Statement. It does not contain all the information that you should consider. Please read the entire Proxy Statement carefully before voting.

The Company experienced a number of recent executive management changes:

The corporate governance practices of the Company serve the interest of stockholders and emphasize integrity, ethics, and effective risk oversight.

The Company is working to create a more sustainable and efficient company and has prioritized its ESG efforts around the following framework:

 

The Company’s director nominees have a mix of skills and qualifications that provides the Board with the variety and depth of knowledge necessary for effective oversight of the Company and will help the Company reinvigorate growth:

 

For additional information, see the “Compensation Discussion and Analysis,” which begins on page 34, and the 2021 Summary Compensation Table and other related tables and information under “Executive Compensation,” which begins on page 51.

The Company’s vision to be the leading location-based entertainment company would not be possible without its exceptional team members, who are the cornerstone of the Company’s commitment to provide the best customer experience for its guests. The Board and management team are committed to advancing a purpose-led vision and fostering a culture that empowers team members with direct accountability that encourages an entrepreneurial spirit to unleash the power to delight park guests, and enhance operations and the park’s surrounding communities. The Company seeks to create a culture that is results-oriented and supports its values of safety, integrity, accountability, guest-centricity, innovation, teamwork, inclusiveness, and fun. Core to achieving this goal is the Company’s commitment to conducting business in a manner that respects all individuals and promotes human rights, including providing fair working conditions and competitive wages.

The Board and senior management are focused on ensuring that the Company maintains and promotes a culture that fosters the values, behaviors and attributes necessary to advance the Company’s mission and business strategy.

To foster team member engagement and commitment, the Company follows a robust process to listen to team members, take action and measure its progress with ongoing team member conversations, transparent communications and team member satisfaction surveys. The Board receives regular updates on matters of employee culture and engagement.

The Company is committed to creating an inclusive environment that fully embraces the diversity of its guests and team members, regardless of race, ethnicity, gender, age, disability, cultural background, sexual orientation, or religious beliefs. The Company has prioritized pay equity and recently conducted a salary and wage analysis that confirmed no significant statistical disparity by race/ethnicity or gender. In addition, the Company established a Diversity and Inclusion Council, which provides feedback on a wide variety of issues. The Company is also investing in training and other programs focused on enhancing diversity, equity and inclusion.

The Company is dedicated to being a place where its team members love to work, where they feel recognized and rewarded for all that they do. Maintaining a competitive total rewards program helps the Company attract, motivate and retain the key talent it needs to delight guests and achieve outstanding business and financial results. To accomplish this goal, the Company strives to appropriately align its total compensation with the pay, benefits and training and development offered by other companies that compete with it for talent in the marketplace.

Attracting, developing, and retaining the best people is crucial to all aspects of the Company’s business and long-term success, and is central to the Company’s mission, vision, and values. The Company is focused on attracting, developing, and retaining best-in-class diverse teams, and continuing to build an inclusive culture that inspires leadership, encourages innovative thinking, and ties to the Company’s values. These guiding principles have been more important than ever in light of the unique challenges the Company faced throughout the pandemic.

Team members have the opportunity to be part of a vibrant, motivated group and to develop valuable leadership skills as they gain real-world work experience in a fun environment. The Company seeks to continually elevate learning, development and overall team member engagement through a variety of different programs, opportunities and resources. Many team members continue to have careers at the Company or utilize their skills as valuable contributors for the communities that the Company serves.

The Company is committed to the health and safety of its team members and their families. To support the Company’s team members during the COVID-19 pandemic, in 2020, the Company expanded remote work opportunities where possible and implemented extensive health and safety measures, such as enhanced sanitization protocols and distribution of personal protective equipment, to provide a safe working environment. The Company enhanced its operations to make it safer and easier for team members to come to work including adding training to ensure compliance with applicable health and safety protocols, implementing contactless recruiting and hiring procedures, and offering voluntary on-site COVID testing and vaccination opportunities. The Company received favorable responses from team members on its safety measures as evidenced by team member survey satisfaction scores.

The Company’s attention to health and safety of its team members extends to the workers and communities in the supply chain. The Company believes that respect for human rights is fundamental to creating a stronger, high-performance culture and the Company’s commitment to ethical business conduct. In 2021, the Company adopted a human rights policy that is grounded in international standards and is an important expression of the Company’s values. The policy provides the framework to hold team members accountable to advance, support and respect human rights in the course of doing business. The Company is focused on screening and doing business with vendors and suppliers who conduct their business with ethical standards that are consistent with the Company’s policy, and requires that vendors and suppliers abide by the Company’s code of vendor conduct.

The business, property, and affairs of the Company are managed under the direction of the Board. The Board is elected by stockholders to oversee management and to ensure that the long-term interests of stockholders are served. The Board is responsible for establishing broad corporate policies and for the overall performance of the Company. It is not, however, involved in operating details on a day-to-day basis. The Board is advised of the Company’s business through discussions with the Chief Executive Officer and other members of management; by reviewing reports, analyses, and materials provided to them; and by participating in Board and committee meetings.

The Board has four regularly scheduled meetings during the year to review significant developments affecting the Company and to act on matters requiring Board approval. It also holds additional meetings when a matter requires Board action between regularly scheduled meetings. Directors are expected to attend all scheduled Board and committee meetings, as well as the annual meeting of stockholders. The Board held 6 meetings during 2021. Each director of the Company attended at least 75% of the aggregate of the meetings of the Board and the meetings of committees of the Board on which such director served. All of the then-current directors of the Company (other than one retiring director) attended the Company’s 2021 annual meeting, and the Company expects that each director nominee will attend the Annual Meeting.

The Board has only one class of directors. As a result, all directors are elected each year by the Company’s stockholders at the annual meeting. In 2021, the Company added a director resignation policy to its Corporate Governance Guidelines. Accordingly, any non-employee incumbent director nominee who does not receive the affirmative vote of the majority of shares voted in connection with his or her uncontested election is required to tender his or her resignation from the Board. This resignation is subject to review by the Nominating and Corporate Governance Committee, and determination by the Board whether to accept such resignation. Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Also in 2021, the Company amended its Corporate Governance Guidelines to include that a director may not stand for election to the Board after the director has reached the age of 72.

All of the directors of the Company were elected at the 2021 annual meeting. The Board currently has six directors, all of whom are being nominated by the Board for re-election at the Annual Meeting, See “Proposal 1: Election of Directors.”

The Board has affirmatively determined that five of the six current directors, including all members of the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee, are “independent” within the meaning of the Company’s director independence standards as set forth in the Company’s Corporate Governance Guidelines. These standards reflect the independence standards adopted by the New York Stock Exchange (“NYSE”). The independent directors are Ben Baldanza, Esi Eggleston Bracey, Denise Clark, Enrique Ramirez, and Arik Ruchim.

None of the independent directors, their respective affiliates or members of their immediate family, directly or indirectly, receives any fee or payment from the Company or its affiliates, other than the director compensation described below. None has engaged in any transaction with the Company or its affiliates or has any relationship with the Company or its affiliates which, in the judgment of the Board, is inconsistent with a determination that the director is independent. There is no family relationship among any of the directors or executive officers of the Company.

 

Consistent with the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee considers, among other factors, character, integrity, ethics, judgment, diversity, independence, areas of expertise relevant to the Company’s business, and other commitments when reviewing and making recommendations to the Board regarding the composition and size of the Board. Although the Board does not maintain a specific policy with respect to Board diversity, the Board believes that the Board should be a diverse body. The Nominating and Corporate Governance Committee considers a broad range of backgrounds and experiences when making determinations regarding nominations of directors and in overseeing the annual Board and committee evaluations. The Nominating and Corporate Governance Committee, and the Board as a whole, broadly construe diversity to mean not only diversity of race, gender, and ethnicity, but also diversity of opinions, perspectives, and professional and personal experiences. Although candidates must be committed to serving on the Board for an extended period of time, the Board does not believe that directors should expect to be routinely re-nominated annually.

The Nominating and Corporate Governance Committee regularly considers director succession planning and the long-term composition of the Board, including how the members on the Board will change over time.

In 2021, the Board added a retirement policy for non-employee directors in the Company’s Corporate Governance Guidelines providing that no director will stand for election or re-election if such director has reached the age of 72. A director who turns 72 during his or her term, however, may serve out the remainder of such term. As of the Record Date, the average age of the Board nominees was approximately 55, with age diversity ranging from 41 to 65. Furthermore, it is anticipated that an independent director would not serve on the Board longer than ten years and no independent director shall serve on the Board longer than 15 years. The Nominating and Corporate Governance Committee strives to reach an appropriate balance between the deep expertise and knowledge that comes from longer-term service and the new experiences and perspectives that can be provided with additions to the Board.

As of the Record Date, the average tenure of the Board nominees was approximately 1.7 years. This average tenure is due in part to director retirements and the recent appointment of Ms. Clark in 2021. The retirement policy of the Board reflects the commitment of the directors to Board refreshment and to seek balance in the boardroom. Tenure is one factor considered by the Board. Director succession planning also impacts tenure. See “Board Leadership Structure” and “Nomination Process” for additional information.

and CEO should be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separate or combined, based upon the Company’s best interests at the time of selection, considering the dynamic environment in which the Company operates, and the current and future strategic and governance needs of the business.

The succession planning discussions regarding the Chair and CEO roles in November 2021 included consideration of the Board leadership structure, together with the value of separating or combining the Chair and CEO roles, and whether the Chair role should be held by an independent director following the appointment of the new CEO. The Board considered a number of factors, including the Company’s progress with respect to its key strategic initiatives, the opportunities and challenges facing the Company, the various roles and capabilities of the directors, the Company’s stockholders’ interests, and corporate governance practices generally. The Board also focused on its own dynamics and independent oversight function. The Board concluded that a separate Chair and CEO structure creates the right balance between effective independent oversight of the Company’s business and Board activities and provides the best leadership structure for the Company at this time. As such, Mr. Baldanza was appointed as Non-Executive Chairman in November 2021 and Mr. Bassoul was appointed as CEO.

The CEO is responsible for setting the Company’s strategic direction and the day-to-day leadership and performance of the business, while the Chair of the Board provides general guidance to the CEO, reviews the agenda for Board meetings, and presides over meetings of the full Board.

The Board believes that there is no single Board leadership structure that would be most effective in all circumstances. Therefore, the Board retains the authority to modify this structure to best address the Company’s and the Board’s then-current circumstances as and when appropriate.

One of the primary responsibilities of the Board is to ensure that the Company has a high-performing management team. The CEO provides a regular review to the Board assessing the members of the senior management team and their potential to succeed him. In addition, the Company’s Human Resources department leads an annual comprehensive review of talent and succession planning at deeper levels of the Company, emphasizing career development of promising management talent. Pursuant to the Company’s Corporate Governance Guidelines, the Board approves and maintains a succession plan for the CEO and senior executives based upon recommendations from the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee reviews CEO and senior executive succession planning as a component of its regular agenda.

The Company’s management is responsible for identifying, assessing, and managing the material risks facing the business. The Board oversees management’s identification, assessment and management of risks. The Board and its committees engage with management on risk as part of broad strategic and operational discussions, as well as on a risk-by-risk basis. The Board and its committees, as appropriate, regularly receive and discuss updates from the CEO, the CFO, the Vice President of Internal Audit, and other members of senior management regarding significant risks to the Company. These discussions include financial, reputational, legal, operational, strategic, environmental, and cybersecurity risks, as well as plans to address these risks. The Board or the Audit Committee, as the case may be, receives an update from the Chief Information Officer on the Company's data and network security at least two times per year. The Company believes that the Board’s leadership structure, including its Non-Executive Chair, supermajority of independent directors, and allocation of oversight responsibilities to appropriate committees, provides effective board-level risk oversight.

Each Board committee assists the Board in overseeing the management of the Company’s risks within the areas delegated to that committee and reports to the full Board as appropriate. In particular:

Each standing committee has full access to management, as well as the ability to engage advisors. Accordingly, with the oversight of the Board, the Company has implemented practices and programs designed to help manage the risks to which the Company is exposed and to align risk-taking appropriately with the Company’s efforts to increase stockholder value.

The Nominating and Corporate Governance Committee seeks to develop and maintain an effective, well-rounded, experienced, and diverse Board that functions in an atmosphere of transparency and collaboration.

Process for Identification and Review of Director Candidates

 

The Company’s Corporate Governance Guidelines include qualification criteria that the Nominating and Corporate Governance Committee uses to identify individuals it believes are qualified to become directors. See “—Board Composition Overview” for a discussion of the characteristics and qualities that director candidates should possess.

After identifying qualified individuals and conducting interviews, as appropriate, the Nominating and Corporate Governance Committee recommends selected individuals to the Board. The Nominating and Corporate Governance Committee uses the same process to evaluate all candidates whether they are recommended by the Company or by one of the Company’s stockholders.

The Nominating and Corporate Governance Committee may retain a search firm to help identify qualified director candidates. In 2021 and 2022, the Company engaged search firms to assist with recruitment of new director candidates. The search firms provide director candidates and work with the Nominating and Corporate Governance Committee to contact prospects to assess interest and availability. The search firms also contact references for the candidates. A background check is completed before any candidate is approved by the Board.

Stockholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by sending the name and supporting information in accordance with Rule 14a-8 of the Exchange Act and the information set forth in the Company’s Amended and Restated Bylaws (“Bylaws”) to the Corporate Secretary, c/o Six Flags Entertainment Corporation, 1000 Ballpark Way, Suite 400, Arlington, Texas 76011.

The Company’s Bylaws permit a stockholder to nominate directors for election at an annual meeting. A nominating stockholder is required to provide written notice of that stockholder’s intent to make the nomination to the Corporate Secretary of the Company not less than 90 days nor earlier than 120 days before the first anniversary of the Company’s previous annual meeting. To be considered timely for the 2023 annual meeting, notice of the nomination must be received by the Corporate Secretary of the Company on or after January 11, 2023, and on or before February 10, 2023. A nominating stockholder must provide the information required by the Company’s Bylaws and each nominee must meet the qualifications required by the Company’s Bylaws.

In response to a stockholder proposal, the Board amended the Company’s Bylaws in February 2018 to implement proxy access. As amended, the Company’s Bylaws permit a stockholder or group of up to 20 stockholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years, to nominate and include in the Company’s proxy materials director nominees constituting up to two directors or 20% of the Board, whichever is greater, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the Company’s Bylaws. A nominating stockholder is required to provide written notice of that stockholder’s intent to make the nomination to the Corporate Secretary of the Company not less than 120 days nor earlier than 150 days before the first anniversary of the date that the Company sent its proxy statement for the prior year’s annual meeting of stockholders. In order to be considered timely for the 2023 annual meeting, notice of the nomination must be received by the Corporate Secretary of the Company on or after October 30, 2022, and on or before November 29, 2022.

The Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with H Partners Management, LLC and certain of its affiliates (collectively, “H Partners”), dated as of January 30, 2020, regarding the membership and composition of the Board and related matters. Pursuant to the Cooperation Agreement, the Company appointed Mr. Ruchim to the Board as a director, and Mr. Ruchim was appointed to the Nominating and Corporate Governance Committee and the Compensation Committee.

The Company also committed to (i) appointing three additional independent directors (each, a “New Independent Appointee”) to the Board within a reasonable timeframe and (ii) ensuring that one director serving on the Board as of January 31, 2020, resigns from the Board on or before the appointment of the third New Independent Appointee. H Partners was permitted to present to the Board a list of up to eight candidates (each, an “Additional Nominee”) who were not affiliates or representatives of H Partners for consideration for appointment to the Board as a New Independent Appointee, and the Board agreed to consider at least one Additional Nominee in good faith alongside any other qualified candidates identified by

the Nominating and Corporate Governance Committee as a part of its standard processes for considering new director candidates. In accordance with the Cooperation Agreement, Messrs. Baldanza and Bassoul were Additional Nominees considered by the Board and appointed as directors on February 24, 2020.

During the period ending 10 days after Mr. Ruchim (or any replacement) is no longer serving on the Board (the “Cooperation Period”), H Partners has agreed to certain standstill provisions, including, among other things, agreeing not to (i) acquire ownership (beneficial or otherwise) of 14.9% or more of the Company’s outstanding shares, (ii) nominate or recommend for nomination any person for election to the Board, (iii) submit any proposal for consideration at, or bring any other business before, any stockholder meeting, or (iv) solicit any proxy, consent, or other authority to vote of stockholders or conduct any other referendum (including any “withhold,” “vote no,” or similar campaign) with respect to, or from the holders of, the Company’s shares.

At any stockholder meeting during the Cooperation Period, H Partners has also agreed to vote its shares of the Company’s common stock (i) in favor of the slate of directors recommended by the Board, (ii) against the election of any nominee for director not approved, recommended, and nominated by the Board for election, and (iii) in accordance with the Board’s recommendation with respect to any other matter or proposal presented at any such meeting, subject to certain exceptions relating to business combination transactions.

The foregoing is a summary of the Cooperation Agreement and the complete Cooperation Agreement is available as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 31, 2020.

The Company’s relationship with its stockholders is an important part of the Company’s success, and the Company seeks to engage meaningfully with its stockholders to obtain their perspectives. The Company’s management team believes that this approach to engaging openly with the Company’s stockholders drives increased corporate accountability, improves decision making, and ultimately creates long-term value. The Company is committed to:

The Company holds meetings during the course of each year with many of its stockholders through in-person and teleconference meetings to better understand stockholders’ key concerns. Through these activities, management discusses and receives input, provides additional information, and addresses questions about the Company’s business strategy, executive compensation programs, corporate governance, and other topics of interest to the Company’s stockholders. These engagement efforts allow the Company to better understand stockholders’ priorities and perspectives, and provide the Company with useful input concerning its compensation and corporate governance practices. For example, stockholder feedback influenced the Company’s implementation of proxy access and the specific terms adopted through an amendment to the Company’s Bylaws in 2018. See also “—Stockholder Cooperation Agreement” for a discussion of additional stockholder engagement activity.

As part of the Company’s stockholder engagement program in 2021, management discussed the Company’s compensation practices, corporate governance and ESG program with the Company’s largest institutional investors. In direct response to feedback from stockholders, the Company took several actions as described under “Compensation Discussion and Analysis—Annual Say-on-Pay Vote and Stockholder Engagement.”

The Company’s Securities Trading Policy applies to all directors, officers, and employees of the Company. The policy includes the following restrictions with respect to Company securities:

Director education about the Company and its industry is an ongoing process, which begins when a director joins the Board. New directors are provided with an orientation about the Company, including financial, operational, and governance information. In addition, directors receive Board and committee presentations, and regular communications from senior executives, to keep them appropriately apprised of key developments in the Company’s business and industry, as well as developments in corporate governance, so they can carry out their oversight responsibilities.

The Company endeavors to integrate environmental, social, and governance practices that create sustainable economic value to its team members, stockholders, surrounding communities, and other stakeholders. The Company believes that environmental and community stewardship is an integral component of delivering excellence, driving strategic innovation, and growing long-term stockholder value. The Company believes that its impact on the environment, how it manages its relationships with team members, suppliers, customers and the communities in which it operates, and the accountability of its leadership to the Company’s stockholders are all critically important to the business. The Company is committed to fostering a culture that drives meaningful growth, is agile and enables empowerment across every position in the organization.

In 2021, the Company amended the Nominating and Corporate Governance Committee’s charter to include among its responsibilities oversight of activities, initiatives, and policies regarding ESG matters. The Nominating and Corporate Governance Committee reviews and recommends to the Board ESG policies developed by management, including policies related to diversity, equity and inclusion, and climate-related risk. Once adopted, the Nominating and Corporate Governance Committee monitors the Company’s compliance and reviews annually such policies with management and will make recommendations for updates as appropriate. The Company strives to expand and communicate its sustainability and ESG-related initiatives and commitments in meaningful ways, and to improve the level of engagement across its various stakeholders.

The Company is working to create a more sustainable and efficient company and has prioritized its ESG efforts around the following framework:

 

Attracting, developing, and retaining the best people is crucial to all aspects of the Company’s business and long-term success, and is central to the Company’s mission, vision, and values. The Company is focused on attracting, developing, and retaining best-in-class diverse teams, and continuing to build an inclusive culture that inspires leadership, encourages innovative thinking, empowers expeditious decision-making, and ties to the Company’s values. These guiding principles have been more important than ever in light of the unique challenges of operating during the pandemic.

The Company offers, among other things, competitive and balanced compensation programs to its full-time team members that include well-rounded healthcare; prescription drug and disability insurance benefits; participation in a 401(k) plan, with a matching contribution by the Company; an employee assistance plan that provides professional support; and access to special programs and certain resources for team members experiencing personal, work, financial, or family-related issues. A unique Company perquisite offers full-time team members complimentary passes, including for their dependents, which provides free admission to any of the Company’s parks, preferred parking and discounts on in-park products.

The Company seeks to continuously elevate learning, development, and overall team member engagement through a variety of different programs, opportunities, and resources. The Company has enhanced its talent development program by providing team members access to virtual classrooms and online courses on topics including safety, Office 365, harassment, discrimination, business ethics, anti-corruption, and privacy and security. The Company also conducts capabilities assessments to address the individual development needs of the Company’s internal talent pool. This evolving catalog of internal resources allows the Company to evaluate training needs as well as focus recruiting efforts on addressing any identified gaps in skills, diversity, and critical experiences. In addition, information the Company collects from guest satisfaction surveys, team member satisfaction surveys, and annual performance reviews helps the Company determine whether additional trainings or training redesigns are needed to ensure that its training program furthers the Company’s strategic priorities.

The Company understands that continuous engagement with its team members is vital to driving successful, meaningful outcomes. Senior management conducts regular “town-hall” style meetings with team members to address topics such as business operations, strategy, market conditions, and question-and-answer sessions, to foster an environment and corporate culture of transparency and collaboration. Management also provides regular written communication of Company events and conducts ongoing team member satisfaction surveys that provide actionable feedback from team members to management. The survey responses are anonymous, measure team member satisfaction, and solicit honest feedback. Management from both corporate and the parks meet routinely to review the survey results and develop action plans in response to the team member feedback.

Performance reviews are conducted at least annually for all full-time team members, during which team members and managers address goals, developmental opportunities, strengths, and weaknesses. These reviews facilitate both strong and productive conversations across the organization and an open feedback culture.

The Company understands that enhancing its financial strength and improving the guest’s experience requires a diverse and inclusive workforce.

The Company is committed to creating an inclusive environment that fully embraces the diversity of its team members and guests, regardless of race, ethnicity, gender, age, disability, cultural background, sexual orientation, or religious beliefs. We maintain a Diversity and Inclusion Council that provides feedback on a wide variety of diversity and inclusion related issues. In that regard, the Company is focused on the following:

 

In support of developing an empowered and diverse team, during 2021, the Company has done the following:

The Company is committed to equal pay for equal work. The Company recently conducted a salary and wage analysis that confirmed no significant statistical disparity by race/ethnicity or gender. In addition, based on recent team member census data, a higher percentage of the Company’s full-time female workforce holds management positions than their male counterparts.

The safety and security of the Company’s guests and team members is the Company’s highest priority. Team members are the Company’s most valued asset, and the Company is committed to the health and safety of its team members and their families. To support the Company’s team members during the height of the pandemic, the Company expanded remote work opportunities where possible and implemented extensive

health and safety measures, such as enhanced sanitization protocols and distribution of personal protective equipment, to provide a safe working environment for its team members. The Company continues to monitor guidance from federal and local health authorities in evaluating the need for continued COVID-19 health and safety protocols with regard to ongoing operations.

It is the shared responsibility of every team member to actively participate in creating a safe and secure environment and to minimize injuries. The hallmarks of the Company’s safety and security programs are:

The Company uses a robust risk management software tool when conducting audits, for Occupational Health and Safety (OSHA) and other safety trainings, and for predictive analytics. All managers in the Company’s Safety Department are required to obtain various safety and security certifications including OSHA, Americans with Disabilities Act (ADA) Coordinator, and Certified Protection Professional (ASIS CSP).

Team members are provided with ongoing resources and education to continuously promote safe and secure operating environments at the parks. This includes compliance with OSHA standards, improving overall workplace safety and health, regular and ongoing safety training and assessments, and annual safety audits.

The Company supports the communities in which its parks are located by partnering with charitable organizations throughout North America whose missions align with the Company’s mission to create thrilling, memorable experiences for all.

The parks assist their surrounding communities by partnering with state and local emergency response units to help coordinate relief efforts in the event of hurricanes, wildfires, and other natural disasters. In response to the COVID-19 pandemic, the Company supported vaccination efforts by donating over $12.5 million worth of single-day admissions tickets to individuals upon their first dose of the vaccine. In addition, the Company assisted state and local efforts by enabling park locations to serve as testing and vaccination sites and by donating food and critically needed personal protective equipment supplies. The Company also supported local schools by donating masks to teachers and students.

The Company encourages team member volunteerism at all of its locations through organized activities. For example, most of the Company’s full-time team members spend at least an entire day each year volunteering on projects in their local communities to help others. From helping to build homes to organizing food pantries and creating reading rooms, the Company supports local charitable organizations and educational efforts year-round.

The Company is passionate about the communities surrounding its parks, and the Company’s team members enjoy working together for the greater good. The Company supports the local communities by:

The Company is committed to environmental sustainability and to addressing its role in climate change. The Company’s commitment to environmental stewardship is focused on energy management, water conservation, and waste reduction. The Company is enhancing its water reclamation initiatives and continues to prioritize recyclable or biodegradable products in both its operations and supply chain. The Company also continues to seek to incorporate solar power into its operations and otherwise reduce its greenhouse gas emissions. The Company has engaged third party experts to measure its carbon footprint so it can enhance its current environmental initiatives with specific waste, water and energy reduction targets and initiatives. The Company is also in the process of developing an environmental management system to monitor and evaluate the performance of its environmental programs.

In addition, the Company has implemented measures to meaningfully reduce waste at its parks including (i) installing contactless fixtures in restrooms to significantly reduce water usage and waste, (ii) using hand dryers instead of paper towels in restrooms, (iii) making recycling bins widely available for guests to recycle plastic and aluminum, (iv) eliminating disposable cup lids and straws from inventory, and (v) creating a strawless souvenir cup.

In 2021, the Company implemented a vendor code of conduct, which defines the Company’s expectations of its suppliers regarding protecting human rights in the supply chain. All suppliers are required to agree to this code of conduct in order to do business with the Company. Protecting human rights is embedded in the Company’s governance and culture.

The Company is also committed to the ethical treatment of animals through supply chain and food sourcing management. For example, in 2016, the Company announced that it would convert 100% of the eggs in its supply chain to “cage-free” varieties within ten years. The Company is ahead of schedule, having successfully converted all egg products – both whole eggs and substitutes – used in its operations to cage-free. The Company is now working diligently with its suppliers of products containing egg-based ingredients (such as pre-made mixes and pre-baked goods) to convert those ingredients to cage-free and plan to achieve 100% cage-free compliance for all egg ingredients as soon as practicable.

Effective as of May 5, 2021, the Board approved an increase in (i) the non-executive chair equity retainer from $100,000 to $120,000, (ii) the annual cash base retainer from $70,000 to $80,000, (iii) the annual cash retainer for the Audit Committee Chair from $25,000 to $30,000, (iv) the annual cash retainer for a member of the Audit Committee from $12,500 to $15,000, and (v) the annual cash retainer for a member of the Nominating and Corporate Governance Committee from $7,500 to $10,000.

In February 2021, the Board determined that the most effective means for oversight of the Company’s risks was to maintain the responsibility with the Audit Committee, and the Risk Oversight Committee was eliminated. From January 2021 through February 2021, $2,278 was paid to the chair, and $1,139 to each member, of the Risk Oversight Committee.

The Company maintains a director cash retainer deferral program under the Company’s Long-Term Incentive Plan. This program allows members of the Board to elect to receive stock units under the Long-Term Incentive Plan in lieu of the cash compensation for such member’s services as a director. Each deferred stock unit accumulates dividend equivalents, if and when dividends are declared and paid on the Company’s common stock, that are converted to additional deferred stock units annually as applicable. The conversion of stock units into shares and the distribution of such shares under this program occurs on the first business day following the thirtieth day after a director’s service as a director terminates.

To further the Company’s objective of aligning the interests of directors with those of the Company’s stockholders, the Board has adopted stock ownership guidelines for non-employee directors. In May 2021, the director stock ownership requirements increased from three times to five times the annual cash base retainer. Each non-employee director should seek to achieve this level of ownership within five years of the date the person first becomes a director for newly appointed or elected directors. For purposes of the guidelines, the annual cash base retainer does not include any additional cash compensation paid for serving as a member or chair of any committee of the Board. All of the current directors are in compliance, or on target to achieve compliance, with the Company’s stock ownership guidelines.

 

A plurality of the votes cast is required to elect each director. If you own shares through a bank, broker, or other holder of record, you must instruct your bank, broker, or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this Proposal 1.

This Compensation Discussion and Analysis is a summary of the Company’s compensation programs, policies and objectives, and, in particular, their application to a specific group of individuals in their roles at the Company in 2021 that we refer to as the named executive officers (“NEOs”).

The Company strives to align its executive compensation program with the interests of the Company and its stakeholders by focusing the executive compensation program on incentive compensation that emphasizes “pay-for-performance,” and rewarding the executives for performance against pre-established financial and strategic goals. Rewarding improvement in the Company’s financial and operating results and the creation of sustainable long-term stockholder value are key characteristics of the Company’s compensation philosophy. The following are notable pay practices that the Company maintains and those that it avoids:

The Company experienced recent shifts in its executive management team as described below, including the appointment of Mr. Bassoul as CEO in November of 2021, which the Board believes will promote a dynamic performance driven culture focused on the guest experience and supportive of an innovative spirit.

The COVID-19 pandemic had, and may continue to have, a material negative impact on the Company’s business and financial performance. In March 2020, the Company was required to temporarily close its parks due to the pandemic. As of May 29, 2021, the Company had opened all of its parks, and, as of June 15, 2021, none of its parks were subject to mandated capacity constraints, with the exception of three parks outside the United States (two of which, in Mexico, had capacity restraints lifted as of October 18, 2021). Throughout the pandemic, the Company has implemented plans to mitigate the impact of the pandemic on its business and to ensure the health and safety of its team members and guests. Highlights of the Company’s response to the pandemic included:

 

The Company conducted a comprehensive review of its annual and long-term incentive programs to enhance alignment with strategic initiatives and stockholder value creation. With the appointment of a new CEO in November 2021, the Compensation Committee crafted both short-term and long-term incentives closely tied to the Company’s strategy and commitment to improving business results, Company culture and the guest experience.

Annual Cash Incentive

Long-Term Equity Incentive

Changes for 2022:

Given the continued uncertainties due to the pandemic in 2021, the Company was focused on liquidity and cash generation necessary to make needed investments in the business and service the Company’s fixed obligations. In order to reflect this focus in the Company’s compensation strategy, the Company adopted a modified cash flow metric as the primary component of the annual incentive plan. Even though uncertainty regarding the continuing

impact of the pandemic remains, as the business has begun to normalize in 2022, the Company is focusing its growth strategy on elevating the guest experience through initiatives such as (i) improving ride efficiency and convenience, (ii) creating fun through employee friendliness, (iii) enhancing park cleanliness, (iv) delivering better quality food, (v) providing more guest amenities, and (vi) upgrading guest facing technology, including the mobile app. Since safety is inherent in guest satisfaction and guest experience, the Company removed the safety metric as a separate component of the annual incentive plan. The Board, including through its committees, will continue to monitor the Company’s safety performance through periodic updates from management. For 2022, the annual incentive plan components will be modified cash flow (80% weighting), guest satisfaction (10% weighting), and growth of food and beverage business (10% weighting). Since the performance goals in the 2022 annual incentive plan require stretch performance by the Company to levels that have not historically been achieved, the NEOs (other than the CEO) will have a maximum opportunity of 300% of target.

With the Company’s renewed focus on growth and inspiring a culture of ownership and responsibility, beginning in 2022, the Compensation Committee will implement a long-term equity incentive award mix for NEOs that places more emphasis on PSUs (weighted at 80%) than RSUs (weighted at 20%). The performance goals under the 2022 long-term incentive plan will closely align to the CEO PSU award granted in November 2021 consisting of performance goals tied to (i) Adjusted EBITDA for the 2022, 2023 and 2024 calendar years ranging from $560,000,000 to $710,000,000, (ii) employee and guest satisfaction, and (iii) other ESG achievement metrics. In an effort to align the compensation structure of the NEOs to the new CEO, a larger-than-normal PSU is being granted to NEOs (excluding the CEO) in 2022. As a result of increasing the PSU grant size for 2022, the Company does not intend to make additional PSU grants until the earlier of (x) 2025 and (y) when the Company achieves $710,000,000 in Adjusted EBITDA. To focus the Company’s management on its ESG strategy, the 2022 PSU award will include the same ESG metrics as provided in the CEO’s new hire award (described below). Finally, the maximum opportunity for the 2022 PSU is being temporarily increased (excluding the CEO) from 200% of target to 400% of target for certain team members to recognize the aspirational performance goals (further discussed below).

Total direct compensation for the NEOs is generally a combination of three components:

 

The Company takes a holistic approach to executive compensation and is mindful of the Company’s broad group of stakeholders. The primary goal of the Company’s executive compensation program is to drive long-term growth, stockholder value, and favorable outcomes for other stakeholders through the following key objectives:

The Company’s Human Resources department is responsible for the ongoing management of the executive compensation program. The Vice President, Compensation & Benefits, and her staff, serve as the primary management liaison to the Compensation Committee and propose compensation programs and policies to the Compensation Committee at the request of the Compensation Committee and the CEO. The Compensation Committee meets with the CEO and any other senior executives as the Compensation Committee deems appropriate when it determines the performance criteria and compensation levels of senior executives. The CEO makes recommendations to the Compensation Committee regarding individual compensation, such as base salary changes and incentive compensation opportunities for senior executives other than himself. In addition, the CFO and his staff evaluate the financial implications of executive compensation proposals and financial performance measures in incentive compensation arrangements.

In connection with fulfilling its duties, the Compensation Committee recognizes the value in procuring independent, objective expertise and counsel, and has the authority to retain an independent compensation consultant to assist it in carrying out its responsibilities and duties. The Compensation Committee retained FW Cook as its independent compensation consultant for 2021 executive and director compensation decisions. The Compensation Committee assessed the independence of FW Cook pursuant to SEC and New York Stock Exchange rules. FW Cook did not perform any separate additional services for management. On the basis of its consideration of the foregoing and other relevant factors, the Compensation Committee concluded that FW Cook was independent and that there were no conflicts of interest.

In making compensation decisions regarding senior executives generally, the Compensation Committee considers general market information, as well as business and industry conditions, the Company’s strategic business objectives, and the executive’s contributions, performance, and experience. The initial compensation arrangements for the NEOs were a result of arm’s-length negotiations by the Company with the executives in connection with their hire or retention and do not correspond to a specific benchmark level of pay. The compensation for the NEOs is reviewed annually by the Board, the Compensation Committee, and the CEO (for NEOs other than himself). An analysis of overall Company performance, budget targets, and achievement of individual performance goals is undertaken regarding the compensation of each executive. The Compensation Committee makes compensation determinations and adjustments when determined to be appropriate in accordance with the Company’s compensation philosophy and plans.

The Compensation Committee uses peer group data as a reference point to compare the NEOs’ pay against the peer group. The Compensation Committee also uses compensation data from the Company’s peer group as general guidance and as one of many factors that inform its judgment of appropriate compensation parameters for target compensation levels, but has not historically set executive compensation levels with reference to any particular percentile of the peer group and has not sought to match any particular element or mix of elements to that of the peer group.

The Compensation Committee believes that obtaining relevant market and benchmark data is important in making decisions about executive compensation. The Compensation Committee assesses the Company’s executive compensation relative to its peers. Given the unique focus of the Company’s business in the operation of regional theme parks and waterparks, the Company has few direct business competitors, which makes it difficult to create a peer group based solely on industry, revenue or market capitalization. In consultation with FW Cook, the Compensation Committee determined an appropriate peer group for purposes of compensation comparison by considering U.S. publicly traded companies with primary business activities centered around entertainment, leisure, hospitality, and gaming. For 2021, the Compensation Committee used the following peer group for purposes of its executive compensation analysis:

For 2022, the Compensation Committee, with the assistance of FW Cook, determined that two peer companies historically used by the Company—AMC Entertainment Holdings, Inc. and Live Nation Entertainment, Inc.— should be removed because they had become less aligned with established peer group criteria than in prior years. Additionally, the Compensation Committee determined to add Wendy’s Corporation and Callaway Golf Corporation, which are closely aligned with those criteria.

The Compensation Committee believes this peer group achieves the desired level of balance in terms of revenue, market capitalization, and EBITDA, and reflects the types of companies with whom the Company competes for talent. Compared to the peer group (based on year-end 2019 financials to exclude the distortive impact of the pandemic), the Company ranks at the 34^th percentile for revenues, the 46^th percentile for market capitalization, and the 49^th percentile for EBITDA. For executive compensation comparisons, the Compensation Committee primarily reviewed data from the most recently reported proxy statements and SEC filings of the peer group companies, as well as supplemental published compensation survey data.

In order to examine the competitiveness and appropriateness of the Company’s overall compensation program, the Company reviewed the total direct compensation of the NEOs (consisting of base salary, target annual incentive, and target long-term equity, excluding benefits and perquisites) during 2021 to the peer group companies. The Compensation Committee believes the analysis confirms that the executive compensation program is appropriately designed to achieve the Company’s general objectives and is aligned with the companies in the peer group.

The following charts show the relationship between the primary components of the total annual target direct compensation mix for the Company’s CEO and CFO. For the CEO, 81% of his target total compensation is ”at risk” and for the CFO, 68% is “at risk.” The charts illustrate target total compensation for 2021, as described in the Base Salary, Annual Incentives, and Long-Term Equity sections below.

 

The individual components of the Company’s executive compensation program in 2021 included:

 

In setting total compensation, the Compensation Committee consistently applies its compensation philosophy to the facts and circumstances associated with each NEO through the exercise of appropriate business judgment.

Salaries are used to provide a fixed amount of compensation for an executive’s work. Although initially established in each NEO’s individually negotiated employment agreement, the salaries of NEOs are reviewed annually, as well as at the time of a promotion or other change in responsibilities. The Compensation

The annual incentive plan provided for threshold, target and maximum opportunities for each performance goal. Attainment of the weighted target goal was determined separately for each of the three performance goals. For the Modified Cash Flow metric, the threshold, target and maximum opportunities were $140 million, $190 million, and $310 million, respectively. With attainment of $376 million of Modified Cash Flow against a target of $190 million, the NEOs (other than Mr. Bassoul) earned above-target payouts equal to 150% of their target annual incentive for 2021. The Company did not achieve threshold for either of the other two performance goals, which were adversely impacted by the pandemic and tight labor market.

In February 2022, the Compensation Committee approved the following annual incentive awards for the NEOs (other than Mr. Bassoul) pursuant to the criteria of the annual incentive plan as described above, which were paid upon completion of the Company's audit for 2021. The amounts paid pursuant to the annual incentive plan are set forth in the “Non-Equity Incentive Plan Compensation” column of the 2021 Summary Compensation Table because such amounts were paid pursuant to the pre-established criteria under the annual incentive plan. Pursuant to the terms of his employment agreement, with respect to 2021, Mr. Bassoul was eligible to receive an annual incentive award to be determined in the discretion of the Board. The Board awarded an annual incentive to Mr. Bassoul in the amount of $469,471. This represents a prorated bonus in recognition of Mr. Bassoul’s immediate impact in 2021 and reflects the same payout factor (as a percentage of target) provided to all other NEOs.

While annual cash incentives are intended to reward the achievement of short-term financial goals, the executive compensation program emphasizes and rewards results over the long term through equity incentives that have a substantial performance-based component and multi-year vesting schedules. The Company’s long-term equity awards are tied to the Company’s performance and the value of its common stock over multiple years. The Company believes that the characteristics of equity-based compensation, particularly the extended vesting periods, and the direct correlation between realized value to executives and stock price, are closely aligned with maximizing stockholder value, supporting the Company’s long-term growth strategies, and aligning compensation with risk outcomes. Extended vesting periods also incentivize retention. The Compensation Committee believes that it is appropriate to evaluate equity grant opportunities at least annually.

The Compensation Committee may, from time to time, grant additional equity incentive awards to employees, including NEOs, based on individual circumstances such as outstanding performance or in connection with a promotion. In 2021, the Compensation Committee implemented a redesigned long-term incentive program, which consisted of an equal weighting of performance-vesting PSUs and time-vesting RSUs. The Compensation Committee believed that a combination of PSUs and RSUs better aligned with then- current market practices and stockholder interests, and enhanced the Company’s ability to drive stockholder value while attracting, retaining, and motivating leadership talent.

PSUs allow the NEOs to earn a specified number of shares of Company common stock at the end of the three-year performance period (2021 through 2023). As a result, the number of performance shares a NEO earns is based on Company performance, and the value that the NEO realizes is tied to the stock price when the shares vest at the end of the performance period. Key terms of the PSUs granted in 2021 are summarized below:

Adjusted EBITDA is defined above on page 43. “Revenue”, a GAAP measure, is defined as Revenue reported by the Company for fiscal year 2023. The Compensation Committee may approve adjustments to the calculation of a performance goal or performance measure to take into account unanticipated events as the Compensation Committee may determine including, for example, any change in applicable accounting rules or principles, any gain or loss on the disposition of a business, impairment of assets, dilution caused by acquiring a business, tax changes and tax impacts of other changes, changes in applicable laws and regulations, changes in rate case timing, changes in the Company’s structure, and any other circumstances outside of management’s control or the ordinary course of business.

2021 was a challenging operating environment as the Company continued to face impacts from the ongoing pandemic, cost pressures accelerated due to the strong inflationary environment, and revenue from group sales, corporate sponsorships, and international agreements was significantly diminished. As a result, the Company's costs grew faster than revenues. In light of the foregoing, the Board felt that it was critical to appoint a proven leader like Mr. Bassoul. Furthermore, the Board believed that Mr. Bassoul's ability to drive a customer-centric culture, along with his expertise in food & beverage and technological innovation, would be extremely valuable in helping reinvigorate growth at the Company.

The Compensation Committee believed it was important to set ambitious performance goals and reward Mr. Bassoul with a meaningful ownership stake if the high-end of those goals are achieved. The Compensation Committee was focused on creating a culture of engagement and ownership to maximize Mr. Bassoul's incentive to implement meaningful change throughout the Company, with particular focus on the need to improve the guest experience and to drive sustainable earnings growth. The Board is committed to retaining Mr. Bassoul for his strategic vision, leadership, and most importantly, his ability to execute on the Company's long-term strategy.

Accordingly, on November 15, 2021, Mr. Bassoul was granted a PSU award with a target opportunity to earn 50,000 shares and a maximum opportunity to earn 1,200,000 shares, with performance to be determined over a three-year period. The performance goals are based on Adjusted EBITDA for the 2022, 2023 and 2024 calendar years ranging from $560,000,000 to $710,000,000, employee and guest satisfaction, and ESG achievement metrics. Pursuant to Mr. Bassoul’s PSU award, the target payout opportunity for the Adjusted EBITDA performance component requires achievement of Adjusted EBITDA that the Company has never achieved (see below graphic). To achieve the target payout by 2024, the Company must increase Adjusted EBITDA by 12% from the level achieved in 2021, compared to the 4% increase achieved in the three-year period ending in 2019. The maximum payout opportunity requires an aspirational level of Adjusted EBITDA representing a 43% increase from the level achieved in 2021. Additionally, the award provides for payout of additional shares (up to the aggregate maximum of 1,200,000 shares) upon achievement of three ESG goals to incentivize sustainable long-term growth as set forth below:

The Sustainalytics payout opportunity will be based on the Company’s Sustainalytics ESG Risk Rating compared to its peer group. The Sustainalytics ESG Risk Rating measures a company’s exposure to industry-specific material ESG risks and how well a company is managing those risks. The Company is assigned an ESG Risk Rating in eight separate categories based on its ESG risk exposure compared to its ESG risk management.

Pursuant to Mr. Bassoul’s employment agreement, and to demonstrate his commitment to the Company, Mr. Bassoul agreed to purchase an aggregate of $10,000,000 of Company common stock in open market purchases during a short period following commencement of his employment. The Company matched Mr. Bassoul’s commitment by granting him 246,426 RSUs, valued at $10,000,000 on the grant date of November 15, 2021, which will vest in full on the third anniversary of the grant date.

 

Given the significant opportunity of Mr. Bassoul’s 2021 PSU award, the Compensation Committee does not intend to make any additional equity grants to Mr. Bassoul. However, the Compensation Committee maintains flexibility to make additional equity grants in the event that the Company achieves $710,000,000 in Adjusted EBITDA prior to the end of Mr. Bassoul's tenure.

The Company provides a limited number of perquisites and other personal benefits to the NEOs, which the Company believes are reasonable and consistent with market practices. The “All Other Compensation” column of the 2021 Summary Compensation Table sets forth these perquisites in accordance with the requirements of the SEC.

The Company believes retirement plans serve to attract and retain talented personnel generally, but they should not be a significant part of the overall compensation program. The Company has a contributory 401(k) Plan available to employees of the Company who meet the age and service requirements. The Company makes matching contributions in the amount of 100% of the first 3% of salary contributions and 50% of the next 2% of salary contributions made by employees (subject to tax law limits).

The Company also has a Supplemental 401(k) Plan, which permits eligible participants to defer a portion of their compensation without such portion being limited by Internal Revenue Code restrictions applicable to the contributory 401(k) Plan. In 2021, Mr. Reddy was the only NEO who participated in the Supplemental 401(k) Plan. For a discussion of the Supplemental 401(k) Plan, see “Executive Compensation—Fiscal 2021 Non-Qualified Deferred Compensation.”

The Company also maintains a stockholder-approved employee stock purchase plan, which is made available to substantially all of the Company’s employees, and allows participants to acquire the Company’s common stock at a discounted price. The purpose of the plan is to encourage employees at all levels to purchase stock and become stockholders. The plan allows participants to buy the Company’s common stock at a 10% discount to the lower of the market value of the common stock at the beginning and end of each successive six-month offering period. Under applicable tax law, no plan participant generally may purchase more than $25,000 in market value (based on the market value of the Company’s common stock on the first trading day of each offering period) of the Company’s common stock in any calendar year.

The NEOs are eligible to participate in these plans on the same basis as other eligible participants.

The Company provides its NEOs with the same health and disability insurance plans offered to all employees.

From time-to-time, the Compensation Committee determines it is necessary to provide cash or equity compensation in special circumstances for recruiting, special recognition, or retention. Sign-on bonuses and new hire equity awards are an effective means of offsetting the compensation opportunities executives forfeit when they leave a former employer to join the Company. Additional equity awards are a strong incentive to attract top-executive talent. In connection with Mr. Bassoul becoming CEO in November 2021, he was granted the equity awards described under “—Long-Term Equity.”

In addition to the direct compensation program, the Company believes it is important to provide the NEOs with competitive separation payments and benefits because it provides a measure of financial security for the NEO and his or her family in the event of certain terminations of employment and also enables the Company to secure their cooperation following termination. Under their respective employment agreements, the NEOs are or were entitled to severance in the event of specified terminations of employment and as a consequence of a change in control. The agreements (other than Mr. Bassoul’s, which does not provide for additional benefits in the event his employment is terminated in connection with a change in control) contain a double

trigger provision, which requires both a change in control and actual or constructive termination of employment in order for the NEO to receive benefits under the change in control provision rather than a single trigger provision under which benefits are triggered automatically by a change in control. The Company does not provide an excise tax gross-up in the event of a termination due to a change in control.

The separation payments and benefits are intended to provide the executives with a measure of financial support if their employment is terminated in certain circumstances through no fault of their own. The enhanced and accelerated benefits offered in connection with a change in control are designed to support the following business objectives:

In connection with their separation from the Company during 2021, Mr. Spanos and Ms. Doerre received separation payments in accordance with their respective employment agreements. See “—Description of Separation Agreements and Payments Pursuant to Employment Agreements” for additional information.

The Company elects to provide post-employment compensation to the executives on a case-by-case basis as the employment market, the qualifications of potential employees, and the Company’s hiring needs dictate. See “Executive Compensation—Potential Payments upon Termination” for additional information on separation payments and benefits for the NEOs.

In February 2022, Mr. Reddy notified the Company of his decision to resign as CFO effective March 27, 2022.

The Compensation Committee may consider the impact of tax and accounting consequences when developing and implementing the Company’s executive compensation programs. The Compensation Committee designs and administers compensation programs that it believes are in the best interests of the Company and its stockholders.

All types of equity holdings, with the exception of stock options and performance-based stock units, are included in determining ownership under the guidelines. Ownership requirements should be met within five years from appointment to office for new officers. Each current NEO is in compliance, or on target to achieve compliance, with the guidelines.

The Company’s securities trading policy requires executives and directors to consult the Company prior to engaging in transactions involving the Company’s common stock. In order to protect the Company from exposure under insider trading laws, executives and directors are encouraged to enter into pre-programmed trading plans under Exchange Act Rule 10b5-1. The Company’s securities trading policy prohibits directors and

executives from pledging, hedging, or monetization transactions including, but not limited to, transactions involving the use of financial instruments such as exchange funds, prepaid variable forwards, equity swaps, puts, calls, collars, and other derivative instruments, or transactions involving the establishment of a short position in the Company’s securities.

To promote the highest level of financial integrity and ethical behavior, and to discourage excessive risk-taking, in 2021, the Board adopted an Incentive Compensation Clawback Policy (the “clawback policy”) that allows the Board to recoup certain incentive-based compensation in the event of a material restatement of the Company’s financial statements or specific acts of improper conduct. Specifically, any performance-based compensation, including equity compensation and short-term incentive cash compensation, is subject to recoupment in the event of a material restatement of the Company’s financial statements or if the recipient engaged in fraud, willful misconduct, or certain other acts that constitute “improper conduct” under the clawback policy. In the event of a material restatement, each officer of the Company, as well as each employee whose fraud or willful misconduct resulted in the material restatement, would forfeit the amount of any incentive-based compensation paid during the three years preceding the date of the material restatement that the Board determines exceeds the amount the employee would have received had the revised financial statement(s) been used to determine the compensation. In the event of fraud, willful misconduct, or certain other improper conduct—including violation of an employment agreement or Company policy (including the Code of Business Conduct and Ethics), disclosure of confidential information or trade secrets, or violation of any non-solicitation or non-competition covenant—the employee engaging in such conduct would forfeit the amount of any incentive-based compensation paid during the period commencing one year prior to the improper conduct and continuing until the time the improper conduct is discovered, to the extent that the Board determines is appropriate under the circumstances. The clawback policy affords the Board broad discretion to determine the amount and extent of any clawback.

The Compensation Committee does not employ any form of wealth tally; it believes that grants to executives should be made based on individual and Company performance factors and market compensation conditions at the time of grant, as described herein.