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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.     )

 

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  Definitive Proxy Statement
   
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  Soliciting Material under §240.14a-12

UNIVERSAL INSURANCE HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

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

 

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1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309

(954) 958-1200


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LOGO

1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309

(954) 958-1200

April 29, 2021

Dear Fellow Shareholder:

On behalf of your Board of Directors, I am pleased to invite you to attend the Annual Meeting of Shareholders of Universal Insurance Holdings, Inc. The meeting will be held at 9:00 a.m., Eastern Time, on June 11, 2021 at the Boca Raton Resort & Club, 501 E. Camino Real, Boca Raton, Florida.

Enclosed you will find a notice setting forth the matters to be acted on at the meeting, which include:

 

   

Election of the 10 nominees for director named in the accompanying Proxy Statement;

 

   

Approval of the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan;

 

   

Advisory vote to approve the compensation of our named executive officers;

 

   

Ratification of the appointment of our independent registered public accounting firm for fiscal year 2021; and

 

   

Such other business as may properly come before the meeting or any adjournment or postponement thereof.

It is important that your shares be represented and voted at the meeting. We encourage you to submit your proxy over the internet or by telephone in advance of the meeting. If you received your proxy materials by mail, you can also submit your proxy by mail by using the proxy card that was mailed to you. Instructions for these convenient ways to vote are set forth on both the Notice of Internet Availability of Proxy Materials and the proxy card. If you are a beneficial owner of shares held in street name, please follow the instructions to vote provided by your bank, broker or other nominee as indicated on the voting instruction card. Even if you submit your proxy prior to the meeting, you will still be able to attend the meeting and vote your shares in person, as further described in the accompanying Proxy Statement.

 

Sincerely,

LOGO

 

Sean P. Downes

Executive Chairman of the Board


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UNIVERSAL INSURANCE HOLDINGS, INC.

1110 West Commercial Boulevard

Fort Lauderdale, Florida 33309

(954) 958-1200

www.universalinsuranceholdings.com

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

 

                

Proposals of Business

 

 

    

Date and Time

 

 

 

Place

 

 

 

 

 

Record Date

   

Friday, June 11, 2021

9:00 a.m., Eastern Time

 

Boca Raton Resort & Club

501 E. Camino Real

Boca Raton, Florida

 

 

Only shareholders of record at the close of business on April 13, 2021 are entitled to receive notice of, and to vote at, the meeting.

      

Election of ten director nominees named in the Proxy Statement to our Board of Directors

 

Approval of the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan

 

Advisory vote to approve the compensation of our Named Executive Officers

 

Ratification of the appointment of Plante & Moran, PLLC as our independent registered public accounting firm for the 2021 fiscal year

 

Such other business as may properly come before the meeting or any adjournment or postponement thereof

 

 

  
           

 

Proxy Voting

 

Please vote promptly. You can vote your shares in advance of the meeting via the internet, by telephone or, if you received a printed set of the proxy materials, by signing, dating and returning the proxy card in the postage-paid envelope provided. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your option as further described in the Proxy Statement.

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

LOGO

Gary Lloyd Ropiecki,

Secretary

Fort Lauderdale, Florida

April 29, 2021


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TABLE OF CONTENTS

 

PROXY SUMMARY      2  
PROPOSAL 1: ELECTION OF DIRECTORS      7  

Director Nominees

 

     7  

Board Membership Criteria and Nominations

 

     12  

Corporate Governance Framework

 

     13  

Committees and Committee Chairs

 

     21  

Compensation Committee Interlocks and Insider Participation

 

     22  

Director Compensation

 

     23  

Delinquent Section 16(a) Reports

 

     23  

Information About Our Executive Officers

     24  
PROPOSAL 2: APPROVAL OF UNIVERSAL INSURANCE HOLDINGS, INC. 2021 OMNIBUS STOCK INCENTIVE PLAN      25  

Key Features of the 2021 Plan

     25  
PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS      32  

Compensation Discussion and Analysis

 

     32  

Compensation Committee Report

 

     35  

2020 Summary Compensation Table

 

     36  

2020 All Other Compensation Table

 

     37  

2020 Grants of Plan-Based Awards

 

     37  

2020 Outstanding Equity Awards at Year-End Outstanding Equity Awards at Year-End

 

     38  

Options Exercised and Stock Vested

 

     39  

Employment Agreements and Potential Payments Upon Termination or Change in Control

 

     40  

2020 Potential Payments Upon Termination or Change in Control Table

 

     43  

CEO Pay Ratio

     44  
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      45  

Independent Auditor

 

     45  

Policy on Audit Committee Preapproval of Audit and Permissible Non-Audit Services

 

     45  

Accounting Fees and Services

 

     45  

Audit Committee Report

     46  
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS      47  
BENEFICIAL OWNERSHIP      48  

Ownership of Series A Preferred Stock

 

     48  

Ownership of Common Stock

     49  
INFORMATION ABOUT ANNUAL MEETING AND VOTING PROCEDURES; SHAREHOLDER PROPOSALS FOR 2022 ANNUAL MEETING      51  
OTHER MATTERS      55  
APPENDIX A      A-1  


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PROXY STATEMENT

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (“Board”) of Universal Insurance Holdings, Inc., a Delaware corporation (“Company,” “Universal” or “UVE”), of proxies to be voted at the 2021 Annual Meeting of Shareholders (the “Annual Meeting”), to be held at the Boca Raton Resort & Club, 501 E. Camino Real, Boca Raton, Florida, on Friday, June 11, 2021, at 9:00 a.m., Eastern Time, and at any and all postponements or adjournments thereof, for the proposals of business set forth in the accompanying Notice of 2021 Annual Meeting of Shareholders. This Proxy Statement, Notice of 2021 Annual Meeting of Shareholders, accompanying proxy card and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 are available at http://www.proxydocs.com/UVE.

To reduce our costs and decrease the environmental impact of our proxy materials, in lieu of mailing our proxy materials, we will send a Notice of Internet Availability of Proxy Materials (the “Notice”) to certain of our shareholders containing instructions on how to access our proxy materials online. If you receive a Notice, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review the proxy materials online and on how to submit your proxy online. If you received a Notice and would like to receive a copy of our proxy materials, follow the instructions contained in the Notice to request a copy electronically or in paper form. The Notice and printed copies of our proxy materials, as applicable, are expected to be mailed to shareholders April 29, 2021.

 

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PROXY SUMMARY

 Meeting Agenda and Board Vote Recommendations

 

 

  Proposal

  Number

        Meeting Agenda Proposal   

Board Vote

Recommendation

  

Page

Reference

1      Election of 10 directors named in this Proxy Statement   

FOR

EACH NOMINEE

   7 – 24
2      Approval of Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan    FOR    25 – 31
3      Advisory vote to approve the compensation of our Named Executive Officers    FOR    32 – 44
4       

Ratification of the appointment of Plante & Moran, PLLC as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2021

 

   FOR    45 – 46

 Company Overview and Business Strategy

 

Universal is a holding company offering property and casualty insurance and value-added insurance services. We develop, market and underwrite insurance products for consumers predominantly in the personal residential homeowners lines of business and perform substantially all other insurance-related services for our primary insurance entities, including risk management, claims management, and distribution. Our primary insurance entities, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC” and together with UPCIC, the “Insurance Entities”), offer insurance products through both our appointed independent agent network and our online distribution channels across 19 states (primarily in Florida), with licenses to write insurance in two additional states. The Insurance Entities seek to produce an underwriting profit (defined as earned premium less losses, loss adjustment expense, policy acquisition costs and other operating costs) over the long term; maintain a resilient balance sheet to prepare for years in which the Insurance Entities are not able to achieve an underwriting profit; and generate investment income exceeding short-term operating needs.

Universal’s strategic focus is on creating a best-in-class experience for our customers. We have more than 20 years of experience providing protection solutions. Our business strategy leverages our differentiated capabilities to support the Insurance Entities across all aspects of the insurance value chain to provide our customers with a streamlined experience. We continue to evaluate ways in which we can improve the customer experience, provide disciplined underwriting, maintain a resilient balance sheet backed by our reinsurance programs and geographic diversification, and maximize earnings stability through inversely correlated or complementary high-quality earnings streams. We have made substantial efforts in recent years to improve our claims operation, including reductions in our claim resolution times and strengthening of our reserves to position us for the future.

 

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 Director Nominees

 

The following table provides summary information regarding each of our Board’s nominees for election as director as well as their tenure and business experience.

 

                               

Committee Membership

 Name       Age      

Director

Since

      Principal Occupation      

Nominating
&

Governance

      Compensation       Audit       Investment       Risk

 Sean P. Downes

 (Executive Chairman)

 

    51     2005    

 

Executive Chairman, Universal Insurance Holdings, Inc.

 

                      X      

 Scott P. Callahan

    67     2013    

 

President and Managing

Member of SPC Global RE Advisors, LLC; Former EVP of Everest Reinsurance Holdings

 

    Chair                 X      

 Kimberly D. Campos

    43     2017    

 

Chief Information Officer and Chief Administration Officer, Universal Insurance Holdings, Inc.

 

                            X

 Stephen J. Donaghy

 (CEO)

    56     2020    

 

Chief Executive Officer, Universal Insurance Holdings, Inc.

 

                             

 Marlene M. Gordon

    54     2020    

 

SVP, Chief Administrative Officer, General Counsel & Secretary for Del Monte Fresh Produce Company

 

    X                        
 Richard D. Peterson     53     2014    

 

CFO of Clarus Therapeutics

 

          X     Chair            

 

 Michael A. Pietrangelo

 (Lead Independent

 Director)

    78     2010    

 

President and Managing Director of The Theraplex Company, LLC.

 

    X     Chair                  

 Ozzie A. Schindler

    52     2007    

 

Lawyer with Greenberg Traurig LLP

 

                X           Chair

 Jon W. Springer

    51     2013    

 

Director, Universal Insurance Holdings, Inc.

 

                      X     X

 Joel M. Wilentz, M.D.

    86     1997    

 

Founding Member of Dermatology Associates and the Centers for Cosmetic Enhancement in Florida

 

    X     X     X            

 Governance Highlights

 

 

   

Six of our 10 director nominees are independent.

 

   

Our independent directors elect our lead independent director, who is actively engaged and chairs regularly-scheduled executive sessions at which our independent directors discuss matters without management present, including management’s performance, succession planning and Board effectiveness.

 

   

We have five Board committees: Audit Committee, Compensation Committee, Nominating and Governance Committee, Investment Committee and Risk Committee, with the Audit Committee, Compensation Committee and Nominating and Governance Committee comprised exclusively of independent directors.

 

   

Our directors are elected annually.

 

   

We routinely engage with our largest shareholders and have established a telephone hotline to allow shareholders to communicate any concerns to our independent directors on an anonymous basis.

 

   

The Board focuses on continuing director education for all directors and Board orientation for new directors.

 

   

The Board and each committee conduct an annual evaluation of their performance.

 

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Within two years of joining the Board, each director is expected to own shares of our common stock having a value of at least $50,000.

 

   

Our directors may not hedge or short shares of our common stock, engage in options trading, trade on margin or pledge shares of our common stock as collateral.

 

   

Senior management succession planning is a top Board priority. The Board devotes significant attention to identifying and developing talented senior leaders.

 Performance Highlights

 

Our 2020 financial results reflect our execution against our strategic priorities and commitment to returning value to shareholders through share repurchases and dividends (comparisons are to 2019 unless otherwise specified):

Grow other states and Florida:

 

   

Total direct premiums written grew by 17.4%, to $1.5 billion.

 

   

Outside of Florida, direct premiums written grew by 17.7%, to $266.7 million.

 

   

UPCIC commenced writing homeowners policies in Iowa and received Certificate of Authority in Tennessee.

Focus on disciplined growth and earnings stability:

 

   

Total revenue, including services businesses and investment performance, up 14.2% to $1.1 billion.

 

   

Diluted GAAP earnings per share decreased 55.9% to $0.60 impacted predominantly by 2020 weather events.

 

   

Full year Florida primary rate increases approved of close to 20% for UPCIC (includes 7.0% in 4Q20).

 

   

Continued to grow our digital agency CloveredSM with multiple third party carriers.

 

   

Generated a return on average equity (ROE) of 4.1% for 2020.

Maintain a resilient balance sheet:

 

   

Self-funded the Company’s Insurance Entities’ capital requirements, in addition to enhancing reserves.

 

   

Debt-to-equity ratio of 1.9% in 2020.

 

   

Over 75% of reinsurance capacity for June 1, 2021 renewals secured.

 

   

Total unrestricted cash and invested assets of $1.1 billion.

Return value to shareholders:

 

   

Declared and paid dividends per common share of $0.77, including a $0.13 special dividend in December.

 

   

Repurchased 1,610,783 shares in 2020 at an aggregate cost of $28.9 million.

 

   

Returned $53.5 million to shareholders through share repurchases and dividends in 2020.

 

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LOGO    LOGO
LOGO    LOGO

* Excludes preferred stock.

** Includes interest earned on cash and cash equivalents and restricted cash and investment income earned on real estate investments. Net of custodial fees, investment accounting, advisory fees and expenses associated with real estate investments.

For further details about our 2020 performance, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

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LOGO

(1) TSR results reflect reinvestment of dividends. Our Florida specialty peer group for fiscal 2020 includes United Insurance Holdings Corp., FedNat Holding Company, HCI Group, Inc. and Heritage Insurance Holdings, Inc.

 

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PROPOSAL 1: ELECTION OF DIRECTORS

The Board, upon the recommendation of the Nominating and Governance Committee, has nominated incumbent directors Scott P. Callahan, Kimberly D. Campos, Stephen J. Donaghy, Sean P. Downes, Marlene M. Gordon, Richard D. Peterson, Michael A. Pietrangelo, Ozzie A. Schindler, Jon W. Springer and Joel M. Wilentz, M.D. for election to the Board to serve as directors until the 2022 Annual Meeting of Shareholders or until each nominee’s successor is duly elected and qualified. Incumbent director Ralph J. Palmieri is not standing for re-election at the Annual Meeting. The Board has fixed the number of director seats on the Board at ten, effective as of the Annual Meeting.

The nominees have consented to be named in this Proxy Statement as director nominees and have indicated their intent to serve if re-elected. If any nominee becomes unavailable for any reason, or if any vacancy in the slate of directors to be elected at the meeting should occur before the election, the shares represented by the proxy will be voted for the person, if any, who is designated by the Board to replace the nominee or to fill such vacancy on the Board.

A director nominee must receive the affirmative vote of the majority of votes cast at the annual meeting in order to be elected. If elected, each nominee is expected to serve for a one-year term until the 2022 Annual Meeting of Shareholders. Each director will hold office until his or her successor is duly elected and qualified or until such director’s earlier death, resignation or removal. Otherwise, if a director nominee fails to receive the affirmative vote of the majority of votes cast, then he or she shall promptly tender his or her resignation to the Board, and the Board, taking into account the recommendation of the Nominating and Governance Committee, shall subsequently determine whether to accept or reject the resignation, or whether other action should be taken.

THE BOARD RECOMMENDS A VOTE FOR EACH OF ITS NOMINEES FOR ELECTION AS DIRECTORS.

 Director Nominees

 

The director nominees are set forth below. If elected, each nominee is expected to serve for a one-year term until the 2022 Annual Meeting of Shareholders. Each director will hold office until his or her successor is duly elected and qualified or until such director’s earlier departure.

 

 Name                                                 

                              Age                               

Position at the Company

          Date of Joining        
the Board    

 Scott P. Callahan

 

 

  67  

 

  Director  

 

  2013    

 Kimberly D. Campos

 

 

  43  

 

  Director, Chief Information Officer and Chief Administrative Officer  

 

  2017    

 Stephen J. Donaghy

 

 

  56  

 

  Director and Chief Executive Officer  

 

  2020    

 Sean P. Downes

 

 

  51  

 

  Executive Chairman  

 

  2005    

 Marlene M. Gordon

 

 

  54  

 

  Director  

 

  2020    

 Richard D. Peterson

 

 

  53  

 

  Director  

 

  2014    

 Michael A. Pietrangelo

 

 

  78  

 

  Director  

 

  2010    

 Ozzie A. Schindler

 

 

  52  

 

  Director  

 

  2007    

 Jon W. Springer

 

 

  51  

 

  Director, Former President and Chief Risk Officer  

 

  2013    

 Joel M. Wilentz, M.D.

    86    

Director

    1997    

 

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LOGO

  

Scott P. Callahan became a director of the Company in 2013. Mr. Callahan has

more than thirty years’ experience in the property and casualty reinsurance industry. Mr. Callahan currently serves as President and Managing Member of SPC Global RE Advisors LLC, a consulting firm specializing in reinsurance matters, a position he has held since 2013. From 2002 to 2011, Mr. Callahan served as Executive Vice President of Everest Reinsurance Holdings, Inc. and Everest Reinsurance Company. Mr. Callahan also served as a director of Everest Reinsurance Company from 2001 to 2011, a director of Everest International Reinsurance, Ltd. from 2003 to 2007, and director of Everest Reinsurance (Bermuda), Ltd. from 2001 to 2007. Mr. Callahan’s broad knowledge of the reinsurance industry allows him to provide valuable perspective to the Board, particularly on matters related to the Company’s reinsurance program.

 

LOGO

  

Kimberly D. Campos became a director of the Company in 2017. Ms. Campos

joined the Company in 2007 and became Chief Administrative Officer in June 2015 and Chief Information Officer in February 2015. Prior to assuming these roles, Ms. Campos spent eight years in the Company’s internal audit department, serving as both IT Manager and then IT Audit Director. She managed IT general controls reviews and new application deployment and performed ongoing security and risk awareness training to improve operational efficiencies and address ongoing compliance with regulatory requirements. Ms. Campos brings to the Board significant experience in information technology, risk management, regulatory compliance and operational efficiency practices.

 

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LOGO

  

Stephen J. Donaghy became a director of the Company in 2020. Mr. Donaghy

became Chief Executive Officer of the Company in July 2019 and was previously the Chief Operating Officer of the Company from March 2016 until his appointment as Chief Executive Officer. He also served as our Secretary from February 2013 to December 2019, Chief Marketing Officer from January 2015 to March 2016, Chief Administrative Officer from February 2013 to June 2015, Chief Information Officer from 2009 to February 2015 and Executive Vice President since 2006. Before joining the Company, Mr. Donaghy held various executive positions at JM Family Enterprises, a private company, including Vice President of Strategic Initiatives, Vice President of Sales and Marketing and Senior Information Officer. As our Chief Executive Officer, Mr. Donaghy provides substantial insight on the Board regarding the operations of the Company.

 

LOGO

  

Sean P. Downes became Executive Chairman in July 2019. Prior to being the

Executive Chairman, Mr. Downes was Chairman of the board of directors and Chief Executive Officer of the Company from 2013 to July 2019. Mr. Downes also served as President of the Company from 2013 to March 2016. Prior to becoming President and Chief Executive Officer, Mr. Downes served as Senior Vice President and Chief Operating Officer of the Company since 2005 and Chief Operating Officer of UPCIC, a wholly-owned subsidiary of the Company, since 2003. Mr. Downes has served as a director of the Company since 2005 and as a director of UPCIC since 2003. Prior to joining UPCIC, Mr. Downes was Chief Operating Officer of Alder Adjusting Corporation (formerly Universal Adjusting Corporation), a wholly-owned subsidiary of the Company, from 1999 to 2003. As an experienced financial and operational leader within the insurance industry, Mr. Downes brings to the Board a broad understanding of the strategic priorities and operational demands facing the Company.

 

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LOGO

  

Marlene M. Gordon became a director of the Company in 2020. Mrs. Gordon has

more than 25 years of experience serving as legal counsel within the consumables and service industries, and championing women’s leadership in the workplace. Since September 2020, Mrs. Gordon has served as Senior Vice President, Chief Administrative Officer, General Counsel & Secretary for Del Monte Fresh Produce Company, a global producer, marketer and distributor of fruit and vegetable products. Prior experience includes approximately 6 years at Bacardi U.S.A., Inc. (“Bacardi”), a spirits company, where she served most recently as VP, General Counsel for North America, in addition to serving as the Global Chair for Bacardi’s Women-In-Leadership Program, an initiative that was founded with the mission of unleashing the potential of current and future female leaders at Bacardi to drive sustainable top and bottom line business growth. Prior to Bacardi, Mrs. Gordon spent 14 years at Burger King Corporation, serving most recently as VP, Assistant General Counsel, Marketing & Intellectual Property, in addition to serving as chair of the company’s Women’s Leadership Forum. Mrs. Gordon brings to the Board substantial leadership experience along with compliance and corporate governance expertise.

 

LOGO

  

Richard D. Peterson became a director of the Company in 2014. Mr. Peterson has

over 20 years of experience in the areas of executive management, finance and accounting. Since February 2021, Mr. Peterson has served as the Chief Financial Officer of Clarus Therapeutics, a specialty pharmaceutical company. Mr. Peterson has served as the Chief Financial Officer of various biotech companies from 2015 to 2020 including the publicly traded Botanix Pharmaceuticals, Sienna Biopharmaceuticals, Inc. and Novan, Inc. Mr. Peterson served in various executive roles at Medicis Pharmaceutical Corporation, a New York Stock Exchange (“NYSE”) listed company, from 1995 to 2012, including as Executive Vice President, Chief Financial Officer and Treasurer from 2008 to 2012. Mr. Peterson has an understanding of corporate governance matters and experience with financial reporting and executive leadership that make him a valued member of our Board.

 

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LOGO

  

Michael A. Pietrangelo became a director of the Company in 2010. Since 1998,

Mr. Pietrangelo has practiced law and has been of counsel to the firm of Pietrangelo Smith, PLC. Mr. Pietrangelo is admitted to the bars of the states of New York and Tennessee and the District of Columbia. He served on the board of directors of MRI Interventions Inc., a publicly traded research and development company, from 2010 to 2014. Mr. Pietrangelo also serves as the President and Managing Director of The Theraplex Company, LLC, a privately held skin care company. He brings valuable experience to the Board in corporate governance, legal and financial matters as a result of his positions as a lawyer, executive and director of privately held and public companies, as well as nonprofit organizations.

 

LOGO

  

Ozzie A. Schindler became a director of the Company in 2007. Mr. Schindler has

been a shareholder with the law firm of Greenberg Traurig LLP since 2005, specializing in all aspects of international tax planning. He is admitted to both the Florida and New York state bars. Mr. Schindler provides strong regulatory, accounting, financial, risk analysis, internal audit, compliance, corporate governance and administrative skills and experience to the Board.

 

LOGO

  

Jon W. Springer became a director of the Company in 2013. Mr. Springer served

as President and Chief Risk Officer of the Company from March 2016 until his retirement on January 31, 2021. Prior to taking on such role, he served as an Executive Vice President and Chief Operating Officer of the Company since 2013. Mr. Springer was an Executive Vice President of Evolution Risk Advisors, Inc. (formerly Universal Risk Advisors, Inc.), a wholly-owned subsidiary of the Company, from 2006 through 2008, and an Executive Vice President of Blue Atlantic Reinsurance Corporation (“Blue Atlantic”), a wholly-owned subsidiary of the Company, from 2008 to 2013. Before joining Evolution Risk Advisors, Inc. in 2006, Mr. Springer was an

 

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Executive Vice President of Willis Re, Inc. and was responsible for managing property and casualty operations in its Minneapolis office. Mr. Springer brings to the Board extensive experience in the property and casualty insurance industry, including with respect to reinsurance arrangements.

 

LOGO

  

Joel M. Wilentz, M.D. became a director of the Company in 1997. Dr. Wilentz is

one of the founding members of Dermatology Associates, founded in 1970, and of the Centers for Cosmetic Enhancement in Florida. He is a former member of the Board of Directors of the Neurological Injury Compensation Association for the State of Florida. Dr. Wilentz is a member of the Board of Governors of Nova Southeastern University. Dr. Wilentz’s general business acumen and deep understanding of the Florida business, professional and regulatory environment allow him to provide independent guidance to the Board on a wide variety of general corporate and strategic matters.

 Board Membership Criteria and Nominations

 

In selecting candidates for director, the Nominating and Governance Committee looks for individuals with strong personal attributes including:

 

   

Integrity: Directors should demonstrate high ethical standards in their personal and professional dealings.

 

   

Accountability: Directors should be willing to be accountable for their decisions as directors.

 

   

Judgment: Directors should possess the ability to provide wise and thoughtful counsel on a broad range of issues.

 

   

Responsibility: Directors should interact with each other in a manner that encourages responsible, open, challenging and inspired discussion.

 

   

High Performance Standards: Directors should have a history of achievements that reflects high standards for themselves and others.

 

   

Commitment and Enthusiasm: Directors should be committed to, and enthusiastic about, their service on the Board.

 

   

Courage: Directors should possess the courage to express views openly, even in the face of opposition.

Our Board values diversity in selecting nominees to serve on our board. Pursuant to our Corporate Governance Guidelines, the Board seeks members from diverse professional backgrounds, and considers an individual’s independence, diversity, skills and experience in the context of the needs of the Board. In nominating directors, the Board considers, among other things, functional areas of experience, educational background, employment experience and leadership performance. Two of our directors are racially and ethnically diverse.

The Board generally believes that the Nominating and Governance Committee and the Board are best situated to identify candidates with appropriate industry and related expertise to meet the Company’s needs; however, the Nominating and Governance Committee will consider any director nominees recommended by shareholders in the same way that it evaluates candidates recommended by its members, other members of the Board, or other persons. If a shareholder desires to formally propose a director nominee at the annual meeting, or to put a proposal on the agenda for the annual meeting, our bylaws establish an advance notice procedure that must be complied with in order to do so.

 

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Personal and professional attributes and skills of the nominees

Our nominees have executive experience and skills that are aligned with our business and strategy as follows:

Out of 10 board nominees

 

 

LOGO

 Corporate Governance Framework

 

The Board’s leadership structure is designed so that authority and responsibility are effectively allocated between the Board and management. In addition to our strong corporate governance practices and the key oversight roles of our lead independent director and committee chairs, each as described below, all directors share equally in their responsibilities as members of the Board and take seriously the charge of leading the Company on behalf of our shareholders. Our corporate governance framework reflects our commitment to independence, corporate responsibility and accomplishing our financial goals through responsible development and execution of corporate strategy. Our governance framework enables independent and skilled directors to provide oversight, advice and counsel to promote the interests of the Company and our shareholders. Our governance framework is established and evidenced by our Corporate Governance Guidelines (“Governance Guidelines”), Code of Business Conduct and Ethics (“Code of Conduct”), Whistleblower Policy (“Whistleblower Policy”), our enterprise risk management program and our commitment to transparent financial reporting. Our Governance Guidelines, Code of Conduct, Whistleblower Policy and the charters of each Board committee are available www.universalinsuranceholdings.com. The Board, along with management, regularly reviews our policies and procedures, charters, policies and practices in order to provide appropriate standards of corporate governance.

 

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Governance Highlights

The following chart highlights our corporate governance practices and principles.

 

  Board Independence

   

   Six of our 10 director nominees are independent.
   

   Messrs. Downes and Donaghy and Ms. Campos are the members of management who serve as directors.

  Board Composition

   

   The Nominating and Governance Committee regularly reviews Board performance, assesses gaps in skills or experience on the Board and periodically recommends new directors to add a fresh perspective to the Board while maintaining continuity and valuable historic knowledge.
  Lead Independent Director    

   Our independent directors elect our lead independent director.
   

   Our lead independent director chairs regularly-scheduled executive sessions at which our independent directors discuss matters without management present, including management’s performance, succession planning and Board effectiveness.

  Board Committees

   

   We have five Board committees: Audit Committee, Compensation Committee, Nominating and Governance Committee, Investment Committee and Risk Committee.
   

   Our Audit Committee, Compensation Committee and Nominating and Governance Committee are each comprised exclusively of independent directors.
   

   Chairs of the Board committees shape the agenda and information presented to their committees.

  Board Oversight of Risk   Management

   

   The Board seeks to facilitate the identification and appropriate management of material risks, and the Board and its committees regularly review material operational, financial, compensation and compliance risks with senior management.

  Accountability

   

   Our directors are elected annually.
   

   We have outreach and engagement with our largest shareholders and have established a mechanism to allow shareholders to communicate anonymously any concerns to our independent directors.

  Open Communications

   

   Our committees report to the Board regularly.
   

   The Board promotes open and frank discussions with management.
   

   Our directors have free access to members of management and other employees and are authorized to hire outside consultants or experts at the Company’s expense.

  Director Education

   

   The Board focuses on continuing director education for all directors and Board orientation for new directors.

  Self-Evaluations

   

   The Board and each committee conduct annual evaluations of their performance.

  Succession Planning

   

   Senior management succession planning is a top Board priority. The Board devotes significant attention to identifying and developing talented senior leaders.
  Director Stock Ownership    

   Within two years of joining the Board, each director is expected to own shares of our common stock having a value of at least $50,000.
  Clawback Policy; No Hedging   or Pledging    

   We have a compensation clawback policy designed to mitigate risk in connection with executive compensation.
   

   Our directors, executive officers and senior accounting, finance and legal personnel may not hedge or short shares of our common stock, engage in options trading, trade on margin or pledge shares of our common stock as collateral for a loan or other indebtedness.

 

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Board and Committee Meetings

Meetings of the Board are held regularly each quarter and as may otherwise be required. The Board held 5 meetings during 2020. We encourage directors to attend the annual meeting of shareholders and expect that they will attend. All of our directors then in office were present at the 2020 Annual Meeting of Shareholders. In addition, all of our directors attended at least 75% of the meetings of the Board and the committees on which they served during 2020.

Board Leadership Structure

The Board believes that it is important to retain flexibility in determining the best leadership structure for the Company as our needs may change over time. Currently, our Board leadership structure consists of a lead independent director, an Executive Chairman (who was our former CEO), and strong committee chairs. The Board believes that our current structure provides necessary independent leadership and engagement while maintaining the benefit of having our former CEO chair regular Board meetings as important strategic and business matters are discussed. In addition, our current Chief Executive Officer, who is the individual primarily responsible for management of our Company, is also an active and engaged member of our Board. The roles of Board Chairman and Chief Executive Officer may be filled by the same or different individuals, which provides the Board the flexibility to determine whether these roles should be combined or separated based on the Company’s circumstances and needs at any given time. In July 2019, we separated the Chairman and Chief Executive Officer roles; Sean P. Downes assumed the role of Executive Chairman, and Stephen J. Donaghy was appointed as the Company’s Chief Executive Officer.

The Board believes that our shareholders are best served at this time by having Mr. Downes continue his role as Chairman of the Board, in view of his tenure and experience with the Company. As Executive Chairman, Mr. Downes continues to set agendas for, and to lead Board discussions of, strategic matters affecting our business at the time. Our Executive Chairman is appointed annually by all the directors. The Executive Chairman’s responsibilities, in addition to providing general leadership to the Board, include calling and presiding at Board and shareholder meetings and preparing meeting schedules, agendas and materials.

Independence of Our Directors

NYSE rules require that at least a majority of our directors be independent of the Company and management. The Board has determined that each of our directors, other than Messrs. Downes, Donaghy and Springer and Ms. Campos, is an “independent director,” as such term is defined by NYSE rules. In making such independence determination with regard to Mr. Ralph Palmieri, who is not standing for re-election at the Annual Meeting, the Board considered that Mr. Palmieri’s son, Matthew J. Palmieri, is employed as President of UPCIC, a wholly-owned subsidiary of the Company, was previously employed as President of Blue Atlantic, a wholly-owned subsidiary of the Company, and has been with the Company since June 2006. Matthew Palmieri is not an executive officer of the Company. See “Certain Relationships and Related Party Transactions” for additional details regarding Matthew Palmieri’s employment with UPCIC and Blue Atlantic.

Lead Independent Director; Meetings of Independent Directors

Michael A. Pietrangelo has served as the lead independent director since 2014. Our independent directors met 4 times in executive session in 2020. Our lead independent director presides over all executive sessions of our independent directors, facilitates communication between management and our independent directors and is available for consultation with major shareholders and other constituencies, as appropriate. Interested parties may anonymously communicate any concerns to our independent directors, including our lead independent director, by calling (877) 778-5463, which is the same number that employees may use to anonymously report complaints to the Audit Committee concerning accounting or auditing matters.

Board and Committee Annual Evaluations

At the direction of the Nominating and Governance Committee, the Board annually conducts a self-evaluation aimed at enhancing effectiveness. The Board consults with an outside law firm as an external evaluator. This evaluation process also considers individual director performance. The annual assessment process is a key governance tool used by the Nominating and Governance Committee to solicit feedback in a number of areas, including overall effectiveness, communications with management and committee structures. Each committee also performs an annual self-evaluation, which includes an assessment of its effectiveness and a review of the committee charter and other relevant governance practices and procedures. The Nominating and Governance Committee periodically reviews and assesses the evaluation process as well.

 

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The Board’s Role in Risk Oversight

Risk is an inherent part of our business, and effective risk management is a top Board priority. Enterprise risk management and key risks identified by management are overseen by the Board and its committees. These include material strategic, operational, credit, market, and liquidity risks. The Board and management also focus on privacy protection, cybersecurity and information security in an effort to mitigate the risk of cyber-attacks and to protect the Company’s information and that of our customers. The Board, through its committees, also oversees the Company’s dedicated Enterprise Risk Management (“ERM”) function, as described below.

Our Board committees also help manage risk. The Audit Committee performs a central oversight role with respect to financial and compliance risks. As part of its responsibilities, the Audit Committee discusses with management the Company’s policies and guidelines governing the process by which risk assessment and risk management are undertaken by management, including guidelines and policies to identify major financial risk exposures and the steps management has taken to monitor and control such exposures. Our Investment Committee considers risks related to the investment of the Company’s securities portfolio and the Company’s investment strategy. The Risk Committee assists in managing risk by developing and overseeing the risk management process and systems of internal controls intended to provide assurance that the Company has identified and evaluated key enterprise risks and implemented mitigating controls. The Risk Committee receives a comprehensive periodic risk report, which describes the Company’s key risk exposures using quantitative and qualitative assessments and includes information about breaches or exceptions. The Compensation Committee considers risk in connection with its design of compensation programs for our executives, including confirming that the compensation program does not encourage unnecessary risk taking, as more fully discussed in the Compensation Discussion and Analysis section of this Proxy Statement. The Nominating and Governance Committee assists in managing risk by regularly reviewing the Company’s governance practices and the composition of the Board and its committees, including with regard to director independence.

Enterprise Risk Management

We maintain a dedicated ERM function that is responsible for analyzing and reporting the Company’s risks; facilitating monitoring to ensure the Company’s risks remain within its appetites, limits and tolerances; and ensuring, on an ongoing basis, that our ERM objectives are met. This includes ensuring that proper risk controls are in place; risks are effectively identified, assessed, and managed; and key risks to which the Company is exposed are appropriately disclosed. The ERM function plays an important role in fostering the Company’s risk management culture and practices.

In light of the segment of the insurance industry in which we operate, we maintain a moderate to high appetite for underwriting risk, which seeks to provide profitable growth for our shareholders while managing our risk with disciplined pricing and portfolio management standards. We mitigate our underwriting risk with sound reinsurance protection, effective operational policies and procedures, and capital management strategies.

Enterprise Risk Management Framework

Our ERM framework provides a platform to assess the risk/return profiles of risks throughout the organization to enable enhanced decision-making by business leaders. A certain level of risk is inherent in the business activities of the Company. Therefore, there is a strong risk management culture and ERM framework embedded within the organization. The level of acceptable risk is memorialized in the Company’s risk appetite and tolerance statements and is based on the tradeoff of assumed risk versus the expected value of the opportunity or how much risk the Company is willing to accept in the pursuit of value. The risk appetite is articulated as the overall statement that describes the Company’s risk-reward profile while highlighting the types and level of risks assumed in pursuit of the Company’s business objectives. The tolerance statements are established for all key risk categories and are expressed as a measure of the level of variation around business objectives that the Company is willing to accept. Both the risk appetite and tolerance statements are reviewed, refreshed as necessary and approved annually to adjust with the desired level of risk exposure.

Proactive monitoring and reporting enable early detection and mitigation of emerging risks. The Risk Committee reviews the risk appetite and tolerance statements and oversees the design of the framework. The framework supports the acceptable level of risk which is the basis of the decision-making of management and ultimately the Board. The Company has devoted significant resources to developing its ERM program and expects to continue to do so in the future.

 

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Code of Business Conduct and Ethics

Our Code of Conduct is a critical component in helping us maintain high professional standards. We also provide an internal reporting hotline, through which employees can anonymously report suspected violations of the Code of Conduct or other policies. Suspected violations of the Code of Conduct are investigated by the Company and may result in disciplinary action. The Code of Conduct is publicly available on our website at www.universalinsuranceholdings.com. The Audit Committee annually reviews our Code of Conduct for changes, as appropriate. In the event of an amendment to the Code of Conduct, or a waiver from a provision of the Code of Conduct granted to a senior executive officer, the Company intends to post such information on its website.

Governance Guidelines

Our Governance Guidelines address director independence standards, conflicts of interest, meeting and committee procedures, Board membership criteria, director qualifications and duties and succession planning, among other pertinent governance matters. Our Governance Guidelines are publicly available on our website at www.universalinsuranceholdings.com. The Nominating and Governance Committee annually reviews the Governance Guidelines for changes, as appropriate.

Shareholder Communications

We have established a process for shareholders to send communications to the Board. Shareholders may anonymously communicate any concerns regarding the Company to our independent directors by calling (877) 778-5463, which is the same number that employees may use to anonymously report complaints to the Audit Committee concerning accounting or auditing matters. Upon receipt of any shareholder concerns, our independent directors have discretion whether to convey any such information to our full Board. Shareholders may send other general communications to our Company by mail to our Secretary, Gary Lloyd Ropiecki, at Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309.

We proactively engage with our shareholders on a variety of topics, including governance and executive compensation matters.

Corporate Responsibility

Our shareholders, customers and other stakeholders have increasingly expressed interest in our environmental, social and governance (“ESG”) practices. We value being a responsible corporate citizen. We are continually evaluating our strategic approach to corporate responsibility and have implemented various initiatives to address ESG issues.

Sustainability

Climate

 

   

We acknowledge our responsibility to reduce environmental impacts of our business. We are committed to promoting the benefits of environmental sustainability, reducing our environmental footprint, encouraging employee involvement, and monitoring progress. In addition, we are focused on managing our business to ensure environmental laws and recognized standards are met.

   

Through our online consumer content resource CloveredSM , we continue to educate consumers on how to prepare, protect, and recover to reduce potential financial losses, save lives, and preserve property. In addition, CloveredSM has partnered with a number of carriers to provide a variety of coverages to consumers in predominately coastal states that are most affected by climate. We believe this service and protection we provide to those hardest impacted by climate-related natural disasters is one of the strongest actions we can take to support the livelihood of consumers and is paramount to the sustainability and resilience of our towns and cities as well as environmental management and climate strategy.

   

In coastal states that are affected by natural disasters, we have strived to be a pillar of support for the communities affected. We have paid out hundreds of millions of dollars in claims over the years, along with our reinsurance partners, to help our customers get back on their feet after challenging natural disasters.

 

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Going Green

 

   

To reduce our paper consumption and more efficiently deliver services to our customers, we revitalized our digital presence to enable our customers to submit claims and view documents electronically through our newly revamped public-facing websites.

   

We have continued our concerted effort to transition close to one million U.S. policyholders to “go paperless.” The goal of this ongoing initiative is to capture all policyholders electronically, while reducing our dependency on paper correspondence.

   

For the 2020 proxy we have taken a digital first approach to reduce the consumption of paper products, by offering soft copies of proxy materials, voting capabilities and annual reports through the appropriate url links, with hard copies as a secondary option.

   

In 2020, we installed Elkay water fountain filtration systems in several of our buildings. Adding the filtration systems has reduced our dependency on purchasing water bottles for employees and will result in a long-term cost savings for the Company. Each filtration station informs users of the number of 20 oz. single-use water bottles saved from waste by using reusable bottles and cups. By incorporating these fountains, we ultimately plan on reducing our plastic bottle consumption by 200,000 bottles per year.

Energy Efficiency

 

   

We have reduced our energy footprint by assigning hybrid vehicles to field agents and making certain adjustments in our office buildings, such as transitioning to energy-efficient LED lighting.

   

The current modifications to the Company’s facilities serve the goal of achieving significant energy savings for the life of the building. Various energy efficiencies include:

 

Replacing all exterior windows with Low-e tinted glass

 

Replacing roof gravel with white, reflective TPO membrane over R-20 insulation

 

Doubling the required R-5 exterior wall insulation to R-10 batts

 

Replacing the existing DX Air Conditioning system with an air-cooled Chilled Water system.

Social Impact

Insurance is an instrumental partner in social policy. By providing significant social benefits, such as rebuilding property after catastrophes, insurance contributes to the rebuilding of people’s livelihoods, and economies as a whole. Furthermore, philanthropy, health and wellness, and diversity and inclusion are staples of our everyday practices.

Philanthropy

Universal Cares Initiative

 

   

Universal Insurance Holdings is committed to empowering and giving back to the communities it serves. Through our community outreach efforts, we seek to address some of today’s toughest challenges and help people improve their lives, particularly in underserved communities. This philosophy is underscored by the recent revamping of our Universal Cares initiative, which houses our community outreach efforts. Going forward, we have designated three focus areas where we will focus our efforts in terms of volunteer hours and fundraising dollars. They generally fall under categories that our employees are passionate about, that align with our company mission, and that affect our business. Our activities, fundraising, and partnerships with nonprofits will align with organizations in the areas of 1) access to housing, 2) the betterment of youth, and 3) environmental sustainability / climate.

   

This new program allows Universal to be more deliberate and strategic in our approach to how we deliver our resources, whether it be volunteering or dollars / fundraising. A complete relaunch of our Company’s community outreach portion of our website will clearly articulate our plans and partners in the community. At Universal, our people are passionate about giving back and we are excited to announce this new approach.

Current Programs

 

   

We are invested in the communities in which we do business. We regularly engage with and support our communities, including through outreach efforts during major storms and organizing beach cleanup events.

 

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We have committed to a company-wide Day of Service once large gatherings are safe for our workforce. This initiative will bring together the collective power of our entire workforce to have an impact in the communities where we live and work. We have established partnerships with nonprofits in every region where we have sizable operations and designated an impactful service project for our employees.

   

We have kicked off our Brown Bag Lunch series where we invite local nonprofits to come to our headquarters and speak directly with our employees. We hosted the Women in Distress of Broward County, Inc. to begin our series to commemorate International Women’s Day; they spoke to a group of employees about the important work they do in domestic violence. Our goal is to continue providing programming for associates to learn and hear firsthand about the work being performed in the community.

   

We also contribute to organizations that positively impact our communities.

 

Since 2017, UPCIC, has generously funded 1,968 scholarships through contributions totaling $13.5 million to Step Up For Students, a nonprofit organization that helps manage the income-based Florida Tax Credit Scholarship Program. Step Up is serving more than 100,400 students for the 2019-20 school year. More than 1,800 private schools participate in the scholarship program statewide.

 

Since hosting our first head-shaving event in 2016, Universal has raised over $1.2 million for the St. Baldrick’s Foundation, which addresses lifesaving childhood cancer research. This event has become Universal’s largest annual fundraiser for a charity. Every year, we exceed our fundraising goal and the company matches the amount raised by employees, doubling our impact to support the most promising research for kids with cancer. Despite the unexpected circumstances of the past year, Universal officially held the top fundraising event in Florida in 2020, generating more than $325,000 for the nonprofit! Additionally, out of 832 events nationwide, Universal’s efforts placed us 6th overall.

 

We provide several opportunities throughout the year for employees to work with Habitat for Humanity. Additionally, Universal has formed an official partnership with the charity to hold monthly workshops for Habitat for Humanity’s new and existing homeowners. The goal of the meetings is to explain many important aspects of property insurance, including information about getting coverage, maintaining a policy, and understanding deductibles. This is an ongoing effort performed monthly for the duration of the calendar year. We are expanding this program with Community Partners of South Florida, a nonprofit that provides comprehensive services and solutions to individuals and families in need in three primary areas: Behavioral/Mental Health, Housing, and Community.

Great Place to Work Certification

 

   

Universal has received Great Place to Work® (GPTW) Certification. We make employee experience a priority every day and GPTW Certification is a testament to the great work that has gone into addressing our culture and work environment. Our employees have reported a consistently positive experience with their coworkers, their leaders, and with their jobs during the company wide GPTW Trust Index survey made available to the workforce. This includes an 85% positive rating in the GPTW statement question—“Is Universal Insurance Holdings a Great Place to Work?,” compared to 59% for a typical U.S -based company.

   

From our robust benefit offerings, employee recognition programs, upgrades to our facilities, and our emphasis on our key values, the organization has made a concerted effort to enhance the quality of our workplace experience. Great Place to Work® is the global authority on workplace culture. For close to thirty years, they have surveyed more than 100 million employees around the world and used those deep insights to define what makes a great workplace: trust. Their unparalleled benchmark data is used to recognize Great Place to Work-Certified companies like ours.

Health & Wellness

 

   

Our employees are a cornerstone of our operations, and we take their health and wellness seriously. We are proud to provide our employees with 100% full healthcare premium coverage for self and spouse plans. Dental insurance, life insurance and AD&D, short-term disability insurance, employee assistance program, prescription discounts, and a generous matching 401(k) program are also available.

   

In 2020, we launched a partnership with ClassPass, an app and website that allow employees to book video workout classes online, either prerecorded or live sessions or attend in-person fitness centers in the

 

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cities where they live and work. Universal subsidizes a portion of the membership to make it affordable to employees that wish to engage in their wellness journey.

   

We are organizing Health Fairs for all employees biannually. Healthcare professionals are brought into our offices to provide important screenings that can be performed on-site.

COVID-19 Crisis Management

During the unprecedented changes brought about by the COVID-19 pandemic, we have made a concerted effort to protect our workforce, customers, and our community. By deploying our standard natural disaster / crisis rapid response protocol and offering innovative solutions, we have been able to rapidly respond to consumers and maintain an active workforce. Several relief measures were implemented to continue quality service and productivity, limit business disruptions, while ensuring our key stakeholders stay safe and healthy.

 

   

We implemented key policyholder relief measures:

 

When applicable, we waived all penalties/fees relating to late payments and any reinstatement fees.

 

When requested, we are providing a 30-day payment grace period from the expected cancellation effective date and offering installment payment plans.

   

Our Claims team is conducting virtual reviews of claims by using an internally implemented interface application in partnership with Symbility LinkTM. This eliminates the need to visit a policyholder’s house and allows for contactless review of claims.

   

We maintained consistent communication with our policyholders by providing them with resources to access account information through our virtual solutions like our mobile apps, updated websites, and call centers.

   

We implemented our Continuity of Business plan and activated our employee remote work policy. Every employee has been outfitted with necessary hardware and software to enable them to perform their duties remotely.

   

We developed an internal COVID-19 page on our intranet to house all resources, information and communications shared with employees.

   

We performed ongoing, professional, deep cleaning of our building and facilities. Additionally, facilities staff have updated their cleaning measures and protocols to help ensure that high-touch surfaces are being cleaned and sanitized on a frequent basis.

Diversity and Inclusion

 

   

We continue our support of diversity and inclusion to create an inclusive culture and deliver a sustainable talent model to enhance performance and broaden perspectives. On our board, we have two directors who are both women and racially and ethnically diverse. Approximately 70% of our workforce are comprised of women and/or are diverse. Approximately 40% of our leadership positions are held by women and/or are held by diverse employees.

 

   

In 2020, our CEO, Stephen Donaghy, advanced our commitment to diversity and inclusion in the workplace by signing the CEO Action for Diversity & Inclusion pledge. Through this initiative, we have committed to developing a robust plan to our workforce surrounding diversity and inclusion in the workplace.

Corporate Governance and Ethics

 

   

We are committed to promoting corporate responsibility and achievement of our financial goals through responsible development and execution of corporate strategy. The Board provides continuing oversight of our governance process. With a commitment to ethics, we conduct our business in accordance with our Code of Conduct, which emphasizes treating all employees and customers with fairness, decency and good citizenship. We also conduct employee ethics training modules on an annual basis. For more information on our governance practices, see “Governance Highlights” and the accompanying discussion above.

 

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 Committees and Committee Chairs

 

The Board has appointed strong committee chairs to lead each Board committee in its respective area. All committee chairs are independent and appointed annually by the Board. Committee chairs are responsible for setting meeting agendas, presiding at committee meetings, facilitating open communications with the Board and management and working directly with management in connection with committee matters. Our committees have the authority and the resources to seek legal or other expert advice from independent sources. Each committee reports its actions and recommendations to the full Board on a regular basis.

 

           

Nominating &

Governance

Committee

  

Investment

Committee

  

Compensation

Committee

  

Audit

Committee

  

Risk

Committee

Scott P. Callahan    I    Chairperson    Member         
Kimberly D. Campos                   Member
Stephen J. Donaghy                  
Sean P. Downes    C       Member         
Marlene M. Gordon    I    Member            
Ralph J. Palmieri (1)    I       Chairperson         
Richard D. Peterson    I, E          Member    Chairperson   
Michael A. Pietrangelo    I, LD    Member       Chairperson      
Ozzie A. Schindler    I, E             Member    Chairperson
Jon W. Springer          Member          Member
Joel M. Wilentz, M.D.    I    Member         Member    Member     

I - Independent director; C - Chairman of the Board; LD - Lead Director; E - Audit Committee Financial Expert

 

  (1)

Mr. Palmieri’s term ends at the 2021 Annual Meeting. He is retiring from the Board and determined not to stand for re-election.

Audit Committee

The Audit Committee provides oversight of the Company’s financial management, internal audit department and independent auditor. The Audit Committee oversees the quality and effectiveness of the Company’s internal controls, which provide reasonable assurance that assets are safeguarded and that financial reports are properly prepared. The Audit Committee also reviews and monitors the Company’s financial reporting procedures, compliance and disclosure, including overseeing the preparation of financial statements. In performing these functions, the Audit Committee meets periodically with the independent auditor, management and internal auditors (including in private sessions) to review their work and confirm that they are properly discharging their respective responsibilities. In addition, the Audit Committee appoints and evaluates the performance of the independent auditor.

 

   

The Audit Committee held 6 meetings in 2020.

 

   

The Board has determined that Messrs. Peterson and Schindler are each an “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K promulgated by the Securities and Exchange Commission (“SEC”).

 

   

The Audit Committee’s charter is publicly available on our website at www.universalinsuranceholdings.com.

 

   

The Audit Committee annually reviews its charter to determine whether any changes are appropriate.

Compensation Committee

The Compensation Committee is responsible for establishing and overseeing the Company’s executive compensation philosophy and principles, reviewing and recommending for approval by the independent directors the compensation for and employment agreement with our Chief Executive Officer, approving the compensation for and employment agreements with certain other executive officers, establishing and evaluating performance-based goals related to compensation, overseeing the design and administration of the 2009 Omnibus Incentive Plan, as amended from time to time (“2009 Plan”) and the Company’s 2021 Omnibus Incentive Plan, as amended from time to time (the “2021 Plan”), overseeing the design of the 2021 Omnibus Incentive Plan, and reviewing, and recommending for approval by the full Board, the compensation for our independent directors.

 

   

The Compensation Committee held 6 meetings in 2020.

 

   

The Compensation Committee’s charter is publicly available on our website at www.universalinsuranceholdings.com.

 

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The Compensation Committee annually reviews its charter to determine whether any changes are appropriate.

Nominating and Governance Committee

The Nominating and Governance Committee exercises general oversight with respect to the governance of the Board. It assists the Board by identifying individuals qualified to become directors and recommends to the Board nominees for the next annual meeting of shareholders and to fill vacancies in membership of the Board as they occur; recommends to the Board nominees for each committee of the Board; and considers matters relating to corporate governance generally, including assessing the adequacy of our corporate governance policies and procedures and making recommendations to the Board, as appropriate, regarding modifications to such policies and procedures, including our Governance Guidelines and our certificate of incorporation and bylaws. The Nominating and Governance Committee also oversees the director self-evaluation process and is responsible for maintaining orientation and continuing education programs for all directors.

 

   

The Nominating and Governance Committee held 3 meetings in 2020.

 

   

The Nominating and Governance Committee’s charter is publicly available on our website at www.universalinsuranceholdings.com.

 

   

The Nominating and Governance Committee annually reviews its charter to determine whether any changes are appropriate.

Investment Committee

The Investment Committee’s responsibilities include monitoring whether the Company has adopted and adheres to a rational and prudent investment strategy; monitoring whether investment actions are consistent with the Company’s investment strategy, financial objectives and business goals; monitoring compliance with legal and regulatory requirements pertaining to investment and capital management; and assessing the competence and performance of the Company’s third-party investment advisors. The Investment Committee does not make operating decisions about market timing, sector rotation or security selection, which are the responsibilities of management and the Company’s third-party investment advisors.

 

   

The Investment Committee held 3 meetings in 2020.

 

   

The Investment Committee’s charter is publicly available on our website at www.universalinsuranceholdings.com.

 

   

The Investment Committee annually reviews its charter to determine whether any changes are appropriate.

Risk Committee

The Risk Committee’s responsibilities include designing, implementing and maintaining an effective risk management framework; evaluating and addressing risk management and capital management matters affecting the Company related to the design and implementation of the Company’s risk management framework; assessing the Company’s ERM capabilities; maintaining a risk-aware corporate culture; and developing risk tolerance protocols and procedures. The Risk Committee annually reviews the Company’s risk tolerance levels, risk appetite statements and risk management policy.

 

   

The Risk Committee held 4 meetings in 2020.

 

   

The Risk Committee’s charter is publicly available on our website at www.universalinsuranceholdings.com.

 

   

The Risk Committee annually reviews its charter to determine whether any changes are appropriate.

 Compensation Committee Interlocks and Insider Participation

 

Richard D. Peterson, Michael A. Pietrangelo and Joel M. Wilentz, M.D. served as members of the Compensation Committee during 2020. There are no Compensation Committee interlocks, meaning that none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity for which any of our directors served as an executive officer at any time during 2020.

 

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No compensation committee member is or was an employee or officer of the Company or has any relationship with the Company requiring disclosure as a related party transaction.

 Director Compensation

 

Each independent director currently receives an annual cash retainer of $85,000. In light of the workload and broad responsibilities of their positions, the Chairs of our Board committees each receive an additional annual cash retainer of $15,000. The independent directors are also entitled to receive discretionary grants of non-qualified stock options.

In 2020, Messrs. Downes, Donaghy, Springer and Ms. Campos were employees of the Company and did not receive additional compensation for their Board service.

Director Summary Compensation Table

The table below summarizes the compensation paid to our independent directors for the fiscal year ended December 31, 2020.

 

Name        

Fees Paid in Cash

($)

 

Scott P. Callahan

   

$

100,000

Marlene M. Gordon

   

$

46,986

Ralph J. Palmieri (1)

   

$

100,000

Richard D. Peterson

   

$

                100,000

Michael A. Pietrangelo

   

$

100,000

Ozzie A. Schindler

   

$

100,000

Joel M. Wilentz, M.D.

   

$

85,000

 

  (1)

Mr. Palmieri’s term ends at the 2021 Annual Meeting. He is retiring from the Board and determined not to stand for re-election.

Stock Ownership Guidelines; No Hedging or Pledging Shares

We believe that our directors should be personally invested in the Company alongside our shareholders. It is expected that, within two years of joining the Board, each director will own shares of our common stock having a value of at least $50,000. Additionally, our directors may not hedge or short shares of our common stock, engage in options trading, trade on margin or pledge shares of our common stock as collateral for a loan or other indebtedness.

Each independent director is currently in compliance with these guidelines.

 Delinquent Section 16(a) Reports

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and persons who beneficially own more than 10% of the outstanding shares of the Company’s common stock (collectively, “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on a review of copies of Forms 3, 4 and 5 provided to us and written representations by the Reporting Persons, we believe that, for the year ended December 31, 2020, all of the Reporting Persons timely filed the required reports under Section 16(a), except for two transactions on one Form 5 for Mr. Donaghy, eight transactions across two Forms 4 and one Form 5 for Mr. Downes, the initial share ownership on one Form 3 for Mrs. Gordon and one transaction on one Form 4 for Mr. Wilcox.

 

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 Information About Our Executive Officers

 

Our executive officers are elected annually by the Board and serve at the discretion of the Board. The former and current executive officers of the Company are as follows:

 

Name        Age        Position

Stephen J. Donaghy

    

56

    

Chief Executive Officer and Director

Sean P. Downes

    

51

    

Executive Chairman

Jon W. Springer

     51      Director (formerly President and Chief Risk Officer; retired effective as of January 31, 2021)

Frank C. Wilcox

    

55

    

Chief Financial Officer

Kimberly D. Campos

    

43

    

Chief Administrative Officer, Chief Information Officer and Director

Our executive officers are collectively referred to in this Proxy Statement as our “Named Executive Officers” or “NEOs.” Biographical information about our Named Executive Officers is as follows.

Stephen J. Donaghy. For biographical information on Stephen J. Donaghy, see “Director Nominees.”

Sean P. Downes. For biographical information on Sean P. Downes, see “Director Nominees.”

Jon W. Springer. For biographical information on Jon W. Springer, see “Director Nominees.”

Frank C. Wilcox became the Chief Financial Officer and Principal Accounting Officer of the Company and Chief Financial Officer and Treasurer of the Company’s wholly-owned insurance subsidiaries in 2013. Mr. Wilcox served as the Company’s Vice President – Finance from 2011 to 2013. Prior to joining the Company, Mr. Wilcox held senior corporate accounting positions with Burger King Corporation (2006 to 2011) and BankUnited (2000 to 2006), as well as various auditing, finance, accounting and SEC reporting positions from 1989 to 2000 at Coopers & Lybrand, The Blackstone Group, Dean Witter, Credit Suisse First Boston and American Express Financial Advisors. Mr. Wilcox has been licensed as a certified public accountant in New York since 1996.

Kimberly D. Campos. For biographical information on Kimberly D. Campos, see “Director Nominees.”

 

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PROPOSAL 2: APPROVAL OF UNIVERSAL INSURANCE HOLDINGS, INC. 2021 OMNIBUS INCENTIVE PLAN

On April 22, 2021, the Board adopted the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”), subject to the approval of our shareholders. Subject to, and effective upon, the approval of the 2021 Plan by our shareholders, no further grants will be made under the Universal Insurance Holdings, Inc. 2009 Omnibus Incentive Plan (as amended and restated, the “2009 Plan”), which is our only other existing equity incentive plan. Between April 13, 2021 and the Annual Meeting, no grants will be made under the 2009 Plan.

The Board believes that the use of equity-based compensation is a vital factor in attracting and retaining effective and valuable personnel who contribute to our growth and success and in establishing a direct link between the financial interests of such individuals and our shareholders. If the 2021 Plan is not approved by our shareholders pursuant to this proposal, the 2009 Plan will remain in effect according to its terms and we will be unable to continue the use of equity-based compensation following the depletion of the shares remaining under the 2009 Plan. This could require us to significantly increase the cash component of our compensation programs in order to continue to attract and retain effective and valuable personnel. We also intend to utilize shares under the 2021 Plan to broaden participation in our equity compensation program deeper into our employee ranks.

On April 13, 2021, the market price per share of the Common Stock was $13.80 based on the closing price of the Common Stock on the New York Stock Exchange on such date. As of April 13, 2021:

 

   

581,603 shares of Common Stock remained available for grant under the 2009 Plan;

 

   

3,376,784 shares were subject to outstanding stock options under the 2009 Plan with a weighted average exercise price of $22.95 and average remaining term of 6.35 years;

 

   

320,500 shares of Common Stock were subject to outstanding restricted stock units and performance stock units (assuming achievement of the applicable performance metrics) under the 2009 Plan; and

 

   

31,215,931 shares of Common Stock were outstanding.

In determining the overall size of the overall share pool under the 2021 Plan, the Board considered a number of factors, including our burn rate. Our burn rate is equal to the total number of stock options granted, time-based restricted stock units granted, and performance share units granted during the Company’s fiscal year divided by the weighted average common shares outstanding during the fiscal year. Our three-year average burn rate was approximately 3%, as further detailed in the table below.

 

 Year        Stock Options
Granted
        

Restricted Stock

        Units Granted        

         Performance
Share Units
Granted
         Total         

Weighted

Average Common
        Stock Outstanding        

         Burn Rate  

 2020

       1,214,000        342,000                 1,556,000        31,884,000        4.88%  

 2019

       400,000        100,000        77,000        577,000        33,893,000        1.70%  

 2018

       463,000        80,000        142,000        685,000        34,856,000        1.97%  
                        

 

 

      

 

 

 
                                                              

 

Three-Year            
Average

 

 
 

 

        

 

2.85%

 

 

 

The material features of the 2021 Plan are summarized below. The summary is qualified in its entirety by reference to the specific provisions of the 2021 Plan, which is attached as Appendix A to this Proxy Statement.

 Key Features of the 2021 Plan

 

No Repricing of Options or SARs. The 2021 Plan prohibits any amendments to outstanding options or stock appreciation rights (“SARs”) that reduce the purchase price or exercise price without approval by our shareholders. Additionally, options and SARs may be not be terminated and replaced with substitute awards, cash payments or other property if such termination and replacement has the effect of reducing the purchase price or exercise price, in each case, without approval by our shareholders. The Compensation Committee is prohibited from taking any action that would be considered a “repricing” of options or SARs without approval by our shareholders.

 

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Minimum Vesting Requirement. Awards granted under the 2021 Plan must have a minimum vesting period of one year from the date of grant, other than in the event of (i) accelerated vesting in the event of a participant’s death or disability or upon a change in control, (ii) vesting of awards to non-employee directors upon the annual meeting of shareholders that is at least 50 weeks after the immediately preceding year’s annual meeting, and (iii) the grant of awards covering 5% or less of the total number of shares authorized for issuance under the 2021 Plan.

Limitation on Non-Employee Director Compensation. The 2021 Plan limits total equity-based and cash compensation paid to each non-employee during any calendar year for his or her service on the Board to $600,000; however, this limit is increased to $1,200,000 for any calendar year in which a non-employee director is designated as Chairman or Lead Director or first joins the Board.

No Dividends on Unvested Awards. Dividends and dividend equivalents on any awards granted under the 2021 Plan may not be payable or settled until such time as the underlying award to which the dividends or dividend equivalents relate is vested and settled.

Awards Subject to Clawback. In the event of a restatement of its financials due to material noncompliance with a financial reporting requirement, participants will be required to reimburse the Company for amounts earned or payable with respect to awards under the 2021 Plan. Additionally, if a prior determination of the level of achievement of a performance goal is materially incorrect and has resulted in the payment of an amount greater than the amount that should have been paid, participants will be requirement to return to the Company any such excess amount. Awards under the 2021 Plan are also subject to any clawback policy adopted by the policy.

Fungible Plan Design. A total of 1,835,000 shares of Common Stock may be issued under the 2021 Plan. Shares issued pursuant to a stock option or SAR granted under the 2021 Plan will count against this limit on a 1:1 basis. Shares issued pursuant to awards other than stock options and SARs (i.e., full value awards) will count against this limit as 2.38 shares for every one share issued.

No Liberal Share Recycling. Shares surrendered to the Company or withheld in payment or satisfaction of the exercise price of an option or SAR or to satisfy any tax withholding obligations on any award granted under the 2021 Plan will not again be made available for issuance under the 2021 Plan. Additionally, shares repurchased by the Company using the exercise proceeds from an option will not be available for issuance under the 2021 Plan, and upon exercise of a SAR settled in shares, the gross number of shares of Common Stock covered by the portion of the SAR that is so exercised will cease to be available for issuance under the 2021 Plan.

Administration

The 2021 Plan will be administered by the Compensation Committee. The Compensation Committee has the authority, within the limits of the express provisions of the 2021 Plan, to interpret the provisions of the 2021 Plan, to establish and modify its administrative rules, to determine the individuals to whom awards will be granted, and to determine the nature, amount and terms of such awards and the objectives and conditions for earning such awards. The Compensation Committee may delegate its authority under the 2021 Plan to another committee of the Board or a subcommittee, or to such other party or parties, including officers of the Company, as the Compensation Committee deems appropriate and in accordance with applicable laws.

Types of Awards

Awards under the 2021 Plan may include incentive stock options, nonqualified stock options, SARs, restricted shares of Common Stock, restricted stock units, performance awards, other stock-based awards and cash-based incentive awards.

Stock Options. The Compensation Committee may grant to a participant options to purchase Common Stock that qualify as incentive stock options for purposes of Section 422 of the Code (“incentive stock options”), options that do not qualify as incentive stock options (“non-qualified stock options”) or a combination thereof. The terms and conditions of stock option grants, including the quantity, price, vesting periods, and other conditions on exercise, will be determined by the Compensation Committee.

The exercise price for stock options will be determined by the Compensation Committee in its discretion; provided, however, that in no event may the exercise price be less than 100% of the fair market value of a share of the Common Stock on the date of grant. Additionally, in the case of incentive stock options granted to a holder of more

 

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than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, the exercise price may not be less than 110% of the fair market value of one share of Common Stock on the date the stock option is granted.

Stock options must be exercised within a period fixed by the Compensation Committee that may not exceed ten years from the date of grant, except that in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, the exercise period may not exceed five years. The 2021 Plan provides for earlier termination of stock options upon the participant’s termination of service, unless extended by the Compensation Committee, but in no event may the options be exercised after the scheduled expiration date of the options.

At the Compensation Committee’s discretion, payment of the exercise price for shares of Common Stock on the exercise of stock options may be made in cash, shares of the Common Stock held by the participant or in any other form of consideration acceptable to the Compensation Committee (including one or more forms of “cashless” or “net” exercise).

Stock Appreciation Rights. The Compensation Committee may grant to a participant an award of SARs, which entitles the participant to receive, upon its exercise, a payment equal to (i) the excess of the fair market value of a share of Common Stock on the exercise date over the SAR exercise price, times (ii) the number of shares of Common Stock with respect to which the SAR is exercised.

The exercise price for a SAR will be determined by the Compensation Committee in its discretion, but may not be less than 100% of the fair market value of one share of the Common Stock on the date when the SAR is granted. Upon exercise of a SAR, payment may be made in cash, shares of the Common Stock or a combination of cash and shares. SARs must be exercised within a period fixed by the Compensation Committee that may not exceed ten years from the date of grant.

Restricted Shares and Restricted Stock Units. The Compensation Committee may award to a participant shares of Common Stock subject to specified restrictions (“restricted shares”). Restricted shares are subject to forfeiture if the participant does not meet certain conditions such as continued employment over a specified forfeiture period and/or the attainment of specified performance targets over the forfeiture period.

The Compensation Committee also may award to a participant restricted stock units representing the right to receive shares of Common Stock in the future subject to the achievement of one or more goals relating to the completion of service by the participant and/or the achievement of performance or other objectives (“restricted stock units”). The terms and conditions of restricted share and restricted stock unit awards are determined by the Compensation Committee.

Performance Awards. The Compensation Committee may grant performance awards to participants under such terms and conditions as the Compensation Committee deems appropriate. A performance award entitles a participant to receive a payment from the Company, the amount of which is based upon the attainment of predetermined performance targets over a specified award period. Performance awards may be paid in cash, shares of Common Stock or a combination thereof, as determined by the Compensation Committee.

Award periods will be established at the discretion of the Compensation Committee. The performance targets will also be determined by the Compensation Committee. When circumstances occur that cause predetermined performance targets to be an inappropriate measure of achievement, the Compensation Committee, at its discretion, may adjust the performance targets or the amount or value of the performance award.

Other Stock-Based Awards. The Compensation Committee may grant equity-based or equity-related awards, referred to as “other stock-based awards,” other than options, SARs, restricted shares, restricted stock units, or performance awards. The terms and conditions of each other stock-based award will be determined by the Compensation Committee. Payment under any other stock-based awards will be made in Common Stock or cash, as determined by the Compensation Committee.

Cash-Based Awards. The Compensation Committee may grant cash-based incentive compensation awards. The terms and conditions of each cash-based award will be determined by the Compensation Committee.

Dividends and Dividend Equivalents. The Compensation Committee may provide for the payment of dividends or dividend equivalents with respect to any shares of Common Stock subject to an award under the 2021 Plan. In no event will dividend or dividend equivalents be payable or settled on any award granted under the 2021 Plan until

 

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such time as the underlying award with respect to which such dividends or dividend equivalents relate vests and is settled.

Eligibility

The Compensation Committee may grant awards to any employee, director, consultant or other person providing services to the Company or its affiliates. As of April 13, 2021, 4 officers, 948 other employees, 7 non-employee directors, and consultants would be eligible to be granted awards under the 2021 Plan.

The 2021 Plan limits total equity-based and cash compensation paid to each non-employee during any calendar year for his or her service on the Board to $600,000; however, this limit is increased to $1,200,000 for any calendar year in which a non-employee director is designated as Chairman or Lead Director or first joins the Board.

Shares Subject to the Second Amended and Restated Plan

Under the 2021 Plan, 1,835,000 shares of the Common Stock have been reserved for issuance. All such shares may be issued pursuant to awards of incentive stock options. Shares issued pursuant to awards of stock options or stock appreciation rights will count against this limit as one share for every one share issued and shares issued pursuant to awards other than stock options or stock appreciation rights will count against this limit as 2.38 shares for every one share issued. All shares issued under the 2021 Plan will be authorized and unissued Common Stock or issued Common Stock that has been reacquired by the Company.

With respect to awards made under the 2021 Plan, shares of Common Stock underlying awards that are forfeited or canceled (as a result, for example, of the lapse of an option or a forfeiture of restricted stock), will be available for additional grants under the 2021 Plan. However, any shares surrendered to or withheld by the Company in payment or satisfaction of the exercise price of a stock option or tax withholding obligation with respect to any award will not again be made available for grant under the 2021 Plan. In addition, shares of Common Stock underlying awards granted under the 2009 Plan that are forfeited are canceled (as a result, for example, of the lapse of an option or a forfeiture of restricted stock), as well as any shares surrendered to or withheld by the Company in payment or satisfaction of the exercise price of a stock option under the 2009 Plan or tax withholding obligation with respect to an award under the 2009 Plan, will be available for grants under the 2021 Plan. Shares issued with respect to awards assumed by the Company in connection with acquisitions do not count against the total number of shares available for new awards under the 2021 Plan.

Corporate Transactions

In the event of any corporate event or transaction that results in a change in our capital structure, such as a merger, consolidation, reorganization, recapitalization, liquidation, stock dividend, stock split, reverse stock split or other distribution of stock or property of the Company, the Compensation Committee is empowered to make such equitable adjustments with respect to awards and the 2021 Plan as it deems necessary and appropriate, including, if necessary, any adjustments in the maximum number of shares of Common Stock subject to the 2021 Plan, the number of shares of Common Stock subject to awards, and the purchase price or exercise price of an outstanding award.

In the event of a merger, reorganization, consolidation, exchange, transfer of assets or other transaction having a similar effect involving the Company, awards under the 2021 Plan shall be subject to the transaction agreement which may provide, without limitation, for the assumption, continuation or substitution of such awards, for accelerated vesting of such awards, or for the settlement of such awards in cash or cash equivalents.

Amendment and Termination

The Board may, at any time, amend or terminate the 2021 Plan, provided that no such action by the Board may be taken (i) without the affirmative approval of our shareholders if so required by applicable law or the rules of any stock exchange which lists the Common Stock or our voting securities, or (ii) that materially adversely affects any rights or obligations with respect to any awards theretofore made under the 2021 Plan without the consent of the recipient. Notwithstanding the foregoing, an outstanding option or SAR may not be (i) amended to reduce its purchase price or exercise price without the approval of the Company’s shareholders or (ii) terminated and replaced with a substitute award, cash payment or other property if the effect of such termination and substitution is to reduce the purchase price or exercise price. Additionally, the Compensation Committee is prohibited from taking

 

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any action that would be considered a “repricing” of options or SARs. No awards may be made under the 2021 Plan after the tenth anniversary of its effective date.

Federal Income Tax Consequences

The federal income tax consequences of the issuance and exercise of awards under the 2021 Plan are as described below. The following information is only a summary of the tax consequences of the awards, and participants should consult with their own tax advisors with respect to the tax consequences inherent in the ownership or exercise of the awards, and the ownership and disposition of any underlying securities.

Incentive Stock Options. A participant who is granted an incentive stock option will not recognize any taxable income for federal income tax purposes either on the grant or exercise of the incentive stock option. If the participant disposes of the shares purchased pursuant to the incentive stock option more than two years after the date of grant and more than one year after the exercise of the option (required statutory “holding period”), (i) the participant will recognize long-term capital gain or loss, as the case may be, equal to the difference between the selling price and the option price; and (ii) the Company will not be entitled to a deduction with respect to the shares of stock so issued. If the holding period requirements are not met, any gain realized upon disposition will be taxed as ordinary income to the extent of the excess of the lesser of (a) the excess of the fair market value of the shares at the time of exercise over the option price, and (b) the gain on the sale. Also in that case, the Company will be entitled to a deduction in the year of disposition in an amount equal to the ordinary income recognized by the participant. Any additional gain will be taxed as short-term or long-term capital gain depending upon the holding period for the stock. A sale for less than the option price results in a capital loss.

The excess of the fair market value of the shares on the date of exercise over the option price is, however, includable in the option holder’s income for alternative minimum tax purposes.

Nonqualified Stock Options. A participant who is granted a nonqualified stock option under the 2021 Plan will not recognize any income for federal income tax purposes on the grant of the option. Generally, on the exercise of the option, the participant will recognize taxable ordinary income equal to the excess of the fair market value of the shares on the exercise date over the option price for the shares. The Company generally will be entitled to a deduction on the date of exercise in an amount equal to the ordinary income recognized by the participant. Upon disposition of the shares purchased pursuant to the stock option, the participant will recognize long-term or short-term capital gain or loss, as the case may be, equal to the difference between the amount realized on such disposition and the basis for such shares, which basis includes the amount previously recognized by the participant as ordinary income and the option price paid.

Stock Appreciation Rights. A participant who is granted SARs will normally not recognize any taxable income on the receipt of the SARs. Upon the exercise of a SAR, (i) the participant will recognize ordinary income equal to the amount received (increase in the fair market value of each share of Common Stock from the date of grant of the SAR to the date of exercise); and (ii) the Company will be entitled to a deduction on the date of exercise in an amount equal to the ordinary income recognized by the participant.

Restricted Shares. A participant will not be taxed on the date of an award of restricted shares, but will be taxed at ordinary income rates on the fair market value of any restricted shares as of the date that the restrictions lapse, unless the participant, within 30 days after transfer of such restricted shares to the participant, elects under Section 83(b) of the Code to include in income the fair market value of the restricted shares as of the date of such transfer. The Company will be entitled to a corresponding deduction. Any disposition of shares after restrictions lapse will be subject to the regular rules governing long-term and short-term capital gains and losses, with the basis for this purpose equal to the fair market value of the shares at the end of the restricted period (or on the date of the transfer of the restricted shares, if the employee elects to be taxed on the fair market value upon such transfer). To the extent dividends are payable during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income tax rates and will be deductible by the Company unless the participant has elected to be taxed on the fair market value of the restricted shares upon transfer, in which case they will be taxable to the employee as dividends and will not be deductible by the Company.

Restricted Stock Units. A participant will normally not recognize taxable income upon an award of restricted stock units, and the Company will not be entitled to a deduction until the lapse of the applicable restrictions. Upon the lapse of the restrictions and the issuance of the earned shares, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the Common Stock received and the value of any dividend equivalents that are settled at such time, and the Company will be entitled to a deduction in the same amount.

 

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Performance Awards, Other Stock-Based Awards and Cash-Based Awards. Normally, a participant will not recognize taxable income upon the grant of performance awards, other stock-based awards and cash-based awards. Subsequently, when the conditions and requirements of the grants have been satisfied and the payment determined, any cash received and the fair market value of any Common Stock received will constitute ordinary income to the participant. The Company also will then be entitled to a deduction in the same amount.

Limitations on Deductibility by the Company. Section 162(m) of the Code limits the deductibility for federal income tax purposes of certain compensation paid to any “covered employee” in excess of $1 million. For purposes of Section 162(m), the term “covered employee” includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year. It is expected that compensation deductions for any covered employee with respect to awards under the 2021 Plan will be subject to the $1 million annual deduction limitation. The Compensation Committee may grant awards under the 2021 Plan or otherwise that is or may become non-deductible when it believes doing so is in the best interests of the Company and our shareholders.

Clawback

If the Board determines that the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the law, whether such noncompliance is the result of misconduct or other circumstances, a participant will be required to reimburse the Company for any amounts earned or payable with respect to an award to the extent required by and otherwise in accordance with applicable law and any Company policies adopted or implemented by the Board or the Compensation Committee from time to time. Additionally, if the Board determines that a prior determination of the level of achievement of any performance goal is materially incorrect and that materially incorrect determination has caused the payment of cash or delivery of shares in an amount greater than the amount that should have been paid or delivered had the determination been correct, the participant will be required to return to the Company, within 30 days of written demand, the excess amount.

All awards under the 2021 Plan will also be subject to the terms of any clawback policy that the Company adopts or is required to adopt pursuant to applicable law.

Equity Compensation Plan Information

The following table sets forth certain information with respect to all of our equity compensation plans in effect as of the year ended December 31, 2020. The only equity compensation plan in effect on December 31, 2020 was the 2009 Plan.

The following table sets forth certain information with respect to all of our equity compensation plans in effect as of the year ended December 31, 2020.

 

        (a)         (b)         (c)  

 Plan Category

 

     

Number of

Securities

to Be Issued Upon

Exercise of

Outstanding

Options, Warrants

and Rights (1)

 

       

Weighted-Average

Exercise Price of

Outstanding

Options, Warrants

and Rights (2)

 

       

Number of Securities
Remaining

Available for Future

Issuance Under

Equity Compensation

Plans (Excluding

Securities Reflected

in Column(a))

 

 

 Equity compensation plans approved by security holders 

      1,994,782     $ 26.00       927,525

 Equity compensation plans not approved by security holders

                       

 Total

      1,994,782     $ 26.00       927,525

 

  (1)

This column reflects all stock options, restricted stock units and performance share units (assuming achievement of performance) granted under the 2009 Omnibus Plan that were outstanding as of December 31, 2020.

 

  (2)

This column reflects the weighted-average exercise price of stock options granted under the 2009 Plan that were outstanding as of December 31, 2020. Restricted stock units and performance share units reflected in column (a) are not reflected in this column as they do not have an exercise price.

 

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New Plan Benefits

The future awards that will be granted to participants under the 2021 Plan, including the type, number, recipients and other terms of such awards, will be determined in the discretion of the Compensation Committee, and as such, are not determinable at this time.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2021 OMNIBUS INCENTIVE PLAN

 

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PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

In accordance with Section 14A of the Exchange Act, we are asking shareholders to approve the compensation paid to our Named Executive Officers (the “Say on Pay Vote”), as disclosed in this Proxy Statement on pages 33-46. Although the voting results are not binding, we value continuing and constructive feedback from our shareholders on compensation and other important matters, and the Compensation Committee will consider the voting results when evaluating our executive compensation program. After the 2021 Annual Meeting, our next advisory Say on Pay Vote, which is conducted on an annual basis, is expected to occur at our 2022 Annual Meeting of Shareholders.

As evidenced by the Say on Pay Vote of the 2020 Annual Meeting of Shareholders, in which 79% of the shares cast voted to approve the Say on Pay Vote, we believe that our executive compensation program aligns the interests of the Company’s executives and other key employees with those of the Company and its shareholders. The program is intended to attract, retain and motivate high caliber executive talent to enable the Company to maximize operational efficiency and long-term profitability.

Over the course of 2020, the Company solicited feedback on its executive compensation program from its large institutional shareholders. The Company did not receive any criticism or negative feedback in response to its solicitation.

We ask for your advisory approval of the following resolution:

“RESOLVED, that the shareholders hereby approve, on an advisory basis, the compensation paid to Universal Insurance Holdings, Inc.’s Named Executive Officers, as described in this Proxy Statement on pages 33-46.”

THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

 Compensation Discussion and Analysis

 

We believe that the compensation provided to the Named Executive Officers for 2020 is aligned with our pay-for-performance philosophy and our overall business performance as evidenced by the key financial and operational milestones presented on pages 4-6 of this Proxy Statement.

This Compensation Discussion and Analysis provides an overview of the Company’s executive compensation program and compensation principles. The Compensation Committee oversees our compensation program for our Named Executive Officers and the equity compensation program for the Company’s employees generally. All of our executive officers are Named Executive Officers.

The Compensation Committee designs our executive compensation program to:

 

   

attract, retain and reward high-performing executives who will work well as a team to drive Company growth and profitability;

 

   

increase long-term value for shareholders;

 

   

balance both short- and long-term focus;

 

   

manage the Company in a prudent and responsible manner; and

 

   

maintain and enhance the Company’s reputation for operational excellence.

In making its decisions, the Compensation Committee takes into account, among other things:

 

   

the Company’s performance;

 

   

shareholder alignment;

 

   

the voting results of the annual say on pay resolution;

 

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individual performance;

 

   

the Company’s executive retention needs;

 

   

the recommendations of the Chief Executive Officer;

 

   

the terms of applicable employment agreements with the Named Executive Officers; and

 

   

the advice of the Compensation Committee’s independent compensation consultant and outside legal counsel.

 2020 Compensation Highlights; Pay for Performance Alignment

 

Although the Company continued to execute on its strategic priorities as described under “Performance Highlights” on pages 4-6 above, 2020 was a challenging year for the Company with an increase in named weather events, the COVID-19 pandemic and resulting global economic uncertainty. In line with our pay-for-performance philosophy, our named executive officers’ pay was directly impacted by these events.

 

   

In an effort to preserve capital, no annual bonuses were awarded to Messrs. Donaghy, Downes or Springer for 2020 performance, as discussed further below. Reduced annual bonuses, as compared to 2019 levels, were provided to Mr. Wilcox and Ms. Campos in recognition of their extraordinary efforts leading the Company’s finance, accounting, information technology and risk management functions.

 

   

The realizable value of equity awards held by our named executive officers, which is the largest component of our CEO’s pay, has declined significantly. None of the stock options held by our named executive officers are currently in-the-money, and our management team will need to work to improve our share price over the term of such options in order to realize any value from such grants.

 

   

Although we are required to report compensation paid in 2018, our executive compensation program has changed materially and dramatically since then in response to investor concerns as reflected in say-on-pay votes. Amounts paid in 2018 should not be viewed as indicative or predictive of current or future year compensation.

 2020 Compensation Components

 

Base Salary

Base salaries for each Named Executive Officer are set forth in their respective employment agreements, which are summarized below. In general, base salaries for our Named Executive Officers are set after considering a number of factors, including the size, scope and impact of their role, the market value associated with their role, leadership skills and values, length of service, and individual performance and contributions. The objective in setting base salaries is to provide an appropriate level of fixed compensation that will promote executive recruitment and retention.

Annual Cash Bonus

For 2020, Messrs. Donaghy, Downes and Springer were each eligible to receive a discretionary bonus, with the actual bonus payable to be determined based on factors the Compensation Committee determines to be appropriate, including, but not limited to, the Company’s achievement of its financial and operational performance objectives as well as local, national and/or global conditions that directly or indirectly affect the Company. The Committee has elected to apply a more subjective framework when determining bonus payouts in order to allow it to respond to evolving Company strategic priorities and appropriately align bonus payments with individual and company achievements across a multitude of priorities. For 2020, Mr. Donaghy’s bonus potential was set at $2.5 million for target performance and a maximum of up to $3.5 million for superior performance; Messrs. Downes’s and Springer’s bonus potential were each set at at maximum of up to 200% of base salary for superior performance, with a target bonus of 100% of base salary for Mr. Downes.

In 2020, weather events in excess of plan for named hurricane and other severe weather events that occurred during the year resulted in a $162 million pre-tax impact after reinsurance, which, in turn, prompted the Company to contribute capital to UPCIC to support insurance operations. In view of the need to continue preserving capital at the Company, in February 2021, the Compensation Committee did not determine or award any 2020 cash bonuses to Messrs. Donaghy, Downes and Springer.

 

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For Mr. Wilcox and Ms. Campos, based on Mr. Donaghy’s recommendation, the Compensation Committee awarded discretionary bonuses in the amounts of $300,000 and $100,000, respectively. The 2020 bonus amounts to both executives represent a reduction in value compared to their 2019 actual bonus payouts. Mr. Donaghy’s recommendation was based primarily on Mr. Wilcox’s leadership of the Company’s finance and accounting functions and on Ms. Campos’s continued leadership in the areas of information technology and risk management. In approving Mr. Wilcox’s bonus, the Compensation Committee also took into account input from Mr. Peterson, the Chair of the Audit Committee.

Equity Incentive Compensation

In general, the Company uses equity awards to align executives’ interests with shareholders’ interests, to focus executives on delivering long-term value to shareholders and to retain executives. Stock options have value only to the extent that the price of Company stock on the date of exercise exceeds the stock price on the grant date. Stock options vest in three annual equal installments subject to continued employment by the Company on the applicable vesting date. Restricted stock units (“RSUs”) are settled in common stock upon vesting and are subject to time-based vesting requirements. Performance stock units (“PSUs”) are also settled in common stock upon vesting and are subject to both time-based and performance-based vesting requirements. Dividend equivalents are accrued on both RSUs and a portion of PSUs and are paid out in cash at the time that the award vests and shares are delivered to the executive in settlement of the award.

Pursuant to his February 12, 2020 employment agreement, Mr. Donaghy received a grant of 75,000 RSUs, two-thirds of which is subject to a two-year ratable vesting requirement and one-third of which was vested upon grant in early 2021 following the Committee’s certification of attainment of applicable performance goals; stock options with a grant date fair value of $1,000,000, which are subject to a three-year ratable vesting requirement; and a grant of 50,000 PSUs. For the PSU grant, the performance objective was to increase the aggregate amount of 2020 in-force rate adequate premiums from states other than Florida as compared to such premiums for 2019.

Due to COVID-19 related uncertainty, the Compensation Committee did not finalize Mr. Donaghy’s grant of PSUs until February 2021, when the Compensation Committee determined that, in view of the Company’s increasing in-force rate adequate premiums from states other than Florida in 2020 by approximately 17.5% as compared to 2019, the performance condition for the 2020 PSUs had been met. One-third of this grant vested on March 1, 2021, and the remaining two-thirds will vest ratably on March 1, 2022 and December 31, 2022, respectively. Because the terms of this grant of PSUs were not finalized in 2020, the grant will not be reported in the 2020 compensation tables, even though the grant rewards Mr. Donaghy’s performance in 2020; instead, it will be reported in the 2021 compensation tables.

Growth in non-Florida premiums was used to incentivize Mr. Donaghy to execute on the Company’s strategy to increase the Company’s policies in-force outside of Florida in order to grow profitability and diversify revenue and risk. For 2021, the Compensation Committee has discontinued using growth outside of Florida as a performance metric. Instead, Mr. Donaghy’s 2021 grant of PSUs will be subject to three performance conditions: return on average equity, book value per share and net income. The Company adopted these performance goals in order to incentivize Mr. Donaghy to increase longer-term profits and better align his incentive with metrics routinely assessed by our stockholders. The actual goals set will be disclosed following completion of the applicable performance period.

Our other Named Executive Officers received the following equity awards in 2020 pursuant to the terms of their respective employment agreements.

Mr. Downes received a grant of stock options with a grant date fair value of $850,000, which is subject to a three-year ratable vesting requirement.

Mr. Springer received a grant of 75,000 RSUs, of which 40,000 vested on the grant date, 20,000 vested on January 1, 2021 and 15,000 will vest on January 1, 2022; and a grant of stock options with a grant date fair value of $1,000,000, one-third of which vested on the grant date, one-third of which vested on January 1, 2021 and the remaining one-third of which will vest on January 1, 2022. Due to Mr. Springer’s retirement from the Company on January 31, 2021, he has forfeited the tranches of RSUs and stock options that were scheduled to vest in 2022.

Mr. Wilcox received a grant of stock options with a grant date fair value of $400,000, which is subject to annual vesting over a three-year period and will vest immediately upon a change in control.

Ms. Campos received a fully vested grant of 1,800 shares of common stock.

 

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Table of Contents

Perquisites and Other Benefits

In 2020, the Company provided the following benefits to each of the Named Executive Officers: (1) Company-paid medical, dental, disability and other insurance premiums and (2) an annual automobile allowance. The Company also provided Company-paid premiums for term life insurance and long-term care for certain Named Executive Officers.

Other than as discussed herein, our Named Executive Officers participate in our corporate-wide benefit programs, which includes participation in the Company’s 401(k) plan. In addition, the Company believes that executives should be able to provide for their retirement needs from the total annual compensation and thus the Company does not provide its Named Executive Officers with any tax-qualified or nonqualified defined benefit pension plans, supplemental executive retirement plans, deferred compensation plans or other forms of retirement compensation.

Compensation Clawback Policy

Our clawback policy is designed to mitigate risk in connection with executive compensation. The clawback policy seeks to recover certain compensation awarded under our equity plans. Specifically, the clawback policy provides that if the Board determines that:

 

   

we are required to restate our financial statements due to material noncompliance with any financial reporting requirement under the law, whether or not such noncompliance is the result of misconduct, or

 

   

the prior determination of the level of achievement of any performance goal used under the Company’s equity plan is materially incorrect and that such determination caused the award of cash or shares in an amount greater than what should have been paid or delivered had such determination been correct, then the employee must reimburse the Company for the amount of overpayment with respect to an award under the equity plan, as well as to the extent required by and otherwise in accordance with applicable law and our policies as may be adopted from time to time.

No Hedging or Pledging Shares

Our directors, executive officers and senior accounting, finance and legal personnel may not hedge or short shares of our common stock, engage in options trading, trade on margin or pledge shares of our common stock as collateral for a loan or other indebtedness. Other Company employees are not subject to these restrictions.

Compensation Risk Assessment

Our employee compensation programs are intended to address, among other things, whether the program pays for performance and whether the program encourages unnecessary or excessive risk taking. We do not believe that our current compensation programs create risks that are reasonably likely to have a material adverse effect on the Company for the following reasons:

 

   

a significant portion of total compensation is linked to the Company’s long-term performance, which encourages the creation of shareholder value and achievement of key operational and business development goals; and

 

   

our clawback policy provides additional assurance that risks associated with our compensation plans and policies are further mitigated.

 Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

Michael A. Pietrangelo, Chair

Richard D. Peterson

Joel M. Wilentz, M.D.

 

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Table of Contents

 2020 Summary Compensation Table

 

The following table sets forth the compensation paid to or earned by the Named Executive Officers during each of the last three years.

 

    

Name and

Principal Position

      Year         Salary         

Bonus

(1)

         Stock
Awards
(2)
   

Options
Awards

(3)

    Non-Equity
Incentive Plan
Compensation
        All other
Compensation
(4)
        Total  
 

Stephen J. Donaghy,

Chief Executive Officer

and Director

     

 

 

2020

 

2019

 

2018

 

 

 

 

 

    $

 

$

 

$

1,000,000

 

804,375

 

804,375

 

 

 

 

 

      

 

 

 

 

 

 

 

 

 

     $

 

$

 

 

1,269,000

 

1,323,500

 

 

 

 

 

 

  $

 

 

 

1,000,000

 

 

 

 

 

 

 

   

 

$

 

$

 

675,535

 

    1,762,150

 

 

 

 

    $

 

$

 

$

        53,914

 

38,484

 

56,809

 

 

 

 

    $

 

$

 

$

3,322,914

 

2,841,894

 

2,623,334

 

 

 

 

 

Sean P. Downes,

Executive Chairman

     

 

 

2020

 

2019

 

2018

 

 

 

 

 

    $

 

$

 

$

1,567,813

 

998,846

 

2,217,499

 (5) 

 

 

 

 

      

 

$

 

 

1,000,000

 

 

 

 

 

 

      

 

$

 

$

 

2,350,500

 

3,604,392

 

 

 

 

  $

 

$

 

$

850,000

 

999,999

 

5,433,862

 

 

 

 

   

 

$

 

$

 

 

6,606,463

 

 

 

 

    $

 

$

 

$

69,274

 

56,715

 

61,163

 

 

 

 

    $

 

$

 

$

2,487,087

 

5,406,060

 

17,923,379

 

 

 

 

 

Jon W. Springer,

Former President and

Chief Risk Officer;

Director

     

 

 

2020

 

2019

 

2018

 

 

 

 

 

    $

 

$

 

$

1,338,202

 

1,000,000

 

1,340,625

 (5) 

 

 

 

 

     $

 

 

 

1,000,000

 

 

 (6) 

 

 

 

 

     $

 

$

 

$

1,255,500

 

1,752,990

 

1,923,999

 

 

 

 

  $

 

 

 

1,000,000

 

 

 

 

 

 

 

   

 

 

$

 

 

3,919,500

 

 

 

 

    $

 

$

 

$

44,885

 

24,662

 

29,124

 

 

 

 

    $

 

$

 

$

4,638,576

 

2,777,652

 

7,213,248

 

 

 

 

 

Frank C. Wilcox,

Chief Financial Officer

     

 

 

2020

 

2019

 

2018

 

 

 

 

 

    $

 

$

 

$

462,500

 

412,500

 

412,500

 

 

 

 

 

     $

 

$

 

$

300,000

 

400,000

 

300,000

 

 

 

 

 

      

 

$

 

$

 

 

1,542,500

 

 

 

 

  $

 

$

 

 

399,998

 

247,547

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

    $

 

$

 

$

47,974

 

46,319

 

51,222

 

 

 

 

    $

 

$

 

$

1,210,472

 

1,106,366

 

2,306,222

 

 

 

 

   

Kimberly D. Campos,

Chief Admin. Officer,

Chief Information

Officer and Director

       

 

 

2020

 

2019

 

2018

 

 

 

 

 

      $

 

$

 

$

300,000

 

269,901

 

298,077

 

 

 

 

 

       $

 

$

 

$

100,000

 

125,000

 

125,000

 

 

 

 

 

       $

 

 

 

29,286

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

      $

 

$

 

$

21,332

 

19,693

 

22,296

 

 

 

 

      $

 

$

 

$

450,618

 

414,594

 

445,373

 

 

 

 

 

  (1)

For 2020, Messrs. Donaghy, Downes and Springer were each eligible to receive a discretionary bonus, with the actual bonus payable to be determined based on factors the Compensation Committee determines to be appropriate, including, but not limited to, the Company’s financial and operational performance objectives as well as local, national and/or global conditions that directly or indirectly affect the Company. Mr. Donaghy’s bonus potential was set at $2.5 million for target performance and $3.5 million for superior performance; Messrs. Downes’s and Springer’s bonus potential were each set at up to 200% of base salary for superior performance, with a target bonus of 100% of base salary for Mr. Downes. For the reasons discussed above, Messrs. Donaghy, Downes and Springer determined not to accept any cash bonuses for 2020. As a result, the Compensation Committee did not award any 2020 performance bonuses to these executives.

 

  (2)

The amounts reported in this column represent the aggregate grant date fair value related to (a) the RSUs granted to Mr. Donaghy under his employment agreement, (b) the RSUs granted to Mr. Springer pursuant to his employment agreement and (c) the shares of common stock granted to Ms. Campos in accordance with her employment agreement. Grant date fair value is computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”) without regard to forfeitures related to service-based vesting conditions.

 

  (3)

The amounts reported in this column for 2020 represent the aggregate grant date fair value of the stock option awards granted to Messrs. Donaghy, Downes, Springer and Wilcox pursuant to their respective employment agreements. The amounts disclosed for option awards represent the grant date fair value computed in accordance with FASB ASC Topic 718, which was $3.67, and are estimated using a Black-Scholes option-pricing model utilizing the following assumptions on a weighted average basis: weighted-average volatility, 35.8%; dividend yield, 4.3%; weighted-average risk-free interest rate, 0.49%; and expected term in years, 6.00. See Note 9 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for a discussion of the relevant assumptions used in calculating these amounts.

 

  (4)

For further details regarding all other compensation contained in this column, see the “2020 All Other Compensation” table below.

 

  (5)

Messrs. Downes and Springer also received cash in lieu of accrued vacation time in view of Mr. Downes’s transition to Executive Chairman and Mr. Springer’s retirement at the end of January 2021, in the amounts of $567,183 and $338,202, respectively.

 

  (6)

Mr. Springer received $1,000,000 as a signing bonus for entering into his employment agreement in 2020.

 

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Table of Contents

 2020 All Other Compensation Table

 

The following table sets forth amounts included in the “All Other Compensation” column in the 2020 Summary Compensation Table.

 

           Insurance Premiums                                         
  Name         

Medical/

Dental

          

Life/

Disability/
Other

          

Long-Term

Care

          

401(k)

Match

          

Auto Allowance

and

Related Expenses

           Total  

  Stephen J. Donaghy

    

 

14,092

    

 

4,109

    

$

            13,963

    

$

        14,250

    

$

                             7,500

    

$

        53,914

  Sean P. Downes

    

 

32,759

    

 

13,651

    

$

2,614

    

$

14,250

    

$

6,000

    

$

69,274

  Jon W. Springer

    

 

20,156

    

 

3,279

    

 

 

    

$

14,250

    

$

7,200

    

$

44,885

  Frank C. Wilcox

    

 

1,817

    

 

1,694

    

$

23,013

    

$

14,250

    

$

7,200

    

$

47,974

  Kimberly D. Campos

    

 

1,200

    

 

1,694

    

 

 

    

$

13,638

    

$

4,800

    

$

21,332

 2020 Grants of Plan-Based Awards

 

The following table sets forth certain information with respect to grants of executive compensation plan-based awards to the Named Executive Officers during the year ended December 31, 2020.

 

  Name        

Grant

Date

          Estimated  Future
Payouts
under
Non-Equity
Incentive
Plan
Awards
    Estimated
Future
Payouts
under
Equity
Incentive
Plan
Awards
         

All Other

Stock

Awards:

Number
of

Shares
of Stock
or Units

(#)

   

All Other

Option

Awards:

Number of

Securities

Underlying

Options

(#) (2)

         

Exercise

or

Base

Price of

Option

Awards

         

Grant Date

Fair Value

of Stock

and

Option

Awards (3)

 
 

Threshold

($)

   

Target

($)

         

Maximum

($)

   

Target

(#)

 

  Stephen J. Donaghy

   

 

4/7/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

75,000

 (1) 

 

 

 

   

 

 

   

$

1,269,000

   

 

4/7/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

286,046

   

$

16.92

   

$

  1,000,000

  Sean P. Downes

   

 

4/30/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

221,294

   

$

18.23

   

$

850,000

  Jon W. Springer

   

 

5/12/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

302,747

   

$

16.74

   

$

1,000,000

  

   

 

5/12/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

75,000

 (1) 

 

 

 

   

 

 

   

$

1,255,500

  Frank C. Wilcox

   

 

4/30/2020

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

104,138

   

$

18.23

   

$

399,998

  Kimberly D. Campos

         

 

3/18/2020

 

         

 

 

 

 

 

         

 

 

 

 

 

         

 

1,800

 (1) 

 

 

 

         

 

 

         

 

29,286

 

(1)

With respect to the RSUs granted to Mr. Donaghy on April 7, 2020: 25,000 RSUs vested on April 7, 2020, 25,000 RSUs vested on January 3, 2021, and 25,000 RSUs vest on December 31, 2022. With respect to the RSUs granted to Mr. Springer on May 12, 2020: 40,000 RSUs vested on May 12, 2020, 20,000 RSUs vested on January 1, 2021 and 15,000 RSUs vest on January 1, 2022. With respect to Ms. Campos, this reflects shares of vested common stock granted in accordance with her employment agreement

 

(2)

See note (3) of the 2020 Summary Compensation Table for additional information about these awards.

 

(3)

The amounts shown in this column are valued based on the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See notes (2) and (3) of the 2020 Summary Compensation Table above for a discussion of the relevant assumptions used in calculating these amounts.

 

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Table of Contents

 2020 Outstanding Equity Awards at Year-End

 

The following table sets forth certain information regarding unexercised options and stock, RSUs or PSUs held by the Named Executive Officers that had not vested as of December 31, 2020.

 

        Options Awards         Stock Awards  
  Name      

Number of

Securities

Underlying

Unexercised

Options

(Exercisable)

         

Number of

Securities

Underlying

Unexercised

Options

(Unexercisable)

                      

Option

Exercise

Price

         

Option

Expiration

Date

       

Number of

Shares or

Units of

Stock That

Have Not

Vested

                      

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested (10)

 

  Stephen J. Donaghy

 

 

       

 

 

 

    286,046  

 

 

 

    (1  

 

 

 

  $ 16.92  

 

 

 

    4/7/2030    

 

       

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    50,000  

 

 

 

    (6  

 

 

 

  $ 755,500
  Sean P. Downes  

 

    50,000  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 24.18  

 

 

 

    6/15/2022    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    66,666  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 19.52  

 

 

 

    2/28/2026    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    150,000  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 19.52  

 

 

 

    2/28/2026    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    433,334  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 27.20  

 

 

 

    1/20/2027    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    308,698  

 

 

 

    154,349  

 

 

 

    (2  

 

 

 

  $ 32.80  

 

 

 

    3/19/2028    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    33,663  

 

 

 

    67,328  

 

 

 

    (3  

 

 

 

  $ 31.64  

 

 

 

    3/14/2029    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

    221,294  

 

 

 

    (4  

 

 

 

  $ 18.23  

 

 

 

    4/30/2030    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

       

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

       

 

    18,315  

 

 

 

    (7  

 

 

 

  $ 276,740

 

 

 

       

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

       

 

    33,000  

 

 

 

    (8  

 

 

 

  $ 498,630

  Jon W. Springer

 

 

    22,334  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 19.52  

 

 

 

    2/28/2026    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    82,509  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 19.52  

 

 

 

    2/28/2026    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    98,280  

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

  $ 27.20  

 

 

 

    1/20/2027    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

    100,915  

 

 

 

    201,832  

 

 

 

    (5  

 

 

 

  $ 16.74  

 

 

 

    5/12/2030    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

       

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

       

 

    5,291  

 

 

 

    (7  

 

 

 

  $ 79,947

 

 

 

       

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

       

 

    8,900  

 

 

 

    (8  

 

 

 

  $ 134,479

 

 

 

       

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

       

 

 

 

       

 

    35,000  

 

 

 

    (9  

 

 

 

  $ 528,850
  Frank C. Wilcox  

 

    8,333  

 

 

 

    16,667  

 

 

 

    (3  

 

 

 

  $ 31.64  

 

 

 

    3/14/2029    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

       

 

 

 

    104,138  

 

 

 

    (4  

 

 

 

  $ 18.23  

 

 

 

    4/30/2030    

 

       

 

 

 

 

 

 

 

 

 

 

 

     

  Kimberly D. Campos

 

 

       

 

 

 

       

 

 

 

   

 

 

 

 

 

 

 

 

 

         

 

 

 

 

 

       

 

       

 

 

 

   

 

 

 

 

 

 

 

 

 

     

 

  (1)

The options held by Mr. Donaghy with an exercise price of $16.92 ratably vest on April 7, 2021, 2022 and 2023.

 

  (2)

The options held by Mr. Downes with an exercise price of $32.80 vested on January 15, 2021.

 

  (3)

The options held by Messrs. Downes and Wilcox with an exercise price of $31.64 ratably vest on March 14, 2021 and 2022.

 

  (4)

The options held by Messrs. Downes and Wilcox with an exercise price of $18.23 ratably vest on April 30, 2021, 2022 and 2023.

 

  (5)

The options held by Mr. Springer with an exercise price of $16.74 ratably vest on January 1, 2021 and 2022. Due to Mr. Springer’s retirement from the Company on January 31, 2021, he has forfeited the tranche of stock options that were scheduled to vest in 2022.

 

  (6)

The RSUs held by Mr. Donaghy are subject to time-based vesting conditions and ratably vest on January 3, 2021 and December 31, 2022.

 

  (7)

The PSUs held by Messrs. Downes and Springer that are subject to time-based vesting conditions vested on January 1, 2021.

 

  (8)

The PSUs held by Messrs. Downes and Springer are subject to time-based vesting conditions. Assuming the time condition is satisfied, (a) 17,000 of Mr. Downes’s PSUs vested on March 1, 2021 and 16,000 of the PSUs vest on March 1, 2022; and (b) one-half of Mr. Springer’s PSUs vested on January 2, 2021 and one-half of the PSUs vest on January 2, 2022.

 

  (9)

The RSUs held by Mr. Springer are subject to time-based vesting conditions and 20,000 vested on January 3, 2021 and 15,000 vest on January 1, 2022. Due to Mr. Springer’s retirement from the Company on January 31, 2021, he has forfeited the tranche of RSUs that were scheduled to vest in 2022.

 

  (10)

Calculated based on closing stock price of $15.11 on December 31, 2020.

 

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 Options Exercised and Stock Vested

 

The following table sets forth information regarding stock awards held by the Named Executive Officers that vested during the year ended December 31, 2020. No Named Executive Officers exercised any stock options during 2020.

 

           Stock Awards  
  Name         

Number of

Shares

Acquired on

Vesting

        

Value

Realized on

Vesting

 

  Stephen J. Donaghy

 

 

 

 

     50,000  

 

   $ 889,750

  Sean P. Downes

 

 

 

 

     53,698  

 

   $         1,353,012

  Jon W. Springer

 

 

 

 

     69,221  

 

   $ 1,467,195

  Frank C. Wilcox

 

 

 

 

     16,667  

 

   $ 251,838

  Kimberly D. Campos

 

 

 

 

     1,800  

 

   $ 29,286

 

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 Employment Agreements and Potential Payments Upon Termination or Change in Control

 

The following summaries describe the material terms of each Named Executive Officer’s employment agreement in effect in 2020.

Donaghy Employment Agreement

Mr. Donaghy’s employment agreement provides that he will serve as the CEO of the Company for a term beginning on January 1, 2020 and ending on December 31, 2022, unless earlier terminated in accordance with its terms. Mr. Donaghy will receive a base salary of $1 million, which will not be increased or decreased during the Term. He is eligible to receive a discretionary bonus of $2.5 million for target performance and $3.5 million for superior performance, with the actual bonus payable to be determined based on factors the Committee determines to be appropriate, including, but not limited to, the Company’s financial and operational performance objectives as well as local, national and/or global conditions that directly or indirectly affect the Company.

Mr. Donaghy is eligible to receive an annual grant of 50,000 PSUs, which will be subject to time-vesting and performance-vesting conditions. He will also be eligible to receive a one-time grant of 75,000 RSUs, which will be subject to time-vesting conditions. He is also eligible to receive an annual grant of stock options, with a grant date fair value of $1 million.

If Mr. Donaghy is terminated without cause or resigns for good reason, he would be entitled to a lump-sum cash amount equal to 12 months’ base salary and 12 months of COBRA coverage, subject to his execution of a general release of claims in favor of the Company. He would also be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year. Any stock options and PSUs that would have vested had he been continuously employed through the end of the one-year period following the termination date, and any unvested RSUs, will fully vest as of the termination date and the stock options shall remain exercisable for one year. The PSUs will be paid based on actual performance for the full performance year, determined after the end of the performance year.

In the event of a change in control and Mr. Donaghy is terminated without cause or resigns for good reason within 24 months after such change in control, Mr. Donaghy would be entitled to a lump-sum cash amount equal to 24 months’ base salary, plus two times any bonus paid for the calendar year prior to the change in control, subject to his execution of a general release of claims in favor of the Company. All stock options would immediately vest and all PSUs and RSUs would immediately vest and become payable within 30 days following their regularly scheduled vesting. The PSUs will be paid based on extrapolated performance for the full performance year based on actual performance through the termination date. All such change in control payments would be reduced to the extent they would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, if such reduction would result in Mr. Donaghy receiving a higher net after-tax amount.

If Mr. Donaghy becomes disabled, then the Company would be entitled to suspend his officership, but Mr. Donaghy would be entitled to remain an employee of the Company and receive his compensation and benefits for the lesser of (i) one year from the date of such suspension or (ii) the date on which he is first eligible for long-term disability payments under the Company’s long-term disability plan. If Mr. Donaghy is terminated due to disability or dies, he or his estate, respectively, would be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year. In addition, such termination will be treated as a termination without cause for the purpose of determining the Company’s obligation with respect to stock options, RSUs and PSUs held by Mr. Donaghy.

Mr. Donaghy is subject to a non-compete provision under the agreement that prohibits him from engaging in certain competitive activities for a period of three years following his termination. In the event he and the Company have not entered into a new agreement or renewed this agreement on or prior to December 31, 2022, the non-compete period will be two years. The agreement also contains nondisparagement, nonsolicitation and confidentiality provisions.

Downes Employment Agreement

Mr. Downes’s employment agreement provides that he will serve as the Executive Chairman of the Board. There is no specified term of the agreement. Mr. Downes will receive $1 million in annual base salary and a discretionary bonus of 100% of base salary for target performance and 200% of base salary for superior performance, with the

 

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actual bonus payable to be determined based on factors the Committee determines to be appropriate, including, but not limited to, the Company’s financial and operational performance objectives as well as local, national and/or global conditions that directly or indirectly affect the Company. He will also receive a one-time grant of stock options with a target grant date fair value of $850,000, which will be subject to three-year annual vesting. He will not receive any other equity grants.

If Mr. Downes is terminated without cause or resigns for good reason, he would be entitled to a lump-sum cash amount equal to 12 months’ base salary and 12 months of COBRA coverage, subject to his execution of a general release of claims in favor of the Company. He would also be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year. Any stock options that would have vested had he been continuously employed through the end of the one-year period following the termination date will fully vest as of the termination date and shall remain exercisable for one year.

In the event of a change in control and Mr. Downes is terminated without cause or resigns for good reason within 24 months after such change in control, Mr. Downes would be entitled to a lump-sum cash amount equal to 24 months’ base salary, plus two times any bonus paid for the calendar year prior to the change in control, subject to his execution of a general release of claims in favor of the Company. All stock options would immediately vest and remain outstanding for one year following termination. All such change in control payments would be reduced to the extent they would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, if such reduction would result in Mr. Downes receiving a higher net after-tax amount.

If Mr. Downes becomes disabled, then the Company would be entitled to suspend his status as Executive Chairman of the Board, but Mr. Downes would be entitled to remain an employee of the Company and receive his compensation and benefits for the lesser of (i) one year from the date of such suspension or (ii) the date on which he is first eligible for long-term disability payments under the Company’s long-term disability plan. If Mr. Downes is terminated due to disability or dies, he or his estate, respectively, would be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year. In addition, such termination will be treated as a termination without cause for the purpose of determining the Company’s obligation with respect to equity awards held by Mr. Downes.

Mr. Downes is subject to a non-compete provision under the agreement that prohibits him from engaging in certain competitive activities for a period of three years following his termination. The agreement also contains nondisparagement, nonsolicitation and confidentiality provisions.

Springer Employment Agreement

Mr. Springer’s employment agreement provides that he will continue to serve as President and Chief Risk Officer of the Company for a term beginning on May 12, 2020 and ending on January 1, 2021, unless earlier terminated in accordance with its terms. Mr. Springer will receive a base salary of $1 million and received a signing bonus of $1,000,000. Mr. Springer was required to refund the full amount of the signing bonus in the event he were terminated for cause or resigned without good reason prior to January 1, 2021.

For the calendar year ending December 31, 2020, Mr. Springer was eligible to receive a discretionary bonus of up to 200% of base salary, with the actual bonus payable to be determined based on factors the Compensation Committee determines to be appropriate, including, but not limited to, the Company’s financial and operational performance objectives, the recommendation of the Executive Chairman, as well as local, national and/or global conditions that directly or indirectly affect the Company.

Pursuant to his agreement Mr. Springer received a grant of 75,000 restricted share units; this RSU grant is subject to time-vesting conditions, discussed above. Mr. Springer also received a grant of stock options with a grant date fair value of $1,000,000, which are subject to three-year annual vesting.

If Mr. Springer is terminated without cause or resigns for good reason, he would be entitled to a lump-sum cash amount equal to 12 months’ base salary and 12 months of COBRA coverage, subject to his execution of a general release of claims in favor of the Company. He would also be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year, provided that the Company will endeavor to apply the same percentage of annual bonus for determining the pro rata portion of the annual incentive award as it applies for determining the annual bonus for other similarly-situated senior executives of the Company. Any stock options that would have vested had he been continuously

 

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employed through the end of the one-year period following the termination date will fully vest as of the termination date and will remain exercisable for one year. In addition, any RSUs that would have vested had he been continuously employed through the end of the one-year period following the termination date will fully vest as of the termination date and become payable within 30 days following their originally scheduled vesting dates.

In the event of a change in control and Mr. Springer is terminated without cause or resigns for good reason within 24 months after such change in control, Mr. Springer would be entitled to a lump-sum cash amount equal to 24 months’ base salary, plus two times any bonus paid for the calendar year 2018, subject to his execution of a general release of claims in favor of the Company. All stock options would immediately vest and all RSUs would immediately vest and become payable within 30 days following their regularly scheduled vesting dates. All such change in control payments would be reduced to the extent they would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, if such reduction would result in Mr. Springer receiving a higher net after-tax amount.

If Mr. Springer becomes disabled, then the Company would be entitled to suspend his officership, but Mr. Springer would be entitled to remain an employee of the Company and receive his compensation and benefits for the lesser of (i) one year from the date of such suspension or (ii) the date on which he is first eligible for long-term disability payments under the Company’s long-term disability plan. If Mr. Springer is terminated due to disability or dies, he or his estate, respectively, would be entitled to receive a pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year. In addition, such termination will be treated as a termination without cause for the purpose of determining the Company’s obligation with respect to stock options and RSUs held by Mr. Springer.

Mr. Springer is subject to a non-compete provision under the Agreement that prohibits him from engaging in certain competitive activities for a period of three years following his termination. In the event he and the Company have not entered into a new agreement or renewed this agreement on or prior to January 1, 2021, the non-compete period will be two years. The Agreement also contains nondisparagement, nonsolicitation and confidentiality provisions.

Wilcox Employment Agreement

Mr. Wilcox’s employment agreement provides that he will continue to serve as the Company’s Chief Financial Officer for a term beginning on January 1, 2020 and ending on December 31, 2021, unless earlier terminated in accordance with its terms. He is entitled to receive an annual base salary of $412,500, with any subsequent increases to be determined by the Compensation Committee based on a recommendation by the Chief Executive Officer, and an annual bonus as determined by the Compensation Committee in its sole discretion. He was also entitled to receive a one-time grant of stock options with a grant date fair value of $400,000, which is subject to a three-year ratable vesting period.

If Mr. Wilcox is terminated without cause, he is entitled to receive a lump-sum cash amount equal to his base salary for the remaining term of the agreement, subject to his execution of a general release of claims in favor of the Company.

Mr. Wilcox’s agreement also contains noncompete, nondisparagement, nonsolicitation and confidentiality provisions.

Campos Employment Agreement

Ms. Campos’s employment agreement provides that she will continue to serve as the Company’s Chief Administrative Officer and Chief Information Officer for a term beginning on January 1, 2020 and ending on December 31, 2021. She will receive an annual base salary of $300,000, which is subject to adjustment by the Compensation Committee based on the recommendation of the Company’s Chief Executive Officer. She is also eligible to receive an annual bonus as determined by the Company in its sole discretion, subject to her continued employment through the payment date of the bonus.

Ms. Campos also received a grant of 1,800 shares of fully vested and non-forfeitable common stock of the Company.

If Ms. Campos is terminated without cause, she will also receive a lump-sum cash payment equal to her base salary for the remaining term of the agreement, subject to her execution of a general release of claims in favor of the Company.

Ms. Campos’s agreement also contains non-compete, nondisparagement, nonsolicitation and confidentiality provisions.

 

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 2020 Potential Payments Upon Termination or Change in Control Table(1)

 

The following table presents the potential payments to which our Named Executive Officers would have been entitled assuming a termination or change in control had occurred as of December 31, 2020.

 

Name       Benefit      

Termination

Without Cause

or for Good
Reason (2)

                  

Upon

Change in
Control (3)

        Upon Death (4)        

Upon

Disability (4)

 

Stephen J. Donaghy

    Base Salary     $         1,000,000         $         2,000,000                
    Annual Incentive Award                 $ 1,351,070                
    Equity Compensation     $ 755,500         $ 755,500     $ 755,500     $         755,500
    Other Post-Employment Obligations               (6                        

Sean P. Downes

    Base Salary     $ 1,000,000         $ 2,000,000                
    Annual Incentive Award                 $ 2,000,000              
    Equity Compensation     $ 533,610         $ 775,370     $         533,610     $ 533,610
    Other Post-Employment Obligations               (6                        

Jon W. Springer

    Base Salary     $ 1,000,000         $ 2,000,000                
    Annual Incentive Award                 $ 7,839,000                
    Equity Compensation(5)     $ 449,387         $ 743,276     $ 449,387     $ 449,387
    Other Post-Employment Obligations               (6                        

Frank C. Wilcox

    Base Salary     $ 462,500                            

Kimberly D. Campos

    Base Salary     $ 300,000                                  

 

(1)

If the payments and benefits to a Named Executive Officer under his or her respective agreement or another plan, arrangement or agreement would subject the Named Executive Officer to the excise tax imposed by Section 4999 of the Code, then such payments will be reduced by the minimum amount necessary to avoid such excise tax, if such reduction would result in the Named Executive Officer receiving a higher net after-tax amount. The amounts reflected in this table do not reflect the application of any reduction in compensation or benefits pursuant to the terms of their employment agreements.

 

(2)

The amounts in this column assume a termination of employment without “cause” or for “good reason” on December 31, 2020, and no prior change in control. For Mr. Donaghy, these amounts represent (i) a lump-sum cash amount equal to 12 months’ base salary and 12 months of COBRA coverage (which amount is not included here), subject to his execution of a general release of claims in favor of the Company, (ii) his pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year, and (iii) the value of any stock options and PSUs that would have vested had he been continuously employed through the end of the one-year period following the termination date, and the value of any unvested RSUs, which will fully vest as of the termination date. The PSUs will be paid based on actual performance for the full performance year, determined after the end of the performance year. For Mr. Downes, these amounts represent: (i) a lump-sum cash payment equal to 12 months’ base salary and 12 months of COBRA coverage (which amount is not included here), subject to his execution of a general release of claims in favor of the Company, and (ii) his pro rata portion of his annual incentive award for the year of termination, calculated on the basis of the Company’s actual performance for such year, (iii) the value of any stock options and PSUs that would have vested had he been continuously employed through the end of the one-year period following the termination date. For Mr. Springer, these amounts represent: (i) a lump-sum cash payment equal to one times the amount of his then-current annual rate of base salary, (ii) his pro rata portion of his 2020 annual incentive award, and (iii) the value of any stock options, RSUs and PSUs that would have vested had he been continuously employed through the end of the one-year period following the termination date. For Mr. Wilcox and Ms. Campos, this amount represents a lump-sum cash payment equal to his or her base salary for a period equal to the remaining term of his or her 2020 Employment Agreement, which expires on December 31, 2021.

 

(3)

The amounts in this column assume a termination of employment without “cause” or for “good reason” on December 31, 2020, within 24 months after a change in control. With respect to Mr. Donaghy, the amounts represent (i) two times his then-annual rate of base salary, (ii) two times any bonus paid for the calendar year prior to the change in control, subject to his execution of a general release of claims in favor of the Company, and (iii) all equity compensation (stock options, RSUs and PSUs) held by Mr. Donaghy would immediately vest and/or become exercisable and remain outstanding for one year following termination. With respect to Mr. Downes, the amounts represent (i) two times his then-annual rate of base salary, (ii) two times his bonus paid for the calendar year prior to the change in control, subject to his execution of a general release of claims in favor of the Company. and (iii) all equity compensation (stock options RSUs and PSUs) held

 

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by Mr. Downes would immediately vest and/or become exercisable and remain outstanding for one year following termination. With respect to Mr. Springer, the amounts represent (i) two times his then-annual rate of base salary, (ii) two times his bonus paid for the calendar year 2018, and (iii) all equity compensation (stock options, RSUs and PSUs) held by Mr. Springer would immediately vest and/or become exercisable, as applicable and remain outstanding for one year following termination.

 

(4)

The amounts in these columns represent equity compensation (stock options, RSUs and PSUs) that would have vested had Messrs. Donaghy, Downes and Springer been continuously employed by the Company through the end of the one-year period following the termination date.

 

(5)

Includes the “intrinsic value” as of December 31, 2020 (that is, the value based upon the last reported sales price of our common stock on the NYSE on December 31, 2020, $15.11, and in the case of options, minus the exercise price) of equity awards that would become exercisable or vested in the event of a termination of employment and change-in-control assuming the awards are not assumed or substituted. For all outstanding equity awards owned by our Named Executive Officers as of December 31, 2020, see the 2020 Outstanding Equity Awards at Year-End table above.

 

(6)

Messrs. Donaghy, Downes and Springer are also entitled to up to 12 months of COBRA payments in the event of termination without cause or for good reason (which amount is not included here).

CEO Pay Ratio

 

For 2020:

 

   

the annual total compensation of the median compensated of all employees of our Company (other than our CEO) was $84,289; and

 

   

the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $3,322,914.

Based on this information, for 2020, the ratio of the annual total compensation of Mr. Donaghy, our Chief Executive Officer, to the annual total compensation of the median compensated all Company employees (other than Mr. Donaghy), calculated in a manner consistent with Item 402(u) of Regulation S-K, was 39 to 1.

To identify the median employee, we reviewed our employee population as of December 31, 2020 and compensation for the period of January through December 31, 2020 as reported to the Internal Revenue Service on Form W-2 in Box 1, which we determined reasonably reflects the compensation of our employees. Once we identified our median employee, we combined all of the elements of such employee’s compensation for the full 2020 year in accordance with the requirements of Item 402 of Regulation S-K.

SEC rules for identifying the median employee and calculating the pay ratio allow companies to use various methodologies and assumptions. As a result, the pay ratio reported by the Company may not be comparable to the pay ratio reported by other companies.

 

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PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We are asking our shareholders to ratify the selection of Plante & Moran, PLLC (“Plante & Moran”) as our independent registered public accounting firm for 2021. The Audit Committee has approved the selection of Plante & Moran as our independent registered public accounting firm for 2021, and Plante & Moran is currently our independent registered public accounting firm.

Although the Company is not required to seek shareholder approval of this appointment, the Board believes that doing so is consistent with good corporate governance practices. If the selection is not ratified, the Audit Committee will explore the reasons for shareholder rejection and whether it is appropriate to select another independent auditor.

Representatives of Plante & Moran are expected to be available at the annual meeting, by telephone, to respond to appropriate questions, and will have the opportunity to make a statement if they so choose.

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PLANTE & MORAN, PLLC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021.

 Independent Auditor

 

The Audit Committee retained Plante & Moran to audit our consolidated and combined financial statements for 2020. In addition, the Audit Committee retained Plante & Moran to provide tax services in 2020. We understand the need for Plante & Moran to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of Plante & Moran, our Audit Committee has restricted the non-audit services that Plante & Moran may provide to us to tax services.

 Policy on Audit Committee Preapproval of Audit and Permissible Non-Audit Services

 

All audit and non-audit services must be preapproved by the Audit Committee. In 2020, the Audit Committee approved Plante & Moran’s provision of tax services, based on its conclusion that the provision of such services was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

 Accounting Fees and Services

 

The following table presents fees paid for the audit of our annual financial statements and all other professional services rendered by Plante & Moran for the years ended December 31, 2020 and 2019.

 

        

For the Years Ended

December 31,

          2020         2019

Audit fees

 

 

   $                                                                              782,900    

 

   $                                                                              768,000 

Audit-related fees

 

 

   103,330    

 

   114,237 

Tax fees

 

 

   95,700    

 

   94,750 

All other fees

 

 

   —    

 

   — 

Total fees

 

 

   $981,930    

 

   $976,987 

In the table above, in accordance with SEC rules, “Audit fees” are fees that we paid to Plante & Moran for (i) the audit of the Company’s annual financial statements included in the Annual Report on Form 10-K and review of

 

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financial statements included in the Quarterly Reports on Form 10-Q for the first, second and third quarters of the applicable year, and (ii) services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. “Audit-related fees” are fees that we paid to Plante & Moran for assurance and related services that were reasonably related to the performance of the audit or review of the financial statements and are not reported under “Audit fees.” “Tax fees” are fees that we paid to Plante & Moran for tax compliance, tax advice and tax planning.

 Audit Committee Report

 

The Audit Committee reviews and makes recommendations to the Board concerning the reliability and integrity of the Company’s financial statements and the adequacy of its system of internal controls and processes to assure compliance with the Company’s policies and procedures, Code of Conduct and applicable laws and regulations. The Audit Committee annually recommends the Company’s independent auditor for appointment by the Board and ratification by the shareholders and evaluates the independence, qualifications and performance of the Company’s independent auditor. The Audit Committee discusses with management the Company’s policies regarding risk assessment and risk management, evaluation of the Company’s major financial risk exposures and the steps management has taken to monitor and manage such exposures within the Company’s risk tolerance. The Audit Committee oversees the Company’s internal audit function. It establishes procedures for and oversees receipt, retention and treatment of complaints received by the Company regarding accounting, internal control or auditing matters and the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters.

This report of the Audit Committee is with respect to the Company’s audited financial statements for the fiscal year ended December 31, 2020, which include the balance sheets of the Company as of December 31, 2020 and 2019, and the related statements of income, shareholders’ equity and cash flows for the years ended December 31, 2020, 2019 and 2018 and the notes thereto (collectively, “Audited Financial Statements”).

The Audit Committee of the Board is comprised of the three directors named below. Each member of the Audit Committee meets the independence requirements under the applicable rules of the SEC and NYSE.

The Audit Committee reviewed and discussed the Company’s Audited Financial Statements with management. The Audit Committee discussed with Plante & Moran, our independent registered public accounting firm for 2020, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC, and matters related to the conduct of the audit of the Audited Financial Statements.

The Audit Committee received written disclosures and the letter from Plante & Moran required by the applicable requirements of the PCAOB regarding Plante & Moran’s communications with the Audit Committee concerning independence and discussed with Plante & Moran its independence from the Company.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company’s Audited Financial Statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the SEC.

THE AUDIT COMMITTEE

Richard D. Peterson, Chair

Ozzie A. Schindler

Joel M. Wilentz, M.D.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Code of Conduct addresses related party transactions, including transactions between the Company and our directors or executive officers, or their respective family members. Pursuant to the Code of Conduct, directors, officers and employees must notify the Chairman of the Audit Committee and the Executive Chairman of the Board in writing of the existence of any relationship or transaction that may pose an actual or potential conflict of interest. With respect to all other employees, outside legal counsel, acting independently, or the Board may determine whether a conflict exists. Any waivers of this policy as to an officer or director may only be approved by the Board. There are no family relationships among our current executive officers or directors.

The following discussion sets forth the relationships and transactions since January 1, 2020, which are known by management to involve the Company or its subsidiaries and our directors or executive officers, or their respective family members, or the beneficial owners of more than 5% of any class of our outstanding stock. In each case, pursuant to the Code of Conduct, these relationships and transactions have been disclosed to the Board and a disinterested majority of the Board has approved the transaction or, in the case of an ongoing relationship that was presented to the Board, permitted the continuation and renewal of such relationship.

Dennis J. Downes, the father of Sean P. Downes, our Executive Chairman of the Board, became an employee of the Company as of November 30, 2013. As Senior Vice President of Claims, Mr. Dennis Downes is entitled to an annual base salary of $250,000 and an annual performance bonus. Mr. Dennis Downes received $300,000 in salary and bonus in 2020.

Matthew J. Palmieri is the son of Ralph J. Palmieri, an independent director of the Company who is retiring from the Board as of the date of the Annual Meeting. In November 2020, Mr. Matthew Palmieri took on a new role as President of UPCIC, a wholly-owned subsidiary of the Company effective January 1, 2021; he joined the Company in June 2006. Mr. Matthew Palmieri previously served as the President of Blue Atlantic, a wholly-owned subsidiary of the Company. Mr. Ralph Palmieri was first appointed to the Board in 2014 and on February 21, 2021 notified the Company that he was retiring form the Board of Directors. In 2020, pursuant to an employment agreement with Blue Atlantic, Mr. Matthew Palmieri was entitled to receive an annual base salary of $460,000 and an annual bonus at the discretion of Blue Atlantic. Mr. Matthew Palmieri is entitled to participate in benefit plans generally available to Blue Atlantic employees in similar positions and in equity incentive plans available to Blue Atlantic employees, including the Omnibus Plan. Mr. Matthew Palmieri is also entitled to receive an automobile allowance and life insurance benefits. In 2020, Mr. Matthew Palmieri received $860,000 in salary and bonus.

Ryan Donaghy, the son of Stephen J. Donaghy, our Chief Executive Officer and director of the Company, is a Senior Software Developer at Evolution Risk Advisors, a wholly-owned subsidiary of the Company; he joined the Company in August 2004. As Senior Software Developer, Mr. Ryan Donaghy is entitled to an annual base salary of $156,000, an annual performance bonus at the discretion of management and certain benefits, including an automobile allowance and participation in the Company’s 401(k) plan. Mr. Ryan Donaghy received $193,800 in salary, bonus and benefits in 2020.

 

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BENEFICIAL OWNERSHIP

The following tables set forth certain information as of April 13, 2021 relating to the beneficial ownership of our preferred stock and common stock by (i) all persons that we know beneficially own more than 5% of any class of the Company’s outstanding stock, (ii) each of our Named Executive Officers and directors and (iii) all of our executive officers and directors as a group. In certain instances, knowledge of the beneficial ownership of common stock is drawn from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act. Except as otherwise indicated, to our knowledge, each shareholder listed in the tables below has sole voting and investment power with respect to the shares beneficially owned by the shareholder.

 Ownership of Series A Preferred Stock

 

As of April 13, 2021, the following table sets forth information regarding the number and percentage of shares of preferred stock held by the person who is known by the Company to beneficially own the outstanding shares of our Series A preferred stock. This holder is neither a director nor an executive officer. Each share of Series A Preferred Stock is entitled to one vote per share on all matters submitted to a vote of shareholders, including the election of directors.

 

  Name and Address (1)       

Amount and Nature
of

Beneficial

Ownership

        

Percent

of Class

 

Phylis R. Meier

                                      9,975                    100%  

 

  (1)

The mailing address of Ms. Meier is c/o Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309.

 

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 Ownership of Common Stock

 

As of April 13, 2021, the following table sets forth information regarding the number and percentage of shares of our common stock beneficially owned by our directors and Named Executive Officers individually, our directors and executive officers as a group, and all persons who are known by the Company to beneficially own or exercise voting or dispositive control of more than 5% of our common stock:

 

Name and Address of Beneficial Owner (1)     

 

 

 

Amount and Nature of

Beneficial Ownership (2)

 

 

 

      

 

 

 

Percent

of Class (3)

 

 

 

Beneficial Owners of More than 5% of Our Common Stock

           

BlackRock, Inc. (4)

       4,322,018          13.8%  

The Vanguard Group (5)

       3,078,735          9.9%  

Dimensional Fund Advisors LP (6)

       1,630,197          5.2%  

Named Executive Officers and Directors

           

Scott P. Callahan (7)

       58,536            *  

Kimberly D. Campos

       3,117            *  

Stephen J. Donaghy (8)

       703,001          2.3%  

Sean P. Downes (9)

       2,832,769          9.1%  

Marlene M. Gordon

                  —     

Ralph J. Palmieri (10)

       47,898            *  

Richard D. Peterson (11)

       49,374            *  

Michael A. Pietrangelo (12)

       133,083            *  

Ozzie A. Schindler (13)

       71,519            *  

Jon W. Springer (14)

       940,150          3.0%  

Frank C. Wilcox (15)

       169,725            *  

Joel M. Wilentz, M.D. (16)

       283,348            *  

 

Executive officers and directors as a group (12 people) (17)

 

      

 

5,292,520

 

 

        

 

17.0%

 

 

 

 

  (1)

Unless otherwise noted, the mailing address of each shareholder is c/o Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309.

 

  (2)

A person is deemed to be the beneficial owner of common stock that can be acquired by such person within 60 days from April 13, 2021, upon the exercise of stock options or conversion of preferred stock. Except as otherwise specified, each beneficial owner’s percentage ownership is determined by assuming that stock options and preferred stock that are held by such person (but not those held by any other person) and that are exercisable or convertible within 60 days from April 13, 2021, have been exercised or converted.

 

  (3)

Asterisks represent percentage holdings below 1.0%.

 

  (4)

Based solely on a Schedule 13G/A filed with the SEC on January 26, 2021 by BlackRock, Inc. At that time, BlackRock, Inc. reported sole voting power as to 4,269,193 shares and sole dispositive power as to 4,322,018 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

 

  (5)

Based solely on a Schedule 13G/A filed with the SEC on February 10, 2021 by Vanguard Group Inc. At that time, The Vanguard Group reported shared voting power as to 42,249 shares, sole dispositive power as to 3,010,809 shares and shared dispositive power as to 67,926 shares. The address of Vanguard Group, Inc. is 100 Vanguard Blvd, Malvern, PA 19355.

 

  (6)

Based solely on a Schedule 13G filed with the SEC on February 12, 2021 by Dimensional Fund Advisors LP. At that time, Dimensional Fund Advisors LP reported sole voting power as to 1,536,142 shares and sole dispositive power as to 1,630,197 shares. The address of Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, TX 78746.

 

  (7)

Includes options held by Mr. Callahan to purchase an aggregate of 50,000 shares of common stock.

 

  (8)

Includes options held by Mr. Donaghy to convert and purchase an aggregate of 95,348 shares of common stock.

 

  (9)

Includes options held by Mr. Downes to convert and purchase an aggregate of 1,304,138 shares of common stock.

 

  (10)

Includes options held by Mr. Palmieri to purchase an aggregate of 40,000 shares of common stock.

 

  (11)

Includes options held by Mr. Peterson to purchase an aggregate of 39,200 shares of common stock.

 

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  (12)

Includes options held by Mr. Pietrangelo to purchase an aggregate of 40,000 shares of common stock.

 

  (13)

Includes options held by Mr. Schindler to purchase an aggregate of 40,000 shares of common stock.

 

  (14)

Includes options held by Mr. Springer to convert and purchase an aggregate of 404,954 shares of common stock.

 

  (15)

Includes options held by Mr. Wilcox to purchase an aggregate of 51,378 shares of common stock.

 

  (16)

Includes options held by Dr. Wilentz to purchase an aggregate of 40,000 shares of common stock.

 

  (17)

See footnotes (2) and (7) – (16) above.

 

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INFORMATION ABOUT ANNUAL MEETING AND VOTING PROCEDURES; SHAREHOLDER PROPOSALS FOR 2022 ANNUAL MEETING

General Information

A proxy is your legal designation of another person to vote the stock you own. We have designated Frank C. Wilcox, our Chief Financial Officer, and Gary Lloyd Ropiecki, our Secretary, as the lawful proxies for our shareholders at the meeting.

Attendance at the Meeting

You need to bring a photo ID to gain admission to the meeting. Only shareholders and invited guests may attend the meeting. If you are a beneficial owner, you will need to bring your most recent brokerage statement with you to the meeting. We will use your brokerage statement to verify your ownership of shares and admit you to the meeting; however, you will not be able to vote your shares at the meeting without a legal proxy, as described under “How to Vote” in this section of the Proxy Statement.

How to Vote

If your shares are registered directly in your name with our registrar and transfer agent, Continental Stock Transfer & Trust Company, you are considered a shareholder “of record” with respect to those shares. If your shares are held in a brokerage account or with a bank, you are considered the “beneficial owner” of those shares.

Shareholders of Record. Shareholders of record can vote in any one of four ways:

 

   

Via the internet: Go to the website listed on your proxy card or on the Notice of Internet Availability of Proxy Materials to vote via the internet. You will need to follow the instructions on the website.

 

   

By telephone: Call the telephone number on your proxy card to vote by telephone. You will need to follow the instructions given by the voice prompts.

 

   

By mail: Sign, date and return the proxy card you received from the Company in the enclosed postage-paid envelope.

 

   

In person: Attend the meeting in person. See “Attendance at the Meeting” in this section of the Proxy Statement.

Beneficial Owners. If your shares are held beneficially in the name of a bank, broker or other holder of record (sometimes referred to as holding shares “in street name”), you will receive instructions from the holder of record in the form of a Voting Instruction Form that you must fill out in order for your shares to be voted. If you wish to vote in person at the meeting, you must obtain a legal proxy from the bank, broker or other holder of record that holds your shares, and bring it, or other evidence of stock ownership, with you to the meeting. See “Attendance at the Meeting” in this section of the Proxy Statement.

Shareholders Entitled to Vote

The record date for the meeting is April 13, 2021. Only owners of record at the close of business on the record date are entitled to receive notice of the meeting and to vote at the meeting and any adjournments of the meeting.

The securities to be voted at the meeting consist of shares of our common stock, with each share entitling its record owner to one vote, and shares of our Series A preferred stock, with each share entitling its record owner to one vote.

 

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The table below sets forth the number and classes of Company stock entitled to vote at the meeting.

 

Class of Voting Stock      

Number of Record    

Holders as of    

the Record Date    

      

Number of Shares

Outstanding

and Entitled to

Vote as of

the Record Date

 

Common Stock

    31        31,215,931

Series A Preferred Stock

    1        9,975

Quorum Requirements

The presence, in person or by proxy, of at least a majority of the total number of outstanding shares of our common stock and preferred stock, taken together, is necessary to constitute a quorum at the meeting. If a quorum is not present at the meeting, a majority of the shares so represented may vote to adjourn the meeting without further notice.

Revoking a Proxy

After you have submitted a proxy, you may revoke such proxy prior to the completion of voting at the meeting by the following means:

 

   

sending written notice to Gary Lloyd Ropiecki, Secretary, Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309;

 

   

delivering a later-dated proxy; or

 

   

appearing at the meeting and giving the Secretary notice of your intention to vote in person (unless you are a beneficial owner without a legal proxy, as described under “How to Vote” in this section of the Proxy Statement).

Tabulation of Voting Results

An independent inspector will certify the results of the vote regarding the election of directors.

Voting Options for Each Proposal at the Annual Meeting

With respect to Proposal 1, the Election of Directors, you may vote “FOR” or “AGAINST” each nominee or you may “ABSTAIN” from voting.

With respect to Proposals 2, 3 and 4, you may vote “FOR” or “AGAINST” such proposals or you may “ABSTAIN” from voting.

Votes Required to Pass Each Proposal

Proposals 1, 3 and 4 require the affirmative vote of a majority of the votes cast at the Annual Meeting. With respect to Proposal 2 only, New York Stock Exchange listing standards require us to treat abstentions as the equivalent to “AGAINST” votes. Accordingly, in order for Proposal 2 to be approved, Proposal 2 must receive more “FOR” votes than the aggregate number of “AGAINST” votes and abstentions.

Board Voting Recommendations for Each Proposal

The Board recommends that you vote your shares:

 

   

“FOR” the election of each of the director nominees to the Board (Proposal 1)

   

“FOR” the approval of the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan (Proposal 2)

   

“FOR” the approval of the compensation paid to our Named Executive Officers (Proposal 3)

   

“FOR” the ratification of the appointment of Plante & Moran as our independent registered public accounting firm for the 2021 fiscal year (Proposal 4)

If you sign and return your proxy card, but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board above.

 

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Abstentions and Broker “Non-Votes”

Abstentions and broker non-votes are considered as shares represented for purposes of determining whether a quorum is present.

If you submit a proxy but select “ABSTAIN” from voting on a proposal, your shares will be represented at the meeting but will not have any impact on the voting results of a proposal other than Proposal 2. Abstentions are not considered “votes cast” on a proposal.

A broker non-vote occurs when a nominee holding shares for a beneficial owner (i.e., a broker) does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular matter and has not received instructions from the beneficial owner. Under NYSE rules, ratification of the appointment of Plante & Moran as our independent registered public accounting firm for the 2021 fiscal year (Proposal 4) is considered a routine matter on which brokers will be permitted to vote in their discretion, even if the beneficial owners do not provide voting instructions. However, each of the other proposals is not considered to be a routine matter under NYSE rules, and brokers will not be permitted to vote on Proposals 1, 2 or 3 if the beneficial owners fail to provide voting instructions. Broker non-votes will not have any impact on the voting results of a proposal.

Costs for Proxy Solicitations

We will bear the cost of soliciting proxies. We may solicit proxies by a further mailing or personal conversations or via e-mail, telephone or facsimile.

Cameras and Recording Equipment Prohibited

Please note that cameras and sound or video recording equipment will not be permitted in the meeting room.

Householding

As permitted by the federal securities laws, only one copy of this Proxy Statement, the Annual Report and the Notice of 2021 Annual Meeting of Shareholders is being delivered to shareholders residing at the same address, unless the shareholders have notified us of their desire to receive multiple copies. This is known as householding. We will promptly deliver, upon oral or written request, a separate copy of these materials to any shareholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year should be directed to Gary Lloyd Ropiecki, Secretary, Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309 or (954) 958-1200.

Shareholders of record residing at the same address and currently receiving multiple copies of Proxy Statements may contact our registrar and transfer agent, Continental Stock Transfer & Trust Company, to request that only a single copy of the Proxy Statement be mailed in the future. Please contact the transfer agent by phone at (212) 509-4000 or by mail at 17 Battery Place, New York, NY 10004. Beneficial owners, as described above, should contact their broker or bank.

Where You Can Find More Information/Availability of Proxy Materials

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read any reports, statements or other information we file with the SEC at the SEC’s website at www.sec.gov.

THE NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS, THIS PROXY STATEMENT AND OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020, ARE FIRST EXPECTED TO BE MADE AVAILABLE AT HTTP://WWW.PROXYDOCS.COM/UVE ON APRIL 29, 2021.

We will promptly send a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 to you without charge upon written request by mail to Gary Lloyd Ropiecki, Secretary, Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309 or (954) 958-1200.

Shareholder Proposal Deadline for 2022 Annual Meeting of Shareholders

Proposals that shareholders intend to present at the 2022 Annual Meeting of Shareholders and be included the proxy materials for such meeting pursuant to Rule 14a-8 under the Exchange Act must be received by the Company no later than December 30, 2021.

 

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In addition, a shareholder may wish to have a proposal presented at the 2022 Annual Meeting of Shareholders (including director nominations), but not to have such proposal included in our proxy materials relating to that meeting. Our bylaws establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of shareholders. Pursuant to our bylaws, a shareholder proposal or nomination intended to be brought before the 2022 Annual Meeting of Shareholders must be delivered to the Company between March 13, 2022 and April 12, 2022.

All proposals or nominations a shareholder wishes to submit at the meeting should be directed to Gary Lloyd Ropiecki, Secretary, Universal Insurance Holdings, Inc., 1110 West Commercial Boulevard, Fort Lauderdale, Florida 33309.

 

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OTHER MATTERS

The Company knows of no business that will be presented for action at the annual meeting other than those matters referred to herein. If other matters do come before the annual meeting, the persons named as proxies will act and vote according to their best judgment on behalf of the shareholders they represent.

BY ORDER OF THE BOARD OF DIRECTORS

 

 

LOGO

Gary Lloyd Ropiecki, Secretary

April 29, 2021

 

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APPENDIX A

UNIVERSAL INSURANCE HOLDINGS, INC.

2021 OMNIBUS INCENTIVE PLAN

ARTICLE I

PURPOSE AND ADOPTION OF THE PLAN

1.01     Purpose. The purpose of the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan (as amended from time to time, the “Plan”) is to assist in attracting and retaining highly competent employees, directors and consultants, to act as an incentive in motivating selected employees, directors and consultants of the Company and its subsidiaries to achieve long-term corporate objectives, and to reward superior service to the Company.

1.02     Adoption and Term. The Plan has been approved by the Board and will become effective on June 11, 2021 if approved by the stockholders of the Company at the June 11, 2021 annual meeting of stockholders of the Company (the “Effective Date”). The Plan shall remain in effect until the tenth anniversary of the Effective Date, or until terminated by action of the Board, whichever occurs sooner; provided that no Incentive Stock Options will be granted under the Plan after April 22, 2031.

ARTICLE II

DEFINITIONS

For the purpose of this Plan, capitalized terms shall have the following meanings:

2.01    Affiliate means an entity in which, directly or indirectly through one or more intermediaries, the Company has at least a 50% ownership interest or, where permissible under Section 409A, at least a 20% ownership interest; provided, however, for purposes of any grant of an Incentive Stock Option, “Affiliate” means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, directly or indirectly.

2.02    Award means any one or a combination of Non Qualified Stock Options or Incentive Stock Options described in Article VI, Stock Appreciation Rights described in Article VI, Restricted Shares or Restricted Stock Units described in Article VII, Performance Awards described in Article VIII, other stock based Awards described in Article IX, short term cash incentive Awards described in Article X or any other Award made under the terms of the Plan.

2.03    Award Agreement means a written agreement between the Company and a Participant or a written acknowledgment from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan. An Award Agreement may be in electronic or any other form as determined by the Company.

2.04    Award Period means, with respect to an Award, the period of time, if any, set forth in the Award Agreement during which specified target Performance Goals must be achieved or other conditions set forth in the Award Agreement must be satisfied.

2.05    Beneficiary means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company on such form as determined by the Company succeeds to the rights and obligations of the Participant under the Plan and the Award Agreement upon the Participant’s death. If no such Beneficiary shall be designated in writing, the Beneficiary of a Participant shall be that Participant’s estate.

2.06    Board means the Board of Directors of the Company.

2.07    Change in Control means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:

(a)    The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Company, an Affiliate or any employee benefit plan (or related trust) sponsored or maintained by the Company or an

 

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Affiliate, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities in excess of 30% of the Company Voting Securities unless such acquisition has been approved by the Board;

(b)    Any election has occurred of persons to the Board that causes two thirds of the Board to consist of persons other than (i) persons who were members of the Board on the Effective Date and (ii) persons who were nominated for elections as members of the Board at a time when two thirds of the Board consisted of persons who were members of the Board on the Effective Date, provided, however, that any person nominated for election by a Board at least two thirds of whom constituted persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons described in clause (i);

(c)    The consummation (i.e., closing) of a Merger, unless, following such Merger, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such Merger, following such Merger beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such Merger in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such Merger, as the case may be;

(d)    The consummation (i.e. closing) of a sale or other disposition of all or substantially all the assets of the Company, unless, following such sale or disposition, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or disposition, following such sale or disposition beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity purchasing such assets in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or disposition, as the case may be; or

(e)    a complete liquidation or dissolution of the Company.

Solely to the extent required by Section 409A, an event described above shall not constitute a Change in Control for purposes of the payment (but not vesting) provisions of any Award subject to Section 409A unless such event also constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the Company’s assets within the meaning of Section 409A.

2.08    Code means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

2.09    Committee means the Compensation Committee of the Board.

2.10    Common Stock means the common stock of the Company, par value $0.01 per share.

2.11    Company means Universal Insurance Holdings, Inc., a Delaware corporation, and its successors.

2.12    Company Voting Securities means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board.

2.13    Date of Grant means the date designated by the Committee as the date as of which it grants an Award, which shall not be earlier than the date on which the Committee approves the granting of such Award.

2.14    Dividend Equivalent Account means a bookkeeping account in accordance with Section 11.18 and related to an Award that is credited with the amount of any cash dividends or stock distributions that would be payable with respect to the shares of Common Stock subject to such Awards had such shares been outstanding shares of Common Stock.

2.15    Exchange Act means the Securities Exchange Act of 1934, as amended. References to a section of the Exchange Act shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.

 

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2.16    Exercise Price means, with respect to a Stock Appreciation Right, the amount established by the Committee in the Award Agreement which is to be subtracted from the Fair Market Value on the date of exercise in order to determine the amount of the payment to be made to the Participant, as further described in Section 6.02(b).

2.17    Fair Market Value means, as of any applicable date: (i) if the Common Stock is listed on one or more international or national securities exchanges, the closing sales price of the Common Stock on the exchange having the greatest number of shares listed or eligible for trading on that date, or, if no sale of the Common Stock occurred on that date, on the next preceding date on which there was a reported sale; or (ii) if the above does not apply, the closing bid price as reported by the Nasdaq SmallCap Market on that date, or if no price was reported for that date, on the next preceding date for which a price was reported; or (iii) if none of the above apply, the last reported bid price published in the “pink sheets” or displayed on the National Association of Securities Dealers, Inc., Electronic Bulletin Board, as the case may be; or (iv) if none of the above apply or the Committee elects to use a different standard for determining Fair Market Value for one or more Awards, the fair market value of the Common Stock as determined under written procedures established by the Committee.

2.18    Incentive Stock Option means an incentive stock option within the meaning of Section 422 of the Code.

2.19    Merger means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company.

2.20    Non Qualified Stock Option means an Option which is not an Incentive Stock Option.

2.21    Options means all Non Qualified Stock Options and Incentive Stock Options granted at any time under the Plan.

2.22    Outstanding Common Stock means, at any time, the issued and outstanding shares of Common Stock.

2.23    Participant means a person designated to receive an Award under the Plan in accordance with Section 5.01.

2.24    Performance Awards means Awards granted in accordance with Article VIII.

2.25    Performance Goals means the performance measures established by the Committee, which may be objective or subjective and may be measured on an absolute or relative basis with respect to the Company, any one or more of its subsidiaries and divisions or any individual.

2.26    Plan has the meaning given to such term in Section 1.01.

2.27    Prior Plan means the Company’s Second Amended and Restated 2009 Omnibus Incentive Plan.

2.28    Purchase Price, with respect to Options, shall have the meaning set forth in Section 6.01(b).

2.29    Restricted Shares means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII.

2.30    Restricted Stock Unit means a unit representing the right to receive Common Stock or the value thereof in the future subject to restrictions imposed in connection with Awards granted under Article VII.

2.31    Rule 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, as the same may be amended from time to time, and any successor rule.

2.32    Section 409A means Section 409A of the Code and the guidance and regulations promulgated thereunder and successor provision, guidance and regulations thereto.

2.33    Stock Appreciation Rights or SARs means Awards granted in accordance with Article VI.

2.34    Substitute Awards means Awards granted or shares of Common Stock issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any subsidiary of the Company or with which the Company or any subsidiary of the Company combines.

2.35    Termination of Service means the voluntary or involuntary termination of a Participant’s service as an employee, director or consultant with the Company or an Affiliate for any reason, including death, disability, retirement or as the result of the divestiture of the Participant’s employer or any similar transaction in which the Participant’s employer ceases to be the Company or one of its subsidiaries. Whether entering military or other government service shall constitute Termination of Service, or whether and when a Termination of Service shall

 

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occur as a result of disability or by virtue of transitioning between employee, director and consultant status, shall be determined in each case by the Committee in its sole discretion. For purposes of the payment (but not vesting) provisions of any Award subject to Section 409A, “Termination of Service” shall mean a separation from service within the meaning of Section 409A.

ARTICLE III

ADMINISTRATION

3.01    Committee.

(a)    Duties and Authority. The Plan shall be administered by the Committee and the Committee shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, and to make all factual determinations with respect to and take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. Subject to the limitations of applicable law, the Committee may delegate such of its powers and authority under the Plan as it deems appropriate to a subcommittee of the Committee or designated officers or employees of the Company; provided, however, that unless such delegation is to a subcommittee of the Committee made up exclusively of two or more “non-employee directors” within the meaning of Rule 16b-3, no such delegee shall have authority to grant Awards to any member of the Board or “officer” of the Company within the meaning of Section 16 of the Exchange Act. In addition, the full Board may exercise any of the powers and authority of the Committee under the Plan. In the event of such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer, as appropriate, to the delegate of the Committee or the Board.

(b)    Indemnification. Each person who is or shall have been a member of the Board or the Committee, or an officer or employee of the Company to whom authority was delegated in accordance with the Plan shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such individual in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf; provided, however, that the foregoing indemnification shall not apply to any loss, cost, liability, or expense that is a result of his or her own willful misconduct. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, conferred in a separate agreement with the Company, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

ARTICLE IV

SHARES

4.01    Number of Shares Issuable; Share Counting. Subject to any applicable adjustment in accordance with Section 11.08, the total number of shares initially authorized to be issued under the Plan shall be 1,835,000 shares of Common Stock, all of which may be issued pursuant to awards of Incentive Stock Options. The shares to be offered under the Plan shall be authorized and unissued Common Stock, issued Common Stock that shall have been reacquired by the Company. Any shares of Common Stock that are issued upon exercise of Awards of Options or Stock Appreciation Rights shall be counted against this limit as one share for every one share issued and any shares of Common Stock that are issued under Awards other than Options or Stock Appreciation Rights shall be counted against this limit as 2.38 shares for every one share issued. Similarly, any shares of Common Stock that again become available for Awards under the Plan pursuant to Section 4.02 shall be added to this limit as (i) one share for every one share subject to Options or Stock Appreciation Rights granted under the Plan, and (ii) as 2.38 shares for every one share subject to Awards other than Options or Stock Appreciation Rights granted

 

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under the Plan. Any shares of Common Stock that become available for Awards under the Plan pursuant to Section 4.03 shall be added to this limit as one share for every one share subject to an award under the Prior Plan.

4.02    Shares Subject to Terminated or Cash-Settled Awards. Common Stock covered by any unexercised portions of terminated or forfeited Options (including canceled and expired Options) granted under Article VI, Restricted Shares or Restricted Stock Units forfeited as provided in Article VII, other stock based Awards terminated or forfeited as provided under the Plan, and Common Stock subject to any Awards to the extent settled in cash or that are otherwise surrendered by the Participant may again be subject to new Awards under the Plan. Notwithstanding the foregoing, shares of Common Stock surrendered to or withheld by the Company in payment or satisfaction of the Purchase Price of an Option or Exercise Price of a SAR or tax withholding obligation with respect to an Award shall not be available for the grant of new Awards under the Plan. In addition, shares of Common Stock repurchased by the Company using Stock Option exercise proceeds will not be available for the grant of new Awards under the Plan, and upon exercise of a SAR settled in shares of Common Stock, the gross number of shares of Common Stock covered by the portion of the SAR that is so exercised will cease to be available for the grant of new Awards under the Plan.

4.03    Prior Plan Awards. Common Stock covered by any unexercised portions of terminated or forfeited options (including canceled and expired options) granted under the Prior Plan, restricted shares or restricted stock units granted under the Prior Plan that are forfeited,, other stock based awards granted under the Prior Plan that are terminated or forfeited, and Common Stock subject to any awards under the Prior Plan to the extent settled in cash or that are otherwise surrendered by the participant may be subject to new Awards under the Plan.

4.04    Substitute Awards. Substitute Awards will not reduce the shares of Common Stock authorized for issuance under the Plan. Additionally, in the event that a company acquired by the Company or any subsidiary of the Company or with which the Company or any subsidiary of the Company combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not employees, directors or consultants of the Company and its subsidiaries as of immediately prior to such acquisition or combination.

ARTICLE V

PARTICIPATION

5.01    Eligible Participants. Participants in the Plan shall be such employees, directors and consultants of the Company and its subsidiaries as the Committee, in its sole discretion, may designate from time to time. The Committee’s designation of a Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of a Participant to receive Awards or grants under one portion of the Plan does not require the Committee to include such Participant under other portions of the Plan. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.

5.02    Limitation on Non-Employee Director Compensation. The aggregate dollar value of equity-based (based on the grant date fair value of equity-based Awards) and cash compensation granted under this Plan or otherwise during any calendar year to any non-employee director for his or her services as a member of the Board shall not exceed $600,000; provided, however, that in the calendar year in which a non-employee director first joins the Board or during any calendar year in which a non-employee director is designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the non-employee director may be up to $1,200,000. For the avoidance of doubt, compensation granted to a non-employee director, but deferred, shall be counted against the foregoing limits in the year granted.

 

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ARTICLE VI

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

6.01    Option Awards.

(a)    Grant of Options. The Committee may grant, to such Participants as the Committee may select, Options entitling the Participant to purchase shares of Common Stock from the Company in such number, at such price, and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Committee. The terms of any Option granted under this Plan shall be set forth in an Award Agreement.

(b)    Purchase Price of Options. The Purchase Price of each share of Common Stock which may be purchased upon exercise of any Option granted under the Plan shall be determined by the Committee; provided, however, that in no event shall the Purchase Price be less than the Fair Market Value on the Date of Grant.

(c)    Designation of Options. The Committee shall designate, at the time of the grant of each Option, the Option as an Incentive Stock Option or a Non Qualified Stock Option; provided, however, that an Option may be designated as an Incentive Stock Option only if the applicable Participant is an employee of the Company or a direct or indirect subsidiary on the Date of Grant.

(d)    Special Incentive Stock Option Rules. No Participant may be granted Incentive Stock Options under the Plan (or any other plans of the Company) that would result in Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable by the Participant in any one calendar year. Notwithstanding any other provision of the Plan to the contrary, the Purchase Price of each Incentive Stock Option shall be equal to or greater than the Fair Market Value of the Common Stock subject to the Incentive Stock Option as of the Date of Grant of the Incentive Stock Option; provided, however, that no Incentive Stock Option shall be granted to any person who, at the time the Option is granted, owns stock (including stock owned by application of the constructive ownership rules in Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company, unless at the time the Incentive Stock Option is granted the price of the Option is at least 110% of the Fair Market Value of the Common Stock subject to the Incentive Stock Option and the Incentive Stock Option by its terms is not exercisable for more than five years from the Date of Grant.

(e)    Rights As a Stockholder. Except as otherwise provided by the Committee, a Participant or a transferee of an Option pursuant to Section 11.05 shall have no rights as a stockholder with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of record of any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with respect to any such Common Stock for which the record date is prior to the date on which the Participant or a transferee of the Option shall have become the holder of record of any such shares covered by the Option; provided, however, that Participants are entitled to share adjustments to reflect capital changes under Section 11.08.

6.02    Stock Appreciation Rights.

(a)    Stock Appreciation Right Awards. The Committee is authorized to grant to any Participant one or more Stock Appreciation Rights. Such Stock Appreciation Rights may be granted either independent of or in tandem with Options granted to the same Participant. Stock Appreciation Rights granted in tandem with Options may be granted simultaneously with, or, in the case of Non Qualified Stock Options, subsequent to, the grant to such Participant of the related Option; provided however, that: (i) any Option covering any share of Common Stock shall expire and not be exercisable upon the exercise of any Stock Appreciation Right with respect to the same share, (ii) any Stock Appreciation Right covering any share of Common Stock shall expire and not be exercisable upon the exercise of any related Option with respect to the same share, and (iii) an Option and Stock Appreciation Right covering the same share of Common Stock may not be exercised simultaneously. Upon exercise of a Stock Appreciation Right with respect to a share of Common Stock, the Participant shall be entitled to receive an amount equal to the excess, if any, of (A) the Fair Market Value of a share of Common Stock on the date of exercise over (B) the Exercise Price of such Stock Appreciation Right established in the Award Agreement, which amount shall be payable as provided in Section 6.02(c).

 

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(b)    Exercise Price. The Exercise Price established under any Stock Appreciation Right granted under this Plan shall be determined by the Committee, but in the case of Stock Appreciation Rights granted in tandem with Options shall not be less than the Purchase Price of the related Option; provided, however, that in no event shall the Exercise Price be less than the Fair Market Value on the Date of Grant. Upon exercise of Stock Appreciation Rights granted in tandem with Options, the number of shares subject to exercise under any related Option shall automatically be reduced by the number of shares of Common Stock represented by the Option or portion thereof which are surrendered as a result of the exercise of such Stock Appreciation Rights.

(c)    Payment of Incremental Value. Any payment which may become due from the Company by reason of a Participant’s exercise of a Stock Appreciation Right may be paid to the Participant as determined by the Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common Stock. In the event that all or a portion of the payment is made in Common Stock, the number of shares of Common Stock delivered in satisfaction of such payment shall be determined by dividing the amount of such payment or portion thereof by the Fair Market Value on the date of exercise. No fractional share of Common Stock shall be issued to make any payment in respect of Stock Appreciation Rights; if any fractional share would be issuable, the combination of cash and Common Stock payable to the Participant shall be adjusted as directed by the Committee to avoid the issuance of any fractional share.

6.03    Terms of Stock Options and Stock Appreciation Rights.

(a)    Conditions on Exercise. An Award Agreement with respect to Options or Stock Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic installments) as may be determined by the Committee at the time of grant.

(b)    Duration of Options and Stock Appreciation Rights. Options and Stock Appreciation Rights shall terminate upon the first to occur of the following events:

(i)    Expiration of the Option or Stock Appreciation Right as provided in the Award Agreement; or

(ii)    Termination of the Award in the event of a Participant’s disability, retirement, death or other Termination of Service as provided in the Award Agreement; or

(iii)    Ten years from the Date of Grant (five years in certain cases, as described in Section 6.01(d)); or

(iv)    Solely in the case of a Stock Appreciation Right granted in tandem with an Option, upon the expiration of the related Option.

(c)    Acceleration or Extension of Exercise Time. Subject to Section 11.03 below, the Committee, in its sole discretion, shall have the right (but shall not be obligated), exercisable on or at any time after the Date of Grant, to permit the exercise of an Option or Stock Appreciation Right (i) prior to the time such Option or Stock Appreciation Right would become exercisable under the terms of the Award Agreement, (ii) after the termination of the Option or Stock Appreciation Right under the terms of the Award Agreement, or (iii) after the expiration of the Option or Stock Appreciation Right.

6.04    Exercise Procedures. Each Option and Stock Appreciation Right granted under the Plan shall be exercised under such procedures and by such methods as the Board may establish or approve from time to time. The Purchase Price of shares purchased upon exercise of an Option granted under the Plan shall be paid in full in cash by the Participant pursuant to the Award Agreement; provided, however, that the Committee may (but shall not be required to) permit payment to be made (a) by delivery to the Company of shares of Common Stock held by the Participant, (b) by a “net exercise” method under which the Company reduces the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate Exercise Price or Purchase Price, or (c) such other consideration as the Committee deems appropriate and in compliance with applicable law (including payment under an arrangement constituting a brokerage transaction as permitted under the provisions of Regulation T applicable to cashless exercises promulgated by the Federal Reserve Board, unless prohibited by Section 402 of the Sarbanes Oxley Act of 2002). In the event that any Common Stock shall be transferred to the Company to satisfy all or any part of the Purchase Price, the part of the Purchase Price deemed to have been satisfied by such transfer of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction of the Purchase Price any fractional share of Common Stock. Any part of the Purchase Price paid in cash upon the exercise of any Option shall be added to the general funds of the Company and may be used for any proper corporate purpose. Unless the Committee shall

 

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otherwise determine, any Common Stock transferred to the Company as payment of all or part of the Purchase Price upon the exercise of any Option shall be held as treasury shares.

6.05    Change in Control. With respect to each Award of Options or Stock Appreciation Rights, the Committee shall determine whether and to what extent such Options or Stock Appreciation Rights shall become immediately and fully exercisable in the event of a Change in Control or upon the occurrence of one or more specified conditions following a Change in Control. Such provisions relating to the effect of a Change in Control on an outstanding Award of Options or Stock Appreciation Rights shall be set forth in the applicable Award Agreement.

6.06    Early Exercise. An Option may, but need not, include a provision by which the Participant may elect to exercise the Option in whole or in part prior to the date the Option is fully vested. The provision may be included in the Award Agreement at the time of grant of the Option or may be added to the Award Agreement by amendment at a later time. In the event of an early exercise of an Option, any shares of Common Stock received shall be subject to a special repurchase right in favor of the Company with terms established by the Board. If the Company exercises its repurchase rights, the Company may elect to pay the repurchase price in the form of (i) cash or cash equivalents, (ii) installment payments over a specified period, (iii) cancellation of indebtedness, or (iv) any other form of consideration approved by the Company. The Board shall determine the time and/or the event that causes the repurchase right to terminate and fully vest the Common Stock in the Participant. Alternatively, in the sole discretion of the Board, one or more Participants may be granted stock purchase rights allowing them to purchase shares of Common Stock outright, subject to conditions and restrictions as the Board may determine.

ARTICLE VII

RESTRICTED SHARES AND RESTRICTED STOCK UNITS

7.01    Award of Restricted Stock and Restricted Stock Units. The Committee may grant to any Participant an Award of Restricted Shares consisting of a specified number of shares of Common Stock issued to the Participant subject to such terms, conditions and forfeiture and transfer restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. The Committee may also grant Restricted Stock Units representing the right to receive shares of Common Stock in the future subject to such terms, conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. The terms of any Restricted Share and Restricted Stock Unit Awards granted under this Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with this Plan.

7.02    Restricted Shares.

(a)    Issuance of Restricted Shares. As soon as practicable after the Date of Grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, or its agent, Common Stock, registered on behalf of the Participant, evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Common Stock covered by Awards under this Article VII shall be subject to the restrictions, terms and conditions contained in the Plan and the Award Agreement entered into by the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares may be held in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse or release of all restrictions with respect to an Award as described in Section 7.02(d), one or more share certificates, registered in the name of the Participant, for an appropriate number of shares as provided in Section 7.02(d), free of any restrictions set forth in the Plan and the Award Agreement shall be delivered to the Participant.

(b)    Stockholder Rights. Beginning on the Date of Grant of the Restricted Share Award and subject to execution of the Award Agreement as provided in Section 7.02(a), the Participant shall become a stockholder of the Company with respect to all shares subject to the Award Agreement and shall have all of the rights of a stockholder, including, but not limited to, the right to vote such shares and the right to receive dividends; provided, however, that any dividends, whether distributed as cash or other property, shall be subject to the same restrictions as such Restricted Shares and held or restricted as provided in Section 7.02(a).

 

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(c)    Restriction on Transferability. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution, or to an inter vivos trust with respect to which the Participant is treated as the owner under Sections 671 through 677 of the Code, except to the extent that Section 16 of the Exchange Act limits a Participant’s right to make such transfers), pledged or sold prior to lapse of the restrictions applicable thereto.

(d)    Delivery of Shares Upon Vesting. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, or at such earlier time as provided under the provisions of Section 7.04, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 11.06, the Company shall deliver to the Participant or, in case of the Participant’s death, to the Participant’s Beneficiary, one or more share certificates for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law.

(e)    Forfeiture of Restricted Shares. Subject to Sections 7.02(f) and 7.04, all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company or an Affiliate as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award.

(f)    Waiver of Forfeiture Period. Notwithstanding anything contained in this Article VII to the contrary but subject to Section 11.03 below, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate.

7.03    Restricted Stock Units.

(a)    Settlement of Restricted Stock Units. Payments shall be made to Participants with respect to their Restricted Stock Units as soon as practicable after the Committee has determined that the terms and conditions applicable to such Award have been satisfied or at a later date if distribution has been deferred. Payments to Participants with respect to Restricted Stock Units shall be made in the form of Common Stock, or cash or a combination of both, as the Committee may determine. The amount of any cash to be paid in lieu of Common Stock shall be determined on the basis of the Fair Market Value of the Common Stock on the date any such payment is processed. As to shares of Common Stock which constitute all or any part of such payment, the Committee may impose such restrictions concerning their transferability and/or their forfeiture as may be provided in the applicable Award Agreement or as the Committee may otherwise determine, provided such determination is made on or before the date certificates for such shares are first delivered to the applicable Participant.

(b)    Stockholder Rights. Until the lapse or release of all restrictions applicable to an Award of Restricted Stock Units, no shares of Common Stock shall be issued in respect of such Awards and no Participant shall have any rights as a stockholder of the Company with respect to the shares of Common Stock covered by such Award of Restricted Stock Units. If specified by the Committee in the Award Agreement, the recipient of Restricted Stock Unit shall be entitled to receive, currently or on a deferred basis, dividend equivalents with respect to the Common Stock or other securities covered by the Award of Restricted Stock Units; provided, however, that any dividend equivalents shall be subject to the same vesting or other restrictions as the Restricted Stock Unit to which it relates.

(c)    Waiver of Forfeiture Period. Notwithstanding anything contained in this Section 7.03 to the contrary but subject to Section 11.03 below, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of shares issuable upon settlement of the Restricted Stock Units constituting an Award) as the Committee shall deem appropriate.

 

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(d)    Deferral of Payment. If approved by the Committee and set forth in the applicable Award Agreement, a Participant may elect to defer the amount payable with respect to the Participant’s Restricted Stock Units in accordance with such terms as may be established by the Committee, subject to the requirements of Section 409A.

7.04    Change in Control. With respect to each Award of Restricted Shares and Restricted Stock Unit Awards, the Committee shall determine whether and to what extent such Restricted Shares and Restricted Stock Unit Awards shall become immediately and fully vested in the event of a Change in Control or upon the occurrence of one or more specified conditions following a Change in Control. Such provisions relating to the effect of a Change in Control on an outstanding Award of Restricted Shares and Restricted Stock Unit Awards shall be set forth in the applicable Award Agreement.

ARTICLE VIII

PERFORMANCE AWARDS

8.01    Performance Awards.

(a)    Award Periods and Calculations of Potential Incentive Amounts. The Committee may grant Performance Awards to Participants. A Performance Award shall consist of the right to receive a payment (measured by the Fair Market Value of a specified number of shares of Common Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash amount) contingent upon the extent to which certain predetermined performance targets have been met during an Award Period. The Committee, in its discretion and under such terms as it deems appropriate, may permit newly eligible Participants, such as those who are promoted or newly hired, to receive Performance Awards after an Award Period has commenced.

(b)    Performance Targets. Subject to Section 11.19, the performance targets applicable to a Performance Award may include such goals related to the performance of the Company or, where relevant, any one or more of its subsidiaries or divisions and/or the performance of a Participant as may be established by the Committee in its discretion. The performance targets established by the Committee may vary for different Award Periods and need not be the same for each Participant receiving a Performance Award in an Award Period.

(c)    Earning Performance Awards. The Committee, at or as soon as practicable after the Date of Grant, shall prescribe a formula to determine the percentage of the Performance Award to be earned based upon the degree of attainment of the applicable performance targets.

(d)    Payment of Earned Performance Awards. Subject to the requirements of Section 11.06, payments of earned Performance Awards shall be made in cash or Common Stock, or a combination of cash and Common Stock, in the discretion of the Committee. The Committee, in its sole discretion, may define, and set forth in the applicable Award Agreement, such terms and conditions with respect to the payment of earned Performance Awards as it may deem desirable.

8.02    Termination of Service. In the event of a Participant’s Termination of Service during an Award Period, the Participant’s Performance Awards shall be forfeited except as may otherwise be provided in the applicable Award Agreement.

8.03    Change in Control. With respect to each Performance Award, the Committee shall determine whether and to what extent such Performance Awards shall become immediately and fully vested and payable in the event of a Change in Control or upon the occurrence of one or more specified conditions following a Change in Control. Such provisions relating to the effect of a Change in Control on an outstanding Performance Award shall be set forth in the applicable Award Agreement.

ARTICLE IX

OTHER STOCK BASED AWARDS

9.01    Grant of Other Stock Based Awards. Other stock based Awards, consisting of stock purchase rights (with or without loans to Participants by the Company containing such terms as the Committee shall determine), Awards of Common Stock, or Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the persons to whom

 

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and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of the Awards. Any such Award shall be confirmed by an Award Agreement executed by the Committee and the Participant, which Award Agreement shall contain such provisions as the Committee determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.

9.02    Terms of Other Stock Based Awards. In addition to the terms and conditions specified in the Award Agreement, Awards made pursuant to this Article IX shall be subject to the following:

(a)    Any Common Stock subject to Awards made under this Article IX may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses; and

(b)    If specified by the Committee in the Award Agreement, the recipient of an Award under this Article IX shall be entitled to receive interest or dividends or dividend equivalents with respect to the Common Stock or other securities covered by the Award; provided, however, that any interest or dividends or dividend equivalents shall be subject to the same vesting or other restrictions as the Award under this Article IX to which it relates; and

(c)    The Award Agreement with respect to any Award shall contain provisions dealing with the disposition of such Award in the event of a Termination of Service prior to the exercise, payment or other settlement of such Award, whether such termination occurs because of retirement, disability, death or other reason, with such provisions to take account of the specific nature and purpose of the Award.

ARTICLE X

CASH INCENTIVE AWARDS

10.01    Eligibility. Employees of the Company will be eligible to receive cash incentive Awards under this Article X.

10.02    Awards.

(a)    Performance Targets. The Committee shall establish performance targets based on specified levels of one or more of the Performance Goals.

(b)    Amounts of Awards. In conjunction with the establishment of performance targets for a fiscal year or such other performance period established by the Committee, the Committee shall adopt a formula (on the basis of percentages of Participants’ salaries, shares in a bonus pool or otherwise) for computing the respective amounts payable under the Plan to Participants if and to the extent that the performance targets are attained.

(c)    Payment of Awards. Awards will be payable to Participants in cash following expiration of the applicable performance period upon determination of the attainment of the specified performance targets for the applicable performance period.

(d)    Discretion. Notwithstanding the attainment by the Company of the specified performance targets, the Committee shall have the discretion, which need not be exercised uniformly among the Participants, to increase, reduce or eliminate the Award that would be otherwise paid.

(e)    Deferral. The Committee may require that a portion of any cash payment payable under this Article X shall be mandatorily deferred for a deferral period specified by the Committee in connection with the establishment or grant of the Award. In addition, the Committee may permit the applicable Participant to elect to defer a portion of any Award payable hereunder to one or more dates specified by the Participant at the time the deferral election is made. Any voluntary deferral election by a Participant shall be in writing and shall be made and become irrevocable by no later than the end of the calendar year prior to the calendar year in which begins the performance period for the Award to which the deferral election applies.

(f)    Guidelines. The Committee may adopt from time to time written policies for its implementation of this Article X.

(g)    Non Exclusive Arrangement. The adoption and operation of this Article X shall not preclude the Board or the Committee from approving other incentive compensation arrangements for the benefit of individuals who are Participants hereunder as the Board or Committee, as the case may be, deems appropriate and in the best interests of the Company.

 

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ARTICLE XI

TERMS APPLICABLE GENERALLY TO AWARDS

GRANTED UNDER THE PLAN

11.01    Plan Provisions Control Award Terms. Except as provided in Section 11.17, the terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall control. Except as provided in Section 11.04 and Section 11.08, the terms of any Award granted under the Plan may not be changed after the Date of Grant of such Award so as to materially decrease the value of the Award without the express written approval of the holder.

11.02    Award Agreement. Except as otherwise determined by the Committee, no person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant to whom such Award shall have been granted shall have executed and delivered an Award Agreement or received any other Award acknowledgment authorized by the Committee expressly granting the Award to such person and containing provisions setting forth the terms of the Award.

11.03    Minimum Vesting. Awards shall be subject to a minimum vesting period of one year from the Date of Grant; provided, however, that (a) the Committee may permit the acceleration of vesting of an Award in the event of a Participant’s death or disability or the occurrence of a Change in Control, (b) Awards made to non-employee directors may vest on the earlier of the one-year anniversary of the Date of Grant or the next regular annual meeting of the Company’s stockholders that is at least 50 weeks after the immediately preceding year’s annual meeting, and (c) the Committee may grant Awards covering 5% or fewer of the total number of shares of Common Stock authorized for issuance under the Plan without regard to the above-described minimum vesting requirements.

11.04    Modification of Award After Grant; No Repricing. No Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award or is necessary or advisable in the judgment of the Committee to comply with the requirements of Section 409A) after the Date of Grant except by express written agreement between the Company and the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Committee. Except as provided in Section 11.08 or as approved by the Company’s stockholders, an outstanding Option or Stock Appreciation Right may not be (i) amended after the Date of Grant to reduce its Purchase Price or Exercise Price or (ii) terminated and replaced with a substitute Award, cash payment or other property if the effect of such termination and substitution is to reduce the Purchase Price or Exercise Price. The Committee may not take any other action that would be considered a “repricing” of an Option or Stock Appreciation Right under the applicable listing standards of any national securities exchange or association on which the Company’s securities are listed without the prior approval of the Company’s stockholders.

11.05    Limitation on Transfer. Except as provided in Section 7.02(c) in the case of Restricted Shares, a Participant’s rights and interest under the Plan may not be assigned or transferred other than by will or the laws of descent and distribution, and during the lifetime of a Participant, only the Participant personally (or the Participant’s personal representative) may exercise rights under the Plan. The Participant’s Beneficiary may exercise the Participant’s rights to the extent they are exercisable under the Plan following the death of the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of the Exchange Act with respect to Participants subject to such Section, the Committee may grant Non Qualified Stock Options that are transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for such family members, and the Committee may also amend outstanding Non Qualified Stock Options to provide for such transferability.

11.06    Taxes. The Company shall be entitled, if the Committee deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any amount payable and/or shares issuable under such Participant’s Award, or with respect to any income recognized upon a disqualifying disposition of shares received pursuant to the exercise of an Incentive Stock Option, and the Company may defer payment or issuance of the cash or shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for

 

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any such tax. The amount of such withholding or tax payment shall be determined by the Committee and shall be payable by the Participant at such time as the Committee determines in accordance with the following rules:

(a)    The Participant shall have the right to elect to meet his or her withholding requirement (i) by having withheld from such Award at the appropriate time that number of shares of Common Stock, rounded down to the nearest whole share, whose Fair Market Value is equal to the amount of withholding taxes due, (ii) by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of shares and cash.

(b)    In the case of Participants who are subject to Section 16 of the Exchange Act, the Committee may impose such limitations and restrictions as it deems necessary or appropriate with respect to the delivery or withholding of shares of Common Stock to meet tax withholding obligations.

11.07    Surrender of Awards. Subject to compliance with Section 409A, any Award granted under the Plan may be surrendered to the Company for cancellation on such terms as the Committee and the holder approve. Subject to compliance with Section 409A and Section 11.04, with the consent of the Participant, the Committee may substitute a new Award under this Plan in connection with the surrender by the Participant of an equity compensation Award previously granted under this Plan or any other plan sponsored by the Company.

11.08    Adjustments to Reflect Capital Changes.

(a)    Recapitalization. In the event of any corporate event or transaction (including, but not limited to, a change in the Common Stock or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin off, or other distribution of stock or property of the Company, a combination or exchange of Common Stock, dividend in kind, or other like change in capital structure, number of outstanding shares of Common Stock, distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall make equitable and appropriate adjustments and substitutions, as applicable, to or of the number and kind of shares subject to outstanding Awards, the Purchase Price or Exercise Price for such shares, the number and kind of shares available for future issuance under the Plan, and other determinations applicable to outstanding Awards. The Committee shall have the power and sole discretion to determine the amount of the adjustment to be made in each case.

(b)    Merger. In the event that the Company is a party to a Merger, outstanding Awards shall be subject to the agreement of Merger. Such agreement may provide, without limitation, for the continuation of outstanding Awards by the Company (if the Company is a surviving corporation), for their assumption by the surviving corporation or its parent or subsidiary, for the substitution by the surviving corporation or its parent or subsidiary of its own awards for such Awards, for accelerated vesting and accelerated expiration, for settlement in cash or cash equivalents, or for Awards with an Exercise Price or Purchase Price that equals or exceeds the consideration per share of Common Stock in the Merger, for the cancellation of such Award for no consideration.

(c)    Options to Purchase Shares or Stock of Acquired Companies. After any Merger in which the Company or an Affiliate shall be a surviving corporation, the Committee may grant substituted Options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing old options granted under a plan of another party to the Merger whose shares or stock subject to the old options may no longer be issued following the Merger. The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustments may provide for the elimination of any fractional shares which might otherwise become subject to any Options.

11.09    No Right to Continued Service. No person shall have any claim of right to be granted an Award under this Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the service of the Company or any of its subsidiaries.

11.10    Awards Not Includable for Benefit Purposes. Payments received by a Participant pursuant to the provisions of the Plan shall not be included in the determination of benefits under any pension, group insurance or other benefit plan applicable to the Participant which is maintained by the Company or any of its subsidiaries, except as may be provided under the terms of such plans or determined by the Board.

 

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11.11    Governing Law. All determinations made and actions taken pursuant to the Plan shall be governed by the laws of Delaware and construed in accordance therewith.

11.12    No Strict Construction. No rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Committee.

11.13    Compliance with Rule 16b-3. It is intended that, unless the Committee determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3. The Board is authorized to amend the Plan and to make any such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3.

11.14    Captions. The captions (i.e., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions have been used in the Plan.

11.15    Severability. Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect.

11.16    Amendment and Termination.

(a)    Amendment. The Board shall have complete power and authority to amend the Plan at any time; provided, however, that the Board shall not, without the requisite affirmative approval of stockholders of the Company, make any amendment which requires stockholder approval under the Code or under any other applicable law or rule of any stock exchange which lists Common Stock or Company Voting Securities. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted under the Plan, materially adversely affect the right of such individual under such Award.

(b)    Termination. The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the expiration date of such Award to the same extent such Award would have been exercisable had the Plan not terminated.

11.17    Foreign Qualified Awards. Awards under the Plan may be granted to such employees of the Company and its subsidiaries who are residing in foreign jurisdictions as the Committee in its sole discretion may determine from time to time. The Committee may adopt such supplements to the Plan as may be necessary or appropriate to comply with the applicable laws of such foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such supplement with terms or conditions inconsistent with the provision set forth in the Plan.

11.18    Dividend Equivalents. For any Award granted under the Plan, the Committee shall have the discretion, upon the Date of Grant or thereafter, to establish a Dividend Equivalent Account with respect to the Award, and the applicable Award Agreement or an amendment thereto shall confirm such establishment. If a Dividend Equivalent Account is established, the following terms shall apply:

(a)    Terms and Conditions. Dividend Equivalent Accounts shall be subject to such terms and conditions as the Committee shall determine and as shall be set forth in the applicable Award Agreement. Such terms and conditions may include, without limitation, for the Participant’s Dividend Equivalent Account to be credited as of the record date of each cash dividend on the Common Stock with an amount equal to the cash dividends which would be paid with respect to the number of shares of Common Stock then covered by the related Award if such shares of Common Stock had been owned of record by the Participant on such record date. Notwithstanding any other provision of the Plan to the contrary, Dividend Equivalent Accounts shall not be settled until such time as the underlying Award with respect to which the Dividend Equivalent Account relates vests and is settled.

 

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(b)    Unfunded Obligation. Dividend Equivalent Accounts shall be established and maintained only on the books and records of the Company and no assets or funds of the Company shall be set aside, placed in trust, removed from the claims of the Company’s general creditors, or otherwise made available until such amounts are actually payable as provided hereunder.

(c)    No Dividends or Dividend Equivalents on Any Unvested Awards. For the avoidance of doubt, while the Committee may provide that dividends and dividend equivalents accrue on unvested Awards other than Options and Stock Appreciation Rights, no dividends or dividend equivalents shall be paid or distributed on any Award unless and until the corresponding portion of such Award has vested and is settled.

11.19    Adjustment of Performance Goals and Targets. Notwithstanding any provision of the Plan to the contrary, the Committee shall have the authority to adjust any Performance Goal, performance target or other performance based criteria established with respect to any Award under the Plan if circumstances occur (including, but not limited to, unusual or nonrecurring events, changes in tax laws or accounting principles or practices or changed business or economic conditions) that cause any such Performance Goal, performance target or performance based criteria to be inappropriate in the judgment of the Committee.

11.20    Legality of Issuance. Notwithstanding any provision of this Plan or any applicable Award Agreement to the contrary, the Committee shall have the sole discretion to impose such conditions, restrictions and limitations (including suspending exercises of Options or Stock Appreciation Rights and the tolling of any applicable exercise period during such suspension) on the issuance of Common Stock with respect to any Award unless and until the Committee determines that such issuance complies with (i) any applicable registration requirements under the Securities Act of 1933 or the Committee has determined that an exemption therefrom is available, (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed, (iii) any applicable Company policy or administrative rules, and (iv) any other applicable provision of state, federal or foreign law, including foreign securities laws where applicable. Shares issued under the Plan may be documented in book entry form.

11.21    Restrictions on Transfer. Regardless of whether the offering and sale of Common Stock under the Plan have been registered under the Securities Act of 1933 or have been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such Common Stock (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable to achieve compliance with the provisions of the Securities Act of 1933, the securities laws of any state, the United States or any other applicable foreign law.

11.22    Further Assurances. As a condition to receipt of any Award under the Plan, a Participant shall agree, upon demand of the Company, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company, to implement the provisions and purposes of the Plan.

11.23    Clawback. Notwithstanding any other provision of this Plan or any applicable Award Agreement to the contrary, if the Board determines: (i) that the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the law, whether such noncompliance is the result of misconduct or other circumstances, a Participant shall be required to reimburse the Company for any amounts earned or payable with respect to an Award to the extent required by and otherwise in accordance with applicable law and any Company policies adopted or implemented by the Board or Committee from time to time or (ii) that the prior determination of the level of achievement of any Performance Goal is materially incorrect and that materially incorrect determination has caused the payment of cash or delivery of shares in an amount greater than the amount that should have been paid or delivered had the determination been correct, the Participant shall be required to return to the Company, within 30 days of written demand, the amount by which the amount that was paid or delivered exceeds the amount that should have been paid or delivered if the prior determination had been correct. In addition, Awards granted under this Plan will be subject to recoupment in accordance with any clawback policy that the Company adopts or is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. No recovery of compensation under this Section 11.23 or any such clawback policy will be an event giving rise to a right to resign for “good reason” or be deemed a “constructive termination” (or any similar term) as such terms are used in any agreement between any Participant and the Company.

 

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LOGO

P.O. BOX 8016, CARY, NC 27512-9903

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Universal Insurance Holdings, Inc.

Annual Meeting of Shareholders

For Shareholders of record as of April 13, 2021

                       
 
 
 

 

TIME:

Friday, June 11, 2021 9:00 AM, Eastern Time

PLACE:

Boca Raton Resort & Club

    

501 E. Camino Real, Boca Raton, FL 33432

This proxy is being solicited on behalf of the Board of Directors

The undersigned hereby appoints Frank C. Wilcox and Gary L. Ropiecki (the “Named Proxies”), and each of them with full power of substitution, as the lawful proxies of the undersigned, and hereby authorizes them to represent and to vote all shares of capital stock of Universal Insurance Holdings, Inc. (the “Company”) which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of the Company to be held at 9:00 AM, Eastern Time, on Friday, June 11, 2021 at Boca Raton Resort & Club, 501 E. Camino Real, Boca Raton, FL 33432 and at any adjournment or postponement thereof, including, without limitation, to vote for the election for such substitute nominee(s) for Director as such Named Proxies may select in the event that any nominee(s) named become(s) unable to serve.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN OR, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, AND 4. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof.


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Please make your marks like this: LOGO Use dark black pencil or pen only

COMPANY PROPOSALS - THE BOARD OF DIRECTORS RECOMMENDS A VOTE:

FOR EACH NOMINEE IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4

 

    PROPOSAL   YOUR VOTE    BOARD OF
DIRECTORS
RECOMMENDS
1.       Election of ten directors.   FOR   AGAINST   ABSTAIN    LOGO
  1.01 Scott P. Callahan          FOR
  1.02 Kimberly D. Campos          FOR
  1.03 Stephen J. Donaghy          FOR
  1.04 Sean P. Downes          FOR
  1.05 Marlene M. Gordon          FOR
  1.06 Richard D. Peterson          FOR
  1.07 Michael A. Pietrangelo          FOR
  1.08 Ozzie A. Schindler          FOR
  1.09 Jon W. Springer          FOR
  1.10 Joel M. Wilentz, M.D.          FOR
          
    FOR   AGAINST   ABSTAIN   
2.   Approval of Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan.          FOR
3.   Advisory vote to approve the compensation paid to the Company’s named executive officers.          FOR
4.   Ratification of the appointment of Plante & Moran, PLLC as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2021.          FOR

Important Notice Regarding Availability of Proxy Materials for the Annual Meeting

to be Held on June 11, 2021. The Notice, Proxy Statement and Annual Report are

available at www.proxypush.com/UVE

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Signature (and Title if applicable)                                                                  Date       Signature (if held jointly)                                                                              Date
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