Proposals

Proposals

Proposal 2: Advisory Vote on Executive Compensation

Section 14A of the Exchange Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act,” enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. As previously disclosed, the Board has determined that it will hold an advisory vote on executive compensation on an annual basis, and the next stockholder advisory vote will occur at our 2018 Annual Meeting of Stockholders.

As described in detail in the CD&A section above, we design our executive compensation programs to, among other things, attract, motivate, and retain our named executive officers, who are critical to our success. Under these programs, we reward our named executive officers for our successful performance, the achievement of specific annual, long-term and strategic goals, and the realization of increased shareholder value. Our executive compensation programs are substantially tied into our key business objectives and total shareholder return, and, therefore, aligned with the interests of our stockholders. The Board maintains the highest level of corporate governance over our executive pay programs, and closely monitors best practices and the compensation programs and pay levels of executives at peer companies to ensure that our compensation programs are within the norm of a range of market practices.

We have two stockholder approved incentive plans that we use to motivate, retain and reward our executives. These cash and equity plans make up a majority of the pay we provide to our executives. As a result of this pay-for-performance structure, our named executive officers generally realized an amount significantly above their target compensation during 2014, 2015 and 2016, when our Common Stock price appreciated 162% on a cumulative basis during the three-year period ended December 31, 2016 and we delivered strong financial and operational results. We believe our performance pay structure appropriately incents executives without excessive risk. In 2016, the Compensation Committee continued to emphasize its philosophy of pay for performance by utilizing TSR PRSUs and AEBITDA PRSUs.

We ask that you support the compensation of our named executive officers as disclosed in our CD&A and the accompanying tables contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, Summary Compensation Table and the other related tables and narrative disclosure.”

Because your vote is advisory, it will not bind us, the Compensation Committee, or our Board. However, our Board and our Compensation Committee value the opinions of our stockholders and will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs and policies.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.

Proposal 3: Advisory Vote on the Frequency of an Advisory Vote on Executive Compensation

The Dodd-Frank Act enables our stockholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules. By voting on this Proposal 3, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation to occur every three years, every two years or every year. Stockholders may also abstain from voting on this proposal.

After careful consideration of this Proposal, our Board has determined that an advisory vote on executive compensation that occurs every year (an annual vote) is the most appropriate alternative, and therefore our Board recommends that you vote for a one-year interval for the advisory vote on executive compensation. Stockholders are not voting to approve or disapprove the Board’s recommendation.

In formulating its recommendation, our Board considered that an annual advisory vote on executive compensation will allow our stockholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. Additionally, an annual advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices on a routine basis. We understand that our stockholders may have different views as to what is the best approach, and we look forward to hearing from our stockholders on this Proposal.

You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, or three years, or abstain from voting.

The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. However, because this vote is advisory and not binding on our Board or the Company in any way, our Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE OPTION OF EVERY ONE YEAR (ANNUAL) AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.

Proposal 4: Approval of the AMN Healthcare 2017 Senior Executive Incentive Bonus Plan

Introduction

On February 24, 2017, the Board adopted the AMN Healthcare 2017 Senior Executive Incentive Bonus Plan (i.e., the Proposed Bonus Plan), subject to approval of our stockholders. If our stockholders approve the Proposed Bonus Plan, there will be no further awards under the current Bonus Plan and it will terminate subject to the completion of our 2017 bonus awards made under it. The following description only summarizes certain provisions of the Proposed Bonus Plan and is qualified in its entirety by reference to its full text, a copy of which we attach as Exhibit C to this proxy statement. Unless the context indicates otherwise, capitalized terms used in this Proposal 4 have the meanings given to them in the attached Proposed Bonus Plan.

Summary of the Proposed Bonus Plan

Purpose

Section 162(m) of the Code generally does not allow publicly held companies to obtain tax deductions for compensation of more than $1,000,000 paid in any year to their chief executive officer, or any of three most highly compensated executive officers, other than the chief financial officer (such officers for purposes of this Proposal 4 and Proposal 5 below, the “Named Executive Officers”), unless such payments are “performance-based” in accordance with conditions specified under Section 162(m) of the Code and the Treasury Regulations promulgated thereunder (the “Section 162(m) Limitations”). One of those conditions requires us to obtain stockholder approval of the material terms of the performance goals set by a committee of outside directors. We must obtain stockholder approval initially and every five years thereafter. The Proposed Bonus Plan is intended to satisfy the Section 162(m) Limitations.

The purpose of the Proposed Bonus Plan is to establish a program of incentive compensation for Named Executive Officers and other key employees of the Company and its subsidiaries that is directly related to the performance results of the Company and such individuals. We believe if the applicable performance goals are satisfied, this Proposal 4 would enable us to pay performance-based compensation to our Named Executive Officers and to obtain tax deductions for such payments, without regard to the limitations of Section 162(m) of the Code. Although approval of the Proposed Bonus Plan by stockholders will enable us to grant awards that qualify as “performance-based compensation” under Section 162(m) of the Code, we believe that it is in our best interests to maintain the flexibility to also grant awards at the discretion of the Compensation Committee that do not qualify as “performance-based compensation.”

We note that if our stockholders do not approve the Proposed Bonus Plan, our current Bonus Plan will remain in effect. However, because the current Bonus Plan will not have been approved since 2012, it will no longer satisfy the stockholder approval requirement of Section 162(m). Accordingly, we will not be able to utilize “performance-based compensation” in connection with the $1,000,000 tax deduction limit for each of our Named Executive Officers for bonus awards that would otherwise qualify as such subsequent to the date of the Annual Meeting.

Administration

The Board selected the Compensation Committee to administer the Proposed Bonus Plan. The Compensation Committee is composed of two or more members of the Board, each of whom is required to be an “outside director” (within the meaning of Section 162(m) of the Code). The Compensation Committee has all the authority that may be necessary or helpful to enable it to discharge its responsibilities with respect to the Proposed Bonus Plan, including authority to determine eligibility for participation, establish the maximum award that may be earned by each Participant (which may be expressed in terms of dollar amount, percentage of salary or any other measurement), establish goals for each participant, calculate and determine each participant’s level of attainment of such goals, and calculate the Bonus Award for each participant based upon such level of attainment. Except as otherwise specifically limited in the Proposed Bonus Plan, the Compensation Committee has full power and authority to construe, interpret, and administer the Proposed Bonus Plan.

Eligibility

Any officer or other key employee of the Company and its subsidiaries selected by the Compensation Committee, in its sole discretion, shall be eligible to participate in the Proposed Bonus Plan. As of December 31, 2016, 11 of our employees participated in our current Bonus Plan, which the Proposed Bonus Plan is intended to replace.

Bonus Awards and Performance Goals

The Proposed Bonus Plan provides that the Compensation Committee shall designate for each “Performance Period” (i.e., the period during which performance is measured to determine the level of attainment of an award) which participants will be eligible for awards. Our fiscal year, which is currently the calendar year, or any period of one or more years, or a portion of a year, may constitute a Performance Period under the Proposed Bonus Plan. Performance Periods may overlap.

The Compensation Committee will establish for each Performance Period a maximum award (and, if the Compensation Committee so determines, a target and/or threshold award) and goals relating to the Company, subsidiary, divisional, departmental and/or functional performance for each participant (the “Performance Goals”) and communicate such Performance Goals to each participant prior to or during the applicable Performance Period. The maximum award is subject to the fixed maximum under the Proposed Bonus Plan, as described below. Participants will earn Bonus Awards based upon the level of attainment of the applicable Performance Goals during the applicable Performance Period, as and to the extent established by the Compensation Committee.

The Performance Goals will be based on attainment of specific levels of our performance (or of one of our subsidiaries, divisions, departments or functions) with reference to one or more of the following: (i) market value; (ii) book value;(iii) earnings or earnings per share (either basic or diluted), in each case, either before or after taxes (and as may be objectively adjusted as determined by the Compensation Committee, including, without limitation, adjustments for stock compensation expense, integration expenses, incentive awards recorded in the Company’s financial books and records, including annual and long-term incentive awards, extraordinary legal costs (including damages, settlements and attorneys’ fees), changes in United States Generally Accepted Accounting Principles (“GAAP”) treatment of revenue or expenses, discontinued operations, goodwill and other identified asset impairments, depreciation and amortization, and expenses resulting from severance arrangements with terminated employees); (iv) market share; (v) operating profit;(vi) net income; (vii) cash flow; (viii) return on capital or invested capital; (ix) return on assets; (x) return on equity; (xi) margins;(xii) total shareholder return; (xiii) sales or product volume growth; (xiv) productivity improvement or ratios; (xv) costs or expenses; (xvi) net debt reduction; (xvii) earnings before interest, taxes, depreciation and amortization (and other objective adjustments as may be determined by the Compensation Committee, including, without limitation, stock compensation expense, integration expenses, incentive awards recorded in the Company’s financial books and records, including annual and long-term incentive awards, extraordinary legal costs (including damages, settlements and attorneys’ fees), changes in GAAP treatment of revenue or expenses, discontinued operations, goodwill and other identified asset impairments, and expenses resulting from severance arrangements with terminated employees); (xviii) unit volume; (xix) net sales; (xx) balance sheet measurements;(xxi) selling, general and administrative expenses (including, without limitation, SG&A as a percentage of revenue or similar ratios); (xxii) revenue; (xxiii) the Company’s Common Stock price or its enterprise value; (xxiv) completion of acquisitions or business expansion; (xxv) operating income; or (xxvi) any other objective value-based performance measure. Any of the foregoing criteria may be measured in absolute terms or as compared to the results of a peer group, other group of comparable companies selected by the Compensation Committee, or an index.

The Compensation Committee may in its discretion adjust any evaluation of performance with respect to any Performance Goal to exclude or include the impact of the following events:(a) gains or losses on sales or dispositions, (b) asset write-downs, (c) changes in tax law or rate, (d) the cumulative effect of changes in accounting principles or changes in accounting policies, including changes in GAAP treatment of revenue and expenses, (e) events of an “unusual nature” and/or of a type that indicate “infrequency of occurrence,” as defined in FASB Accounting Standards Update 2015 – 01, (f) acquisitions occurring after the start of a Performance Period, integration expenses related to acquisitions, or unbudgeted costs incurred related to future acquisitions, (g) operations discontinued, divested or restructured, including severance costs, (h) gains or losses on refinancing or extinguishment of debt, (i) foreign exchange gains and losses, (j) all or any portion of litigation expenses (including attorneys’ fees, court costs and other out-of-pocket expenses), amounts paid as damages, claim judgments, or settlements, (k) stock compensation expense, (l) expenses resulting from severance arrangements with terminated employees, (m) incentive awards recorded in the Company’s financial books and records, (n) depreciation and amortization and (o) any similar objective event or condition specified by the Compensation Committee.

As soon as practicable following the end of the applicable Performance Period, the Compensation Committee will certify the attainment of the Performance Goals and will calculate the Bonus Award, if any, payable to each participant. Bonus Awards will be paid in a lump sum cash payment, as soon as practicable following the determination of the amount thereof by the Compensation Committee, but not later than the March 15th of the year following the end of the Performance Period. The Compensation Committee retains the right to reduce any Bonus Award, in its discretion. The maximum amount payable to a participant who is a Named Executive Officer in respect of a Bonus Award that is intended to qualify for the performance-based exception to Section 162(m) of the Code with respect to any Performance Period of one year is$3,000,000; provided, however, that (i) such maximum amount shall be proportionately adjusted with respect to Performance Periods that are greater or less than one year in duration, and (ii) if there are two or more Performance Periods that end during any calendar year, in no event shall the aggregate amount payable to any Named Executive Officer with respect to all such Performance Periods for such calendar year exceed $10,000,000.

Clawback under the Proposed Bonus Plan

The Proposed Bonus Plan provides that Bonus Awards thereunder may be subject to recovery under any law, government regulation, stock exchange listing requirement or Company policy adopted pursuant to such laws. Our clawback policy set forth in the Guidelines permits us to require forfeiture or repayment of all or a portion of cash-based incentive awards, which will include Bonus Awards made under the Proposed Bonus Plan, paid to an executive officer under certain circumstances involving misconduct.

Effective Date; Termination and Amendment

If approved by our stockholders, the Proposed Bonus Plan will become effective as of April 19, 2017 (or such later date as the stockholders approve it) and we will not need to seek further stockholder approval until our 2022 Annual Meeting of Stockholders. If our stockholders do not approve the Proposed Bonus Plan, the current Bonus Plan will remain in effect and we will seek re-approval of the current Bonus Plan (with any amendments approved by the Board) at our 2018 Annual Meeting of Stockholders. The Compensation Committee may amend, suspend or terminate the Proposed Bonus Plan at any time; provided, however, that no amendment may be made without the approval of our stockholders if the effect of such amendment would be to cause outstanding or pending 162(m) Bonus Awards to cease to qualify for the performance-based compensation exception to Section 162(m) of the Code.

New Plan Benefits

Because amounts payable under the Proposed Bonus Plan are based on satisfaction of certain Performance Goals in each applicable Performance Period, it cannot be determined at this time what amounts, if any, will be received by any participants under the Proposed Bonus Plan. The amounts earned under the current Bonus Plan for fiscal years 2014, 2015 and 2016 by our Named Executive Officers are set forth in the Summary Compensation Table above.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMN HEALTHCARE 2017
SENIOR EXECUTIVE INCENTIVE BONUS PLAN.

Proposal 5: Approval of the AMN Healthcare 2017 Equity Plan

Introduction

Our stockholders last approved our current Equity Plan in April 2012, which is the last time we requested approval from our stockholders for additional shares for an equity plan. On February 24, 2017, the Board approved the adoption of the AMN Healthcare 2017 Equity Plan (i.e., the Proposed Equity Plan), which is attached to this proxy statement as Exhibit D, subject to approval of our stockholders. If our stockholders approve this Proposal 5, the Proposed Equity Plan will become effective and no more equity awards will be made under our current Equity Plan. Generally, and subject to the share recycling features of the Proposed Equity Plan (as described below), the number of shares that will be reserved for grant under the Proposed Equity Plan upon stockholder approval will equal the sum of (i) 1,400,000 shares, plus (ii) shares available for grant as of the close of business on the Record Date under the current Equity Plan, which equaled 1,765,776, less (iii) shares underlying awards granted under our current Equity Plan between the Record Date and the date of approval by our stockholders of the Proposed Equity Plan (the “Interim Period”). Unless and until our stockholders approve the Proposed Equity Plan, no shares will be authorized for grant under it, and our current Equity Plan will remain in effect.

The Board believes the Proposed Equity Plan will allow us to continue to attract and retain the services of key employees and directors. The Board believes that equity awards are an important element of compensation for management. Equity awards incentivize management to maintain a longer-term perspective to support our growth strategy and meet our financial objectives on a sustained basis. The Board anticipates that continuing to provide such persons with a direct stake in the Company will help assure a close identification of the interests of participants in the Proposed Equity Plan and the interests of us and our stockholders, thereby stimulating their efforts on our behalf and strengthening their desire to remain with us.

Reasons for Stockholder Approval

We are seeking stockholder approval of the Proposed Equity Plan for several reasons, including the following:

  • NYSE rules generally require stockholder approval of equity compensation plans, 
  • Stockholder approval allows the Compensation Committee to grant incentive stock options to employee participants in the Proposed Equity Plan, and 
  • Stockholder approval allows the Compensation Committee to grant awards intended to qualify as “performance-based compensation,” thereby preserving the Company’s tax deduction under Section 162(m) of the Code.

Section 162(m) of the Code generally does not allow publicly held companies to obtain tax deductions for compensation of more than $1,000,000 paid in any year to their Named Executive Officers, unless such payments are “performance-based” in accordance with conditions specified under Section 162(m), which includes obtaining stockholder approval initially (and every five years after the initial approval) of the material terms of the performance goals set by a committee of outside directors.

The Proposed Equity Plan is intended to satisfy Section 162(m) of the Code. If the applicable performance goals (as set forth below) are satisfied, it would enable us to pay performance-based compensation to our Named Executive Officers and to obtain tax deductions for such payments, without regard to the limitations of Section 162(m) of the Code.

If our stockholders do not approve the Proposed Equity Plan, our current Equity Plan will remain in effect. However, because the current Equity Plan was last approved in 2012, it will no longer satisfy the every five year stockholder approval requirement of Section 162(m). Accordingly, we will not be able to utilize “performance-based compensation” in connection with the $1,000,000 tax deduction limit for each of our Named Executive Officers for equity awards that would otherwise be intended to qualify as such subsequent to the date of the Annual Meeting.

Important Aspects of Our Proposed Equity Plan Are Designed to Protect Our Stockholders’ Interests

The Proposed Equity Plan includes a number of features designed to protect our stockholders’ interests, including the following:

  • Stockholder Approval Required for Shares. Subject to the share recycling features of the Proposed Equity Plan (as described below), the Proposed Equity Plan generally authorizes a pool of 3,165,776 shares of our Common Stock (which includes 1,765,776 shares of Common Stock that are available for grant under our current Equity Plan as of the Record Date), less shares underlying awards granted under our current Equity Plan during the Interim Period. The Proposed Equity Plan requires stockholder approval to grant any additional shares of our Common Stock.
  • Prohibition Against Repricing of Options and SARs Without Stockholder Approval. Except in connection with an equitable adjustment or a “sale event,” the Proposed Equity Plan prohibits the repricing of outstanding stock options and SARS, whether by amending an existing award or by substituting a new award at a lower price. These types of awards may also not be cancelled for cash or other awards.
  • Equity Awards Subject to Certain Policies. Any award granted under the Proposed Equity Plan is subject to our securities trading policy and any other policy that the Company adopts in connection with laws, government regulations or exchange listing requirements. In addition, any award granted to an executive officer under the Proposed Equity Plan is subject to our clawback policy set forth in the Guidelines. Pursuant to our clawback policy, we may require forfeiture or repayment of all or a portion of equity-based incentive awards granted or paid to an executive officer under certain circumstances involving misconduct.
  • No Dividends on Unvested Shares. No dividends or dividend equivalents are payable with respect to any shares of Common Stock underlying an award until such award (or the applicable part of the award) has vested.

Historical Burn Rate under Our Equity Plan

We believe we use our equity plans in a judicious and responsible manner. Over the past three years, all of our equity awards have been full-value awards. We set forth in the chart immediately below our average burn rate for each of the last three fiscal years.

fy-burn-rate

(1) We calculate burn rate for a subject year as (a) the sum of (i) the total number of shares underlying awards granted during such year, plus shares vested under our PRSUs during the subject year that exceeded the target amount of shares granted, divided by (b) the weighted average of common shares outstanding (on a basic basis) for the subject year, in each case, rounded to the nearest thousand.

We believe our burn rate over the past three years is very reasonable and below industry norms. We believe that upon approval of the Proposed Equity Plan we will have enough shares available for grant to last for the next five years. As of December 31, 2016, equity awards representing 1,357,016 shares of Common Stock were outstanding under our Equity Plan, with 1,933,298 shares of Common Stock remaining available for future grant under it.

Certain Information Regarding Our Equity Awards as of the Record Date

The following table shows certain information about our equity awards as of the close of business on the Record Date:

record-date-data-items

Additionally, in 2014, the Board adopted the Inducement Plan under which we may grant up to 200,000 shares of our Common Stock to prospective employees. As of the Record Date, no equity awards had been granted under the Inducement Plan.

Summary of the Proposed Equity Plan

The following description only summarizes certain provisions of the Proposed Equity Plan and is qualified in its entirety by reference to its full text. The closing price of our Common Stock on the Record Date was $42.00.

Primary Features

The material features of the Proposed Equity Plan are:

  • Subject to the share recycling features of the Proposed Equity Plan, the maximum number of shares of Common Stock reserved and available for grant equals 3,165,776, which includes 1,765,776 shares of Common Stock that are available under our current Equity Plan as of the Record Date, less any shares granted under our current Equity Plan during the Interim Period,
  • The award of stock options (both incentive and non-qualified options), SARs, restricted stock, unrestricted stock and RSUs is permitted, 
  • All shares of Common Stock underlying an award made under the Equity Plan will be counted as an award of one share of Common Stock regardless of award type, 
  • Each share of Common Stock subject to an award that is forfeited, cancelled or cash settled, or that expires or otherwise terminates (other than by exercise) under the Proposed Equity Plan (or under the current Equity Plan after the Record Date with respect to awards outstanding under it), in each case, shall be made available again for issuance under the Proposed Equity Plan,
  • Each share (a) tendered or held back upon exercise of an option or settlement of an award to cover the exercise price or tax withholding with respect to an award or (b) subject to SARs that are not issued in connection with settlement of the SARs on exercise thereof under the Proposed Equity Plan (or under the current Equity Plan after the Record Date with respect to awards outstanding under it), in each case, shall be made available again for issuance under the Proposed Equity Plan, 
  • The maximum number of SARs/stock options that can be awarded to any one individual in any calendar year is 1,000,000,  The maximum number of shares that can be awarded in the form of incentive stock options during the life of the Proposed Equity Plan is 1,000,000,
  • The maximum number of shares that can be awarded in the form of incentive stock options during the life of the Proposed Equity Plan is 1,000,000, 
  • There is an annual limit on the number of shares of Common Stock that may be subject to an Award to a non-employee director of an amount equal to $500,000 of AGD Fair Value, 
  • No dividends or dividend equivalents may be paid with respect to shares of Common Stock underlying unvested awards, 
  • Shares of Common Stock issued under the Proposed Equity Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise,
  • The Compensation Committee will administer the Proposed Equity Plan with broad power to determine grantees and the terms of each award, 
  • Any material amendment (other than an amendment that curtails the scope of the Proposed Equity Plan) is subject to approval by our stockholders, and 
  • The term of the Proposed Equity Plan expires on the ten-year anniversary of stockholder approval.

To ensure that certain awards granted under the Proposed Equity Plan to a “Covered Employee” (as defined in Section 162(m) of the Code) may qualify as “performance-based compensation” under Section 162(m) of the Code, the Proposed Equity Plan provides that the Compensation Committee may require that the vesting of such awards be conditioned on the satisfaction of performance criteria, described as such criteria relating to Company-wide objectives or of the subsidiary, division, department or function with the Company or subsidiary in which the relevant participant is employed. Such performance criteria (“Performance Criteria”) may be based on the following metrics: (i) market value; (ii) book value; (iii) earnings or earnings per share (either basic or diluted), in each case, either before or after taxes (and as may be objectively adjusted as determined by the Compensation Committee, including, without limitation, adjustments for stock compensation expense, integration expenses, incentive awards recorded in the Company’s financial books and records, including annual and long-term incentive awards, extraordinary legal costs (including damages, settlements and attorneys’ fees), changes in GAAP treatment of revenue or expenses, discontinued operations, goodwill and other identified asset impairments, depreciation and amortization and expenses resulting from severance arrangements with terminated employees); (iv) market share; (v) operating profit;(vi) net income; (vii) cash flow; (viii) return on capital or invested capital; (ix) return on assets; (x) return on equity; (xi) margins;(xii) total shareholder return; (xiii) sales or product volume growth; (xiv) productivity improvement or ratios; (xv) costs or expenses; (xvi) net debt reduction; (xvii) earnings before interest, taxes, depreciation and amortization (and other objective adjustments as may be determined by the Compensation Committee, including, without limitation, stock compensation expense, integration expenses, incentive awards recorded in the Company’s financial books and records, including annual and long-term incentive awards, extraordinary legal costs (including damages, settlements and attorneys’ fees), changes in GAAP treatment of revenue or expenses, discontinued operations, goodwill and other identified asset impairments, and expenses resulting from severance arrangements with terminated employees);(xviii) unit volume; (xix) net sales; (xx) balance sheet measurements; (xxi) selling, general and administrative expenses (including, without limitation, SG&A as a percentage of revenue or similar ratios); (xxii) revenue; (xxiii) the Company’s Common Stock price or its enterprise value; (xxiv) completion of acquisitions or business expansion; (xxv) operating income; or (xxvi) any other objective value-based performance measure. Performance Criteria under the Proposed Equity Plan may be measured in absolute terms or compared to the results of a peer group, other group of comparable companies selected by the Compensation Committee, or an index.

For purposes of determining whether any performance objective has been satisfied under the Proposed Equity Plan, the Compensation Committee may include or exclude, as applicable, the effects of the following events that occur during a performance period: (a) gains or losses on sales or dispositions, (b) asset write-downs, (c) changes in tax law or rate, (d) the cumulative effect of changes in accounting principles or changes in accounting policies, (e) events of an “unusual nature” and/or of a type that indicate “infrequency of occurrence,” as defined in FASB Accounting Standards Update 2015 — 01, (f) acquisitions occurring after the start of a performance period, integration expenses related to acquisitions, or unbudgeted costs incurred related to future acquisitions, (g) operations discontinued, divested or restructured, including severance costs, (h) gains or losses on refinancing or extinguishment of debt, (i) foreign exchange gains and losses, (j) all or any portion of litigation expenses (including attorneys’ fees, court costs and other out-of-pocket expenses), amounts paid as damages, claim judgments, or settlements, (k) stock compensation expense, (l) expenses resulting from severance arrangements with terminated employees, (m) incentive awards recorded in our financial books and records, including annual and long-term incentive awards, (n) depreciation and amortization and (o) any similar objective event or condition specified in such award agreement.

The Compensation Committee may select the particular Performance Criteria within 90 days following the commencement of a performance cycle, or such shorter time period as Section 162(m) of the Code may require to preserve the status of the award as “performance-based compensation.” Subject to adjustments for stock splits and similar events, the maximum award of restricted stock or RSUs (or combination thereof) granted to any one individual that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will not exceed 500,000 shares for any calendar year.

Plan Administration

The Compensation Committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, to determine the specific terms and conditions of each award, and to modify the terms and conditions of any award, subject to the provisions of the Proposed Equity Plan. The Compensation Committee may delegate to our CEO the authority to grant awards at fair market value to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. Under the Proposed Equity Plan, the Compensation Committee may adopt, alter and repeal rules, guidelines and practices for the Proposed Equity Plan’s administration, interpret it or an award’s terms and provisions, make determinations for its administration, decide disputes arising under it, and supervise its administration.

Eligibility and Limits on Grants

Persons eligible to participate in the Proposed Equity Plan will be those officers, employees, non-employee directors and other key persons (including consultants and prospective employees) of ours and our subsidiaries as selected from time to time by the Compensation Committee.

The maximum award of stock options or SARs granted to any one individual will not exceed 1,000,000 shares (subject to adjustment for stock splits and similar events) for any calendar year period. If any award of restricted stock or RSUs granted to an individual is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, then the maximum award shall not exceed 500,000 shares (subject to adjustment for stock splits and similar events) to any one such individual in any calendar year.

Share Recycling Program

The Proposed Equity Plan permits us to add back certain shares of Common Stock. Specifically, if any shares of Common Stock subject to an award are forfeited, an award expires or otherwise terminates without issuance of the Common Stock underlying the award, or an award is settled for cash (in whole or in part) or otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to such award, such shares will, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, be added to the shares of Common Stock available for grant under the Proposed Equity Plan on a one-for-one basis. Additionally, if after the Record Date any of the same events occurs with respect to shares of Common Stock subject to an award under the current Equity Plan, then, in each such case, the shares of Common Stock subject to the applicable award will, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, be added to the shares of Common Stock available for grant under the Proposed Equity Plan on a one-for-one basis.

Similarly, if (i) any option or other award granted under the Proposed Equity Plan is exercised through the tendering of shares of Common Stock or by the withholding of shares of Common Stock by us, or (ii) withholding tax liabilities arising from such option or other award are satisfied by the tendering of shares of Common Stock or by the withholding of shares of Common Stock by the Company, then, in each such case, the shares of Common Stock so tendered or withheld shall be added back to the Proposed Equity Plan on a one-for-one basis. Additionally, if after the Record Date any of the same events occurs with respect to shares of Common Stock underlying awards under the current Equity Plan, then, in each such case, the shares of Common Stock so tendered or withheld shall be added to the shares of Common Stock available for grant under the Proposed Equity Plan on a one-for-one basis.

Equitable Adjustments for Changes in Common Stock

The Compensation Committee will equitably adjust awards, exercise prices and the number of shares of Common Stock reserved for issuance, as may be applicable, as a result of certain extraordinary events or circumstances, including, without limitation, a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, extraordinary cash dividend or other similar change in our capital stock or increases or decreases in the outstanding shares of Common Stock.

Types of Awards

Under the Proposed Equity Plan, the Compensation Committee may grant awards of (1) stock options, (2) SARs,(3) restricted stock, (4) RSUs, and/or (5) unrestricted stock.

Stock Options. The Proposed Equity Plan permits the granting of (1) stock options intended to qualify as incentive stock options under Section 422 of the Code and (2) stock options that do not so qualify. Options granted under the Proposed Equity Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on incentive stock options. Incentive stock options may be granted to employees only; non-qualified options may be granted to employees, non-employee directors and key persons, such as consultants and prospective employees. The option exercise price of each option will be determined by the Compensation Committee but may not be less than 100%of the fair market value of the Common Stock on the date of grant. The maximum number of shares that can be granted in the form of incentive stock options cannot exceed 1,000,000 shares.

The Compensation Committee will fix the term of each option, provided the term cannot exceed ten years from the date of grant. The Compensation Committee will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Compensation Committee. Options may be exercised in whole or in part with written notice to us.

Upon the exercise of options, the option exercise price must be paid in full (1) either in cash, by certified or bank check or other instrument acceptable to the Compensation Committee,(2) by delivery (or attestation to the ownership) of shares of Common Stock that are beneficially owned by the optionee, (3) by a broker pursuant to irrevocable instructions to the broker from the optionee, (4) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such option with a fair market value equal to (a) the aggregate option exercise price at the time of exercise, plus (b) the amount necessary to cover any tax withholding in respect of the exercise, or (5) any combination of the foregoing methods, in each case, as permitted by the Compensation Committee.

To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options that first become exercisable by a participant in any calendar year.

Stock Appreciation Rights. The Compensation Committee may award SARs either as a freestanding award or in tandem with stock options. The Compensation Committee may award SARs subject to such conditions and restrictions as it may determine, provided that (1) upon exercise of SARs granted in tandem with options, the applicable portion of any related options shall be surrendered, (2) SARs granted in tandem with options are exercisable at such time or times and to the extent that the related stock options are exercisable, and (3) the term of SARs may not exceed ten years from the date of grant. The Compensation Committee will determine the exercise price of the SARs award, but it may not be less than 100% of the fair market value of our Common Stock on the date of grant.

Restricted Stock. The Compensation Committee may award shares to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized above) and/or continued employment with us through a specified restricted period.

Restricted Stock Units. The Compensation Committee may award RSUs as deferred stock awards to participants. RSUs are ultimately payable in the form of shares of Common Stock and may be subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized above) and/or continued employment with us through a specified vesting period. In the Compensation Committee’s sole discretion and subject to the participant’s compliance with the procedures established by the Compensation Committee and requirements of Section 409A of the Code, it may permit a participant to make an election in advance to receive a portion of his or her future cash compensation otherwise due in the form of an RSU award.

Unrestricted Stock. The Compensation Committee may grant (or sell at par value or greater purchase price determined by it) shares of Common Stock that are free from any restrictions under the Proposed Equity Plan. Unrestricted stock may be issued to participants in recognition of past services or other valid consideration, and may be issued in lieu of cash compensation to be paid to such individuals.

No Dividends on Unvested Awards

No dividends or dividend equivalents are payable with respect to any shares of Common Stock underlying an award until such award (or the applicable part of the award) has vested. Notwithstanding the foregoing, a grantee shall have the right to the accrual of dividends on the unvested portion of an award that may be payable upon the vesting of the award (or subject portion thereof).

Tax Withholding

Participants in the Proposed Equity Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold with respect to an award exercise, vesting or settlement events. Subject to approval by the Compensation Committee, participants may elect to have the tax withholding obligations satisfied either by authorizing us to withhold shares of Common Stock to be issued pursuant to any such event or by transferring to us shares of Common Stock having a value equal to the amount of such taxes.

Transferability of Awards

Generally, awards shall be exercisable only by the participant during his or her lifetime, or by the legal representative or guardian of the participant in the event of his or her incapacity. Subject to an exception for transfers to family trusts or family members, no awards may be sold, assigned, transferred or otherwise encumbered or disposed of by a participant other than by will or by the laws of descent and distribution.

Change in Control Provisions

The Proposed Equity Plan provides that in the event of a sale event (as defined in the Proposed Equity Plan) resulting in a change in control of the Company, all awards will be subject to the applicable agreement regarding the merger, reorganization or sale of assets. The agreement does not need to treat all awards in the same manner and will provide for one or more of the following:

  1. The continuation of the award by the Company (if the Company is the surviving corporation).
  2. The assumption of the award by the surviving corporation or its parent.
  3. The substitution of the award by the surviving corporation or its parent with a new award.
  4. Full exercisability of an option, full vesting of the shares of Common Stock subject to an option and/or full vesting of all other awards, followed by the cancellation of the option or award. Notwithstanding the foregoing, if an award’s vesting or grant is based on the achievement of Performance Criteria then the administrator may accelerate vesting or grant as to (A) the target number of shares of Common Stock that would be vested or awarded upon the achievement of such Performance Criteria, (B) subject to certain exceptions, the pro-rata amount of the shares of Common Stock subject to the award or grant of an award, (C) if set forth in the award agreement, application of the Performance Criteria as of the date of the sale event or (D) any other manner set forth in the applicable award agreement.
  5. A payment to the grantee equal to the excess of (A) the fair market value of the shares of Common Stock subject to the award as of the effective date of such merger or consolidation over (B) the exercise price or purchase price, as the case may be, of shares of Common Stock subject to the award in connection with the cancellation of the award.

We have the discretion to provide in each award agreement other terms and conditions that relate to (A) vesting of the award in the event of a sale event, and (B) assumption of such awards or issuance of comparable securities or new incentives in the event of a sale event. The terms and conditions of an award in connection with a sale event may vary in each award agreement, and may be different from and have precedence over the provisions of the applicable provision of the Proposed Equity Plan. We are not required to treat all awards in an identical manner.

Prohibition on Repricing

Generally, except in connection with a reorganization or other similar change in our capital stock or a merger or other transaction, the Proposed Equity Plan prohibits the following without stockholder approval: (1) the amendment of the terms of outstanding awards to reduce the exercise price of outstanding options or SARs, and (2) the cancellation of outstanding options or SARs in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original option or SAR award.

Clawback Under the Proposed Equity Plan

The Proposed Equity Plan provides that awards are subject to the Company’s securities trading policy, and any other policy that the Company may adopt in connection with any law, government regulation or stock exchange listing requirement, including without limitation, the federal securities laws. Our clawback policy set forth in the Guidelines permits us to require forfeiture or repayment of all or a portion of equity-based incentive awards to an executive officer under certain circumstances involving misconduct.

Amendments and Termination

The Board may at any time amend or discontinue the Proposed Equity Plan and the Compensation Committee may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent. Any amendments that materially change the terms of the Proposed Equity Plan, including any amendments that increase the number of shares reserved for issuance under the Proposed Equity Plan, expand the types of awards available, materially expand the eligibility to participate in, or materially extend the term of the Proposed Equity Plan, or materially change the method of determining the fair market value of our Common Stock, will be subject to approval by our stockholders. Amendments will also be subject to approval by our stockholders if and to the extent determined by the Compensation Committee to be required by the Code to preserve the qualified status of incentive options or to ensure that compensation earned under the Proposed Equity Plan may qualify as performance-based compensation under Section 162(m) of the Code.

Tax Aspect Under the Code

The following summarizes the principal federal income tax consequences of certain transactions under the Proposed Equity Plan. It does not describe all federal tax consequences under the Proposed Equity Plan, nor does it describe state or local tax consequences.

Incentive Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (1) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (2) there will be no deduction for us for federal income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

If shares acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally (a) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares at exercise (or, if less, the amount realized on a sale of such shares) over the option price thereof, and (b) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive option is paid by tendering shares of Common Stock.

If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above (e.g., if the holding periods described above are not satisfied), the option is treated as a non-qualified option. In addition, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.

Non-Qualified Options. No income is realized by the optionee at the time the option is granted. Generally, (i) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares on the date of exercise, and we receive a tax deduction for the same amount, and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares of Common Stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.

Restricted Stock. Restricted stock is not taxable to a recipient at the time of grant, but instead is included in ordinary income (at its then fair market value) when the restrictions lapse. We are entitled to a tax deduction in an amount equal to the ordinary income recognized by the recipient.

A recipient’s tax basis for restricted shares will be equal to the amount of ordinary income recognized by the recipient. The recipient will recognize capital gain (or loss) on a sale of the restricted stock if the sale price exceeds (or is lower than) such basis. The holding period for restricted shares for purposes of characterizing gain or loss on the sale of any shares as long- or short-term commences at the time the recipient recognizes ordinary income pursuant to an award. A recipient may elect, however, to recognize income at the time of grant, in which case the fair market value of the restricted stock at the time of grant is included in ordinary income and there is no further income recognition when the restrictions lapse.

Restricted Stock Units. RSUs are not taxable to a recipient at the time of grant, but instead is included in ordinary income (at its then fair market value) when the RSU’s are settled. We are entitled to a tax deduction in an amount equal to the ordinary income recognized by the recipient.

A recipient’s tax basis for the Common Stock received upon settlement will be equal to the amount of ordinary income recognized by the recipient. The recipient will recognize capital gain (or loss) on a sale of the Common Stock if the sale price exceeds (or is lower than) such basis. The holding period for Common Stock received upon the settlement of RSUs for purposes of characterizing gain or loss on the sale of any shares as long- or short-term commences at the time the recipient recognizes ordinary income pursuant to an award.

Parachute Payment Treatment Upon Accelerated Vesting Upon Change in Control. The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change in control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

Limitation on Our Tax Deductions. As a result of Section 162(m) of the Code, our deduction for certain awards under the Proposed Equity Plan may be limited to the extent that our CEO or other executive officer (other than our Chief Financial Officer) whose compensation is required to be reported in the summary compensation table receives compensation in excess of $1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). We structured the Proposed Equity Plan with the intention to allow certain grants to qualify as performance-based compensation. Although upon approval of the Proposed Equity Plan by stockholders we will be able to grant awards under the Proposed Equity Plan that qualify as “performance-based compensation” under Section 162(m) of the Code, we believe that it is in our best interests to maintain the flexibility to also grant awards at the discretion of the Compensation Committee that do not qualify as “performance-based compensation.”

New Plan Benefits

As of the date of this proxy statement, no awards have been made from the Proposed Equity Plan. We cannot at this time determine the amount of awards we will make to our current executive officers, our non-executive directors or to our other employees under the Proposed Equity Plan. For the awards received by our Named Executive Officers in 2014, 2015 and 2016 under the current Equity Plan, please see the Summary Compensation Table and the related footnotes. For the awards received by our directors in 2016, please see the section entitled “Director Compensation” above.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMN HEALTHCARE 2017 EQUITY PLAN.

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