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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Boston Scientific Corporation
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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March 28, 2017
Dear
Boston Scientific Stockholder:
You
are cordially invited to attend the Annual Meeting of Stockholders of Boston Scientific Corporation (the Company) to be held on Tuesday, May 9, 2017, at 8:00 a.m. Eastern Time, at
the Company's
Corporate Headquarters located at 300 Boston Scientific Way, Marlborough, Massachusetts 01752 (Annual Meeting).
This
year you are being asked to:
-
1.
-
elect
to the Board of Directors ten nominees for director;
-
2.
-
approve,
on a non-binding, advisory basis, named executive officer compensation;
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3.
-
approve,
on a non-binding, advisory basis, the frequency of future named executive officer compensation advisory votes;
-
4.
-
ratify
the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year; and
-
5.
-
consider
and vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
These
matters are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement. Our Board of Directors urges you to read the accompanying Proxy Statement and recommends that
you vote "FOR" all of the director nominees, our named executive officer compensation, an annual frequency of holding a non-binding, advisory vote on named executive officer compensation, and the
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm. At the meeting, you will be provided with the opportunity to ask questions.
We
are pleased to continue to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders via the Internet. We believe this
e-proxy process, also known as "notice and access," expedites stockholders' receipt of proxy materials, lowers our printing and mailing costs and reduces the environmental impact of producing the
materials for our Annual Meeting. On or about March 28, 2017, we will mail to our stockholders of
record at the close of business on Wednesday, March 15, 2017, the record date for our Annual Meeting, an Important Notice of Internet Availability of Proxy Materials (Notice) containing
instructions on how to access our Proxy Statement and Annual Report for the year ended December 31, 2016 (Annual Report) on the Internet and also how to vote their shares via the Internet. If
you received a Notice by mail you will not receive printed proxy materials unless you specifically request them. Both the Notice and the Proxy Statement contain instructions on how you can request a
paper copy of the Proxy Statement and Annual Report.
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The
Board of Directors appreciates and encourages stockholder participation in the Company's affairs. Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares.
Accordingly, we request that as soon as possible, you vote via the Internet or, if you have received printed proxy materials, you vote via the Internet, by telephone or by mailing your completed proxy
card or voter instruction form.
Thank
you for your continuing support.
Michael F. Mahoney
Chairman of the Board of Directors
President and Chief Executive Officer
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Marlborough,
Massachusetts
March 28, 2017
The
Annual Meeting of Stockholders of Boston Scientific Corporation (Annual Meeting) will be held on Tuesday, May 9, 2017, at 8:00 a.m. Eastern Time, at the Company's Corporate
Headquarters located at
300 Boston Scientific Way, Marlborough, Massachusetts 01752, for the following purposes:
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1.
-
to
elect to the Board of Directors ten nominees for director;
-
2.
-
to
approve, on a non-binding, advisory basis, named executive officer compensation;
-
3.
-
to
approve, on a non-binding, advisory basis, the frequency of future named executive officer compensation advisory votes;
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4.
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to
ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year; and
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5.
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to
consider and vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Only
stockholders of record at the close of business on Wednesday, March 15, 2017, are entitled to notice of and to vote at the meeting or any adjournments or postponements thereof.
It
is important that your shares be represented and voted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting in person, we encourage you to submit your proxy as soon as
possible. For specific instructions, please refer to your Important Notice of Internet Availability of Proxy Materials or to the question on page 3 of the accompanying Proxy Statement entitled
"How do I vote by
proxy?"
At
the direction of the Board of Directors,
Timothy A. Pratt
Secretary
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300 Boston Scientific Way
Marlborough, Massachusetts 01752
March 28, 2017
PROXY STATEMENT
Information About the Annual Meeting and Voting
The
Annual Meeting of Stockholders of Boston Scientific Corporation (Annual Meeting) will be held on Tuesday, May 9, 2017, at 8:00 a.m. Eastern Time, at the Company's
Corporate Headquarters located at 300 Boston Scientific Way, Marlborough, Massachusetts 01752. At this meeting, stockholders will be asked to elect ten nominees for director, approve, on a
non-binding,
advisory basis, named executive officer compensation, approve, on a non-binding, advisory basis, an annual frequency of holding a non-binding, advisory vote on named executive officer compensation,
and ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year. Management will also report on our performance during
fiscal year 2016 and will respond to questions from stockholders. Our principal executive offices are located at 300 Boston Scientific Way, Marlborough, Massachusetts 01752, and our telephone number
is (508) 683-4000. When used in this Proxy Statement, the terms "we," "us," "our," "Boston Scientific" and "the Company" mean Boston Scientific Corporation and its businesses and subsidiaries.
Why am I receiving these materials?
In connection with its solicitation of proxies for use at our Annual Meeting, our Board of Directors (Board) (i) has made these materials available to
you via the Internet or, upon your request, via email, or (ii) upon your request, has delivered or will deliver printed versions of these materials to you by mail. As a stockholder of record of
our common stock at the close of business on March 15, 2017, the record date for our Annual Meeting, you are invited to attend the Annual Meeting, and are entitled to and requested to vote on
the items of business described in this Proxy Statement.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a
full set of printed proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission (SEC), we are making this Proxy Statement and our Annual Report for the year ended
December 31, 2016 (Annual Report and, together with this Proxy Statement, the proxy materials) available to stockholders electronically via the Internet. Stockholders will be able to access the
proxy materials on the website referred to in the Important Notice of Internet Availability of Proxy Materials (Notice) or request to receive printed copies of the proxy materials and a proxy card.
Instructions on how to access the proxy materials via the Internet or to request a printed copy may be found in the Notice and in this Proxy Statement. We
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believe
that this electronic process expedites your receipt of the proxy materials and reduces the cost and environmental impact of printing proxy materials for our Annual Meeting.
On
or about March 28, 2017, stockholders of record and beneficial owners of our common stock at the close of business on March 15, 2017, will be sent a Notice instructing them as to how
to receive their proxy materials via the Internet. The proxy materials will be available on the Internet as of March 28, 2017.
How can I electronically access the proxy materials?
Beginning March 28, 2017, you can access the proxy materials and vote your shares online at
www.proxyvote.com
. The proxy materials are also available on our own website
(
www.bostonscientific.com
).
How can I obtain a full set of printed proxy materials?
If you prefer to receive paper copies of the proxy materials and a proxy card, you may still do so. You may request printed materials by (i) calling
1-800-579-1639; (ii) sending an email to
sendmaterial@proxyvote.com
; or (iii) logging onto
www.proxyvote.com
using the credentials provided on
your Notice or proxy card.
Who is entitled to vote at the Annual Meeting?
Stockholders who held shares of our common stock at the close of business on Wednesday, March 15, 2017, are entitled to vote at the Annual Meeting.
Each share of our common stock is entitled to one vote.
How many shares are eligible to be voted and how many shares are required to hold the Annual Meeting?
A quorum is required to hold the Annual Meeting and conduct business. The presence at the Annual Meeting, in person or by proxy, of stockholders holding a
majority of our common stock outstanding as of the close of business on Wednesday, March 15, 2017, the record date, will constitute a quorum for purposes of holding and conducting business at
the Annual Meeting. As of March 15, 2017, we had 1,368,971,425 shares of our common stock outstanding — each entitled to one vote at the Annual Meeting —
meaning that 684,485,713 shares of common stock must be represented in person or by proxy to have a quorum. Our common stock is our only outstanding class of voting securities. For purposes of
determining whether a quorum exists, broker non-votes (as described further below) and proxies received but marked "ABSTAIN" will be counted.
What am I voting on?
You are voting on proposals to:
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1.
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elect
to the Board ten nominees for director;
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2.
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approve,
on a non-binding, advisory basis, named executive officer compensation;
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3.
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approve,
on a non-binding, advisory basis, the frequency of future named executive officer compensation advisory votes;
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4.
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ratify
the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year; and
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5.
-
consider
and vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
How does the Board recommend that I vote?
The Board recommends that you vote:
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1.
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FOR
the election of each of the ten director nominees;
-
2.
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FOR
our named executive officer compensation;
-
3.
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FOR
an annual frequency of holding a non-binding, advisory vote on named executive officer compensation; and
-
4.
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FOR
the ratification of the appointment of Ernst & Young LLP as our independent registered public
accounting firm for the 2017 fiscal year.
How do I vote by proxy?
Your vote is very important. Whether or not you plan to attend the Annual Meeting in person, you may give a proxy to be voted at the Annual Meeting
either:
-
•
-
via the Internet pursuant to the instructions provided in the Notice; or
-
•
-
if you received printed proxy materials, via the Internet or by telephone or mail pursuant to the instructions provided on the proxy card.
If
you vote by mail, no postage is required if your proxy card is mailed in the United States. If you properly vote pursuant to the instructions provided in the Notice or properly complete and deliver
your proxy card (whether electronically, by mail or by telephone) and our Inspector of Election receives your instructions in time to vote at the Annual Meeting, your "proxy" (one of the individuals
named on your proxy card) will vote your shares as you have directed.
If you sign and return your proxy card, but do not make specific selections, your proxy will vote your
shares as recommended by the Board. If any other matter is properly presented at the Annual Meeting, including a proposal to postpone or adjourn the meeting, your proxy will vote your shares in
accordance with his or her discretion. At present, the Board knows of no other business that is intended to be brought before or acted upon at the Annual Meeting.
How are votes counted?
In the election of directors, your vote may be cast "FOR" one or more of the nominees or your vote may be "WITHHELD" with respect to one or more of the
nominees. If you sign your proxy card with no further instructions, your shares will be voted in accordance with the recommendation of the Board.
In
the advisory vote to approve named executive officer compensation, your vote may be cast "FOR" or "AGAINST" or you may "ABSTAIN." If you "ABSTAIN," it will not count as a share actually voted and
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will
have no effect on the determination of this proposal. If you sign your proxy card with no further instructions, your shares will be voted in accordance with the recommendation of the Board.
In
the advisory vote to approve the frequency of future named executive officer compensation advisory votes, you may vote "1 YEAR," "2 YEARS," "3 YEARS" or you may "ABSTAIN." If you "ABSTAIN," it will
not count as a share actually voted and will have no effect on the determination of this proposal. If you sign your proxy card with no further instructions, your shares will be voted in accordance
with the recommendation of the Board.
In
the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm, your vote may be cast "FOR" or "AGAINST" or you may "ABSTAIN." If you
"ABSTAIN," it will not count as a share actually voted and will have no effect on the determination of this proposal. If you sign your proxy card with no further instructions, your shares will be
voted in accordance with the recommendation of the Board.
How many votes are required to approve each proposal?
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1.
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Under
our By-Laws our directors are elected by plurality vote. That means that for Proposal 1, the ten nominees for director named in this Proxy Statement
receiving the most votes from those shares present or represented at the Annual Meeting will be elected as directors. The majority voting policy set forth in our Corporate Governance Guidelines
requires that, in an uncontested election, any nominee for director who receives a greater number of votes "WITHHELD" from his or her election than votes "FOR" his or her election shall promptly
tender his or her resignation from the Board following the certification of the stockholder vote. The Board will then decide whether to accept the resignation (based on the recommendation of the
Nominating and Governance Committee of our Board) within 90 days following certification of the stockholder vote, and will disclose its determination and its reasoning either in a press release
and/or an SEC filing.
-
2.
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The
affirmative vote of a majority of shares with voting power present in person or represented by proxy and which have actually voted on the proposal is required to
approve, on an advisory basis, our named executive officer compensation. The vote is advisory and non-binding in nature, but the Executive Compensation and Human Resources Committee of our Board
(Compensation Committee) will take into consideration the outcome of the vote when considering future executive compensation arrangements. You may vote "FOR," "AGAINST" or "ABSTAIN." If you "ABSTAIN,"
it will be counted for the purpose of determining whether a quorum is present for conducting the Annual Meeting, but it will not count as a share actually voted and will have no effect on the
determination of this proposal.
-
3.
-
The
frequency of holding a non-binding, advisory vote on our named executive officer compensation that receives the most votes "FOR" will be deemed the selection (on
a non-binding, advisory basis) of our stockholders. The vote is advisory and non-binding in nature, but our Board will take into consideration the outcome of the vote when determining the frequency of
holding an advisory vote on our named executive officer compensation. You may vote "1 YEAR," "2 YEARS," "3 YEARS" or you may "ABSTAIN." If you "ABSTAIN," it will be counted for the purpose of
determining whether a quorum is present for conducting the Annual Meeting, but your vote will not count as a share actually voted and will have no effect on the determination of this proposal.
-
4.
-
The
affirmative vote of a majority of shares with voting power present in person or represented by proxy and which have actually voted on the proposal is required to
ratify the
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appointment
of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year. You may vote "FOR," "AGAINST" or "ABSTAIN." If you "ABSTAIN," it will be
counted for the purpose of determining whether a quorum is present for conducting the Annual Meeting, but it will not count as a share actually voted and will have no effect on the determination of
this proposal.
At
present, the Board knows of no other matters to be presented for stockholder action at the Annual Meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most of our stockholders hold their shares through a broker, trustee, bank, other financial intermediary or other nominee rather than directly in their own
name. As summarized below, there are some differences between stockholders of record and beneficial owners.
Stockholders of Record
If your shares are registered directly in your name with our transfer agent, Computershare Shareowner Services, as of the close of business on Wednesday,
March 15, 2017, you are considered the
stockholder of record
with respect to those shares, and the Notice or proxy materials are being made
available, electronically or otherwise, directly to you by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or a third party, or to vote
in person at the Annual Meeting. The Company has made available a proxy card or electronic voting means for you to use for voting purposes.
Beneficial Owners
If your shares are held through a brokerage firm, trustee, bank, other financial intermediary or nominee, as of the close of business on Wednesday,
March 15, 2017, you are considered the beneficial owner of those shares held in street name, and the Notice or proxy materials are being made available, electronically or otherwise, by the
Company to your broker, trustee, bank, other financial intermediary or other nominee (the "intermediary") and they will forward these materials to you, together with a voting instruction form if
furnished via paper copy to your intermediary. As the beneficial owner, you have the right to direct your intermediary on how to vote and are also invited to attend the Annual Meeting; however, since
you are not the
stockholder of record
, you may not vote these shares in person at the Annual Meeting, unless you request, complete and deliver a legal
proxy from your intermediary. If you requested printed proxy materials, your intermediary will enclose a voting instruction form for you to use in directing the intermediary regarding how to vote your
shares.
What discretion does my broker have to vote my shares held in "street name?"
The New York Stock Exchange (NYSE) rules allow your broker to vote your shares in its discretion on "routine" proposals when it has not received instructions
from you at least ten days prior to the Annual Meeting. The proposal regarding the ratification of the appointment of our independent registered public accounting firm is a matter considered routine
under applicable rules and, therefore, your broker may vote on your behalf for this matter if you do not otherwise provide instructions. The election of directors, the advisory vote on our named
executive officer compensation, and the advisory vote on the frequency of future named executive officer compensation advisory votes are not considered routine matters. If you do not instruct your
broker how to vote your shares on the
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non-routine
matters, your broker will not be permitted to vote your shares on such matters. This is referred to as a "broker non-vote."
Broker
non-votes (shares held by brokers that do not have discretionary authority to vote on the matter and have not received voting instructions from their clients) are counted for purposes of
determining whether a quorum is present, but are not counted or deemed to be present, represented or voted for the purpose of determining whether stockholders have approved a proposal. A broker
non-vote will have no effect on the outcome of the non-routine proposals voted on at the Annual Meeting.
How do I vote my 401(k) shares?
If you participate in our 401(k) Retirement Savings Plan, as amended and restated (401(k) Plan), you will receive a single proxy card (together with the proxy
materials) or Notice that covers all shares credited to your plan account(s) and shares that you own of record that are registered in the same name. If your plan account(s) are registered in different
names, you will receive separate proxy cards or Notices for your record and plan holdings. You may vote your shares by following the instructions provided in your proxy card or Notice and utilizing
the credentials provided therein. Your vote will serve to instruct the trustees and fiduciaries of our 401(k) Plan how to vote any shares of our common stock held in our 401(k) Plan on your behalf.
Shares of our common stock held in our 401(k) Plan must be voted on or before 11:59 p.m. Eastern Time on May 4, 2017. The
trustee and fiduciaries of our 401(k) Plan will vote shares for which timely instructions are not received in the same proportion as other plan shares that were voted.
What happens if I don't specify how I want my shares voted on one or all of the proposals?
If you are the
stockholder of record
and you sign, date and return your proxy and do not mark how you want to
vote, your proxy will be counted as a vote "FOR" all of the nominees for directors, "FOR" our named executive officer compensation, "FOR" an annual frequency of holding a non-binding, advisory vote on
named executive officer compensation, and "FOR" the ratification of our independent registered public accounting firm, Ernst & Young. If you hold your shares in
street
name,
please see the discussion on
"What discretion does my broker have to vote my shares held in 'street name?',"
above.
Can I change my vote or revoke my proxy after I have already voted or given my proxy?
Yes. If you are a
stockholder of record
, you may change your vote or revoke your proxy at any time before the
proxy is voted at the Annual Meeting. To change your vote, you may:
-
•
-
mail a written notice "revoking" your earlier vote to Broadridge Financial Solutions, Inc. (Broadridge), 51 Mercedes Way, Edgewood, NY
11717;
-
•
-
submit to Broadridge a properly completed and signed proxy card with a later date;
-
•
-
vote again telephonically or electronically (available until 11:59 p.m. Eastern Time on May 8, 2017); or
-
•
-
vote in person at the Annual Meeting; however, your attendance at the Annual Meeting alone will not revoke your proxy.
Your
last dated proxy, properly completed and timely received prior to, or vote cast at, the Annual Meeting will be counted.
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If
you own your shares in
street name
, please contact your broker or other intermediary for instructions on changing your vote or revoking your proxy.
Can I vote in person at the meeting?
Yes. If you are the
stockholder of record
of the shares, you can vote in person by coming to the Annual
Meeting, and we will give you a ballot or a new proxy card when you arrive with proper identification. However, since a beneficial owner holding shares in
street
name
is not the
stockholder of record
, if you are such a beneficial owner of shares, you may not vote your shares in person at
the Annual Meeting unless you obtain a legal proxy from the broker or other intermediary that holds your shares giving you the right to vote the shares at the Annual Meeting. Please bring the legal
proxy with you to the Annual Meeting. If you plan to attend the Annual Meeting in person, you must provide proper identification. Please visit our website,
www.bostonscientific.com
, for directions to
the Annual Meeting.
Who will count the votes?
Broadridge has been engaged as our independent agent to tabulate stockholder votes and act as Inspector of Election for the meeting.
Is voting confidential?
Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote
will not be disclosed either within the Company or to third parties, except:
-
•
-
as necessary to meet applicable legal requirements;
-
•
-
to allow for the tabulation and certification of votes; and
-
•
-
to facilitate a successful proxy solicitation.
Occasionally,
stockholders provide written comments on their proxy cards, which may be forwarded to the Company's management and the Board.
What happens if the Annual Meeting is adjourned or postponed?
Your proxy will still be effective and will be voted at the rescheduled Annual Meeting. You will still be able to change or revoke your proxy until it is
voted, provided such new proxy or revocation is properly completed and timely received.
Will any other business be considered or presented at the Annual Meeting?
Our By-Laws provide that a stockholder may present business to be considered at the Annual Meeting only if proper prior written notice was timely received by
us. Other than the items of business described in this Proxy Statement, our Board is not aware of any other business to be acted upon at the Annual Meeting; however, if any other business does
properly come before the Annual Meeting, the persons named as proxies on the proxy card will vote your shares in accordance with their discretion.
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How can I find the results of the Annual Meeting?
We will report the final voting results on a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting. The
Form 8-K will be available on the SEC's website,
www.sec.gov
, as well as on our own website,
www.bostonscientific.com
, under the "
Investor Relations
" section.
Who is soliciting my vote pursuant to this Proxy Statement?
Our Board is soliciting your vote.
Is there a list of stockholders entitled to vote at the Annual Meeting?
A list of stockholders entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting, between
the hours of 8:30 a.m. and 5:00 p.m. Eastern Time, at our Corporate Headquarters located at 300 Boston Scientific Way, Marlborough, Massachusetts 01752. If you would like to view
the stockholder list, please contact our Secretary to schedule an appointment by calling (508) 683-4000 or writing to him at 300 Boston Scientific Way, Marlborough, Massachusetts 01752.
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Internet Availability of Proxy Materials
Under rules adopted by the SEC, we are furnishing proxy materials to our stockholders primarily via the Internet instead of mailing printed
copies of those materials to each stockholder. On or about March 28, 2017, we will mail to our stockholders (other than those who previously requested electronic or paper delivery) an Important
Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report. The Notice also instructs
stockholders on how to vote via the Internet.
This
process is designed to expedite stockholders' receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources; however, if you would prefer to receive printed
proxy materials and a proxy card, please follow the instructions included in the Notice and in this Proxy Statement. If you have previously elected to receive our proxy materials electronically, these
materials will continue to be made available to you via email until you elect otherwise. If you have
previously elected to receive printed proxy materials, you will continue to receive these materials and a proxy card in paper format until you elect otherwise.
Cautionary Statement Regarding Forward-Looking and Other Statements
This Proxy Statement contains forward-looking statements within the meaning of the federal securities laws.
Forward-looking statements may be identified by words like "anticipate," "expect," "project," "believe," "plan," "may," "estimate," "intend" and other similar words. These forward-looking statements
are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. Factors that may cause actual
results to differ materially from those contemplated by the statements in this Proxy Statement can be found in our most recent Annual Report on Form 10-K filed with the SEC and in the Quarterly
Reports on Form 10-Q that we have filed or will file hereafter under the heading "Risk Factors" and "Safe Harbor for Forward-Looking Statements." The forward-looking statements speak only as of
the date of this Proxy Statement and undue reliance should not be placed on these statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements. This
cautionary statement is applicable to all forward-looking statements contained in this document.
This Proxy Statement contains statements regarding individual and Company performance objectives and targets. These objectives and targets are disclosed in the limited context
of our compensation plans and programs and should not be understood to be statements of management's future expectations or estimates of future results or other guidance. We specifically caution
investors not to apply these statements to other contexts.
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PROPOSAL 1: ELECTION OF DIRECTORS
Our
entire Board is elected annually by our stockholders and currently consists of eleven members. John E. Abele, our co-founder, has served at the request of the Board as director
emeritus since his retirement from the Board at the 2011 Annual Meeting of Stockholders so that the Board may continue to avail itself of his wisdom, judgment, and experience. Serving as director
emeritus, Mr. Abele may attend Board and committee meetings and participate in discussion of matters that come before the Board or its committees, but he is not a director and is not entitled
to vote upon any such matters.
On
January 16, 2017, Kristina M. Johnson, Ph.D., a director of Boston Scientific since January 2011 as well as from April 2006 to May 2009, advised us that she would not be standing for
re-election to the Board at the Annual Meeting. We are deeply grateful for the enormous contributions that Dr. Johnson has made to our Company, our Board and our stockholders.
On
July 11, 2016, the Board, upon the recommendation of the Nominating and Governance Committee, appointed Yoshiaki Fujimori to serve on the Board, effective July 13, 2016, to hold
office until the Annual Meeting.
In
light of the departure of one director, ten of our directors have been nominated by our Board, upon the recommendation of our Nominating and Governance Committee, to stand for election at the
Annual Meeting for a one-year term, to hold office until the 2018 Annual Meeting of Stockholders and until
their successors have been elected and qualified. The nominees for election at the Annual Meeting are: Nelda J. Connors, Charles J. Dockendorff, Yoshiaki Fujimori, Donna A. James, Edward J. Ludwig,
Stephen P. MacMillan, Michael F. Mahoney, David J. Roux, John E. Sununu and Ellen M. Zane.
Each
of the director nominees is willing and able to stand for election at the Annual Meeting, and we know of no reason why any of the nominees would be unable to serve as a director. Should such a
situation arise, however, the Board may designate a substitute nominee or, alternatively, reduce the number of directors to be elected. If a substitute nominee is selected, the persons named as
proxies will vote for that substitute nominee. Any vacancies not filled at the Annual Meeting may be filled by the Board.
The
biographies of each of the nominees are listed below and contain information regarding the person's service as a director, business experience, public company director positions
currently held or held at any time during the last five years, information regarding involvement in certain legal or administrative proceedings (if applicable) and the experiences, qualifications,
attributes or skills that caused the Nominating and Governance Committee and the Board to determine that the person should serve as a director in light of our business and structure. Each of the
director nominees listed below exemplifies how our Board values professional experience in business, education, policy and governmental fields as well as strong moral character and diversity in terms
of viewpoint as well as age, ethnicity and gender. Our Board believes that these strong backgrounds and sets of skills provide it, as a whole, with a strong foundation of technical expertise and a
wealth of diverse experience in a wide variety of areas.
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Table of Contents
Nelda J. Connors
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Nelda J. Connors, age 51, has been a director of Boston Scientific since December 2009. Ms. Connors is the founder, Chairwoman and Chief Executive Officer of Pine Grove Holdings, LLC, a privately held
investment company that acquires and operates small-to-middle market businesses primarily focused in power generation, construction equipment, advanced material and aftermarket automotive end-markets. The current Pine Grove portfolio companies are
Alturdyne Power Systems, LLC, Pine Grove Properties, LLC and X-Form Power. She served as President and Chief Executive Officer of Atkore International Inc. from December 2010 until June 2011. Atkore, formerly the Electrical and Metal
Products division of Tyco International, became a privately held company in December 2010. Ms. Connors served as President of this Tyco division from 2008 through 2010. Prior to joining Tyco, she served as Vice President at Eaton Corporation
from 2002 to 2008, where she held several positions in operations, continuous improvement, and general management. Prior to joining Eaton, Ms. Connors was employed in a number of executive and management capacities in the automotive industry.
Her work over 25 years has involved responsibilities in the U.S., Europe, and Asia. Ms. Connors is a Class B director of the Federal Reserve Bank of Chicago and a director of Clarcor Inc. and Echo Global Logistics, Inc. She
previously served on the boards of Atkore, Vesuvius plc and Blount International and was formerly an appointed member for the Takata Independent Quality Assurance Panel to investigate the airbag inflator recall. Ms. Connors holds B.S. and
M.S. degrees in mechanical engineering from the University of Dayton. Ms. Connors' qualifications to serve on our Board include her executive leadership skills and her experience in the areas of operations and financial management, quality,
engineering and business strategy, as well as her knowledge of public company matters resulting from her service on other public company boards.
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Charles J. Dockendorff
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Charles J. Dockendorff, age 62, has been a director of Boston Scientific since April 2015. He was Executive Vice President and Chief Financial Officer of Covidien plc, a publicly traded medical device and
supplies company, a position he held at Covidien and its predecessor, Tyco Healthcare, from 1995 to 2015. Mr. Dockendorff joined the Kendall Healthcare Products Company, the foundation of the Tyco Healthcare business, in 1989 as Controller and
was named Vice President and Controller in 1994. He was appointed CFO of Tyco Healthcare in 1995. Prior to joining Kendall/Tyco Healthcare, Mr. Dockendorff was the Chief Financial Officer, Vice President of Finance and Treasurer of
Epsco Inc. and Infrared Industries, Inc. In addition, Mr. Dockendorff worked as an accountant for Arthur Young & Company (now Ernst & Young) and the General Motors Corporation. Mr. Dockendorff is a director of
Haemonetics Corporation and Keysight Technologies, Inc. Mr. Dockendorff holds a bachelor's degree in accounting from the University of Massachusetts at Amherst and an M.S. in finance from Bentley College. Mr. Dockendorff's
qualifications to serve on our Board include his executive leadership experience at public medical device companies, as well as his extensive expertise in accounting, finance and business strategy.
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Yoshiaki Fujimori
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Yoshiaki Fujimori, age 65, has been a director of Boston Scientific since July 2016. He is currently an adviser to the LIXIL Group Corporation, a position he has held since June 2016, and was the President and CEO of
the LIXIL Group Corporation from August 2011 to June 2016. Prior to joining LIXIL, he was Chairman, President and CEO of GE Japan from January 2008 to June 2011. In his 25 years at GE, beginning in October 1986, he held a variety of positions
including Senior Vice President and CEO of a number of Asian and global business divisions, including Medical Systems, Plastics, and Capital. Mr. Fujimori also served as a member of the GE Corporate Executive Council from 2001 to 2010.
Mr. Fujimori has been an External Director of Tokyo Electric Power Company since June 2012 and an External Director of Takeda Pharmaceutical Company Limited since June 2016, and formerly served as a Director of the Japan Construction
Material & Housing Equipment Industries Federation. Mr. Fujimori received a bachelor's degree in petroleum engineering from the Tokyo University of Science and his M.B.A. from Carnegie Mellon Graduate School of Business, where he serves
as a lifetime member of the Board of Trustees. Mr. Fujimori's qualifications to serve on our Board include his expertise in international business, with a particular emphasis on operations and manufacturing in Japan and Asia, and developing
international markets, as well as his service on other public company boards.
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Donna A. James
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Donna A. James, age 59, has been a director of Boston Scientific since July 2015. She is the founder of Lardon & Associates LLC, a business development and executive advisory services firm, where she
has served as president and managing director since April 2006. Ms. James has more than 30 years of diverse management and leadership experience, including her experience at Nationwide Insurance and Financial Services, beginning in 1981. In
her 25 years at Nationwide, she served in several leadership roles, including president of Nationwide Strategic Investments, a division of Nationwide Insurance Company, from 2003 to 2006, at which time she had direct responsibility for
developing and executing strategies for several U.S. and global financial services subsidiaries and affiliates. Ms. James also is the founder of The Center for Healthy Families, a non-profit in Columbus, Ohio, and the former chair of the
National Women's Business Council by presidential appointment. Ms. James currently serves as a director of L Brands, Inc. and Marathon Petroleum Inc., as well as FIS Group, a privately held asset management and investment advisory firm,
and formerly served as a director of Time Warner Cable Inc. from 2009 until May 2016 and Coca Cola Enterprises from 2005 until 2012. She received her B.S. in Accounting from North Carolina A&T State University. Ms. James'
qualifications to serve on our Board include her expertise in business strategy, finance, accounting and human resources. In addition, her service on other public company boards contributes to her knowledge of public company matters.
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Edward J. Ludwig
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Edward J. Ludwig, age 65, has been a director of Boston Scientific since March 2014. Mr. Ludwig is the former Chairman of the Board of Becton, Dickinson and Company ("BDX"), a global medical technology company,
having served in that position from February 2002 through June 2012. He also served as BDX's Chief Executive Officer from January 2000 to September 2011 and as its President from May 1999 to December 2008. Mr. Ludwig joined BDX as a senior
financial analyst in 1979. Prior to joining BDX, Mr. Ludwig served as a senior auditor with Coopers and Lybrand (now PricewaterhouseCoopers), where he earned his CPA, and as a financial and strategic analyst at Kidde, Inc. Mr. Ludwig
serves as Lead Director on Aetna Inc.'s Board of Directors and chairs its Finance Committee and is a member of the Board of Directors of Xylem, Inc. Additionally, Mr. Ludwig served as Vice Chair of the Board of Trustees of the
Hackensack University Medical Center Network from 2012 to 2015. Mr. Ludwig received a B.A. degree in economics and accounting from The College of the Holy Cross and an M.B.A. degree from Columbia University. Mr. Ludwig's qualifications to
serve on our Board include his executive leadership experience, specifically his service as a director and executive of a public medical technology company, along with his extensive expertise in business strategy, finance, management and
manufacturing.
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Stephen P. MacMillan
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Stephen P. MacMillan, age 53, has been a director of Boston Scientific since April 2015. He is currently the Chairman, President and CEO of Hologic, Inc., a position he has held since June 2015, and he served as
President and CEO of Hologic, Inc., since December 2013. Prior to assuming his role with Hologic, Mr. MacMillan was the Chief Executive Officer of sBioMed, LLC, a medical research company, from October 2012 to December 2013. From 2003
to 2012, Mr. MacMillan served in various roles at Stryker Corporation, including Chief Operating Officer from June 2003 to January 2005, President from June 2003 to February 2012, Chief Executive Officer from January 2005 to February 2012 and
Chairman from January 2010 to February 2012. Prior to 2003, Mr. MacMillan was a senior executive with Pharmacia Corporation, where he oversaw five global businesses. Prior to joining Pharmacia, Mr. MacMillan spent 11 years with
Johnson & Johnson in a variety of senior roles both in the U.S. and Europe, including President of the joint venture between Johnson & Johnson and Merck. Mr. MacMillan began his career with Procter & Gamble in 1985.
Additionally, Mr. MacMillan served on the board of directors of Texas Instruments Inc. from 2008 to 2012 and Alere, Inc. from 2013 to 2015. Mr. MacMillan received a Bachelor of Arts degree in Economics from Davidson College and is
a graduate of Harvard Business School's Advanced Management Program. Mr. MacMillan's qualifications to serve on our Board include his executive leadership experience, specifically his service as a director and chief executive of public medical
technology companies.
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Michael F. Mahoney
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Michael F. Mahoney, age 52, joined the Company as our President in October 2011, and became our President and Chief Executive Officer and a director in November 2012. Mr. Mahoney became our Chairman of the Board
in May 2016. Prior to joining the Company, he was Worldwide Chairman of the Medical Devices and Diagnostics division of Johnson & Johnson from January 2011 to September 2011, overseeing 50,000 employees and seven franchises. Prior to
assuming this position, Mr. Mahoney served as Worldwide Group Chairman of Johnson & Johnson's DePuy franchise, an orthopedics and neurosciences business, from April 2007 through January 2011. From January 2001 through March 2007,
Mr. Mahoney served as President and Chief Executive Officer of Global Healthcare Exchange (GHX), a provider of supply chain solutions and services that brings together hospitals, manufacturers, distributors and group purchasing organizations.
Mr. Mahoney began his career at General Electric Medical Systems, where he spent 12 years, culminating in the role of General Manager of the Healthcare Information Technology business. He currently serves on the board of directors of Baxter
International, Inc. Mr. Mahoney earned a B.B.A. in Finance from the University of Iowa and an M.B.A. from Wake Forest University. Mr. Mahoney's qualifications to serve on our Board, in addition to being our Chief Executive Officer,
include his management experience leading complex organizations in medical device and other healthcare-related businesses, expertise in building strong leadership teams, developing international markets, and a proven ability to execute successful
business strategies and drive operational excellence.
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David J. Roux
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David J. Roux, age 60, has been a director of Boston Scientific since January 2014. Mr. Roux is a cofounder and Senior Director of Silver Lake, a private equity firm focused on technology investing. He was
formerly Chairman and Chief Executive Officer of Liberate Technologies, Executive Vice President at Oracle Corporation and Senior Vice President at Lotus Development. Mr. Roux is also Chairman of Jackson Laboratories, Chairman of Bristol
Seafoods, and Vice Chairman of National Audubon Society. He previously served as a member of the boards of directors of Avaya Inc. from December 2008 until December 2012, Avaya Holdings Corp. from January 2007 until December 2012, Serena
Software, Inc. from March 2006 until March 2011 and Intelsat S.A. from May 2010 until January 2012. Mr. Roux holds an M.B.A. from Harvard Business School and an M. Phil. from King's College, Cambridge University. He is a graduate of
Harvard College. Mr. Roux's qualifications to serve on the Board include his extensive experience regarding operations, technology, management and business strategy, his financial expertise, and his background as an entrepreneur, executive and
director.
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John E. Sununu
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John E. Sununu, age 52, has been a director of Boston Scientific since April 2009. From 2003 to 2009, Senator Sununu served as a U.S. Senator from New Hampshire. He was a member of the Committees on Banking, Commerce,
Finance and Foreign Relations, and he was appointed the Congressional Representative to the United Nations General Assembly. Before his election to the Senate, Senator Sununu served three terms as a Member of the U.S. House of Representatives from
New Hampshire's 1st District from 1996 to 2002. He was Vice Chairman of the Budget Committee and a member of the Appropriations Committee. During his twelve years in Congress, he drafted and helped pass several important pieces of legislation,
including the Internet Tax Freedom Act, the Survivors Benefit Act and the New England Wilderness Act. Prior to serving in Congress, Senator Sununu served as Chief Financial Officer for Teletrol Systems, a manufacturer of building control systems.
Mr. Sununu formerly served as a director of Time Warner Cable Inc. until May 2016. He holds B.S. and M.S. degrees in Mechanical Engineering from the Massachusetts Institute of Technology and an M.B.A. from Harvard Business School. Among
other qualifications, Senator Sununu complements our Board with his experience in government and corporate leadership. Senator Sununu provides important insights on government relations, public policy and other matters relevant to our Company due to
his extensive experience in both the public and private industry sectors.
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Ellen M. Zane
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Ellen M. Zane, age 65, has been a director of Boston Scientific, since April 2016. Ms. Zane is CEO Emeritus and Vice Chair of the board of trustees at Tufts Medical Center & Floating Hospital for
Children, and from 2004 to 2011, she served as its President and Chief Executive Officer. From May 1994 to January 2004, Ms. Zane served as Network President for Partners Healthcare System, a physician/hospital network sponsored by the Harvard
affiliated Massachusetts General Hospital and Brigham and Women's Hospital. Prior to 2004, Ms. Zane served as Chief Executive Officer of Quincy Hospital in Quincy, Massachusetts. Ms. Zane is also currently a member of the board of directors
at Brooks Automation, a publicly traded global provider of automation, vacuum and instrumentation solutions in the semiconductor industry, as well as life science storage technology; Parexel International Corporation, a publicly traded global
bio-pharmaceutical services company; Century Capital Management, LLC, a private mutual fund company; Fiduciary Trust Company, a privately owned wealth management company; and AgNovos Healthcare, LLC a privately held medical device company,
focused on bone health. Ms. Zane previously served as a director of Lincare Holdings Inc. until it was acquired in August 2012. She also served as a director of Haemonetics Corporation until April 2016 and of Press Ganey Holdings until it
was acquired in October 2016. Ms. Zane holds a Professional Director Advanced Certification from the American College of Corporate Directors. Ms. Zane earned her B.A. from George Washington University and her M.A. from Catholic University
of America, both in Audiology and Speech-Language Pathology. Ms. Zane's qualifications to serve on our Board include her executive experience in the health care industry, specifically as the chief executive officer of a large urban academic
(teaching and research) medical center, in addition to her experience as a director at other public companies.
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OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE ELECTION OF ALL TEN OF THESE NOMINEES FOR DIRECTOR.
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CORPORATE GOVERNANCE
To
guide the operation and direction of the Board and its committees, our Board has established our Corporate Governance Guidelines, charters for its standing committees and our Code
of Conduct to reflect our commitment to good corporate governance and to comply with Delaware law, the rules and listing standards of the NYSE, the rules and regulations of the SEC and other legal
requirements. These materials are available under "
Corporate Governance
" in the "
Investor Relations
"
section of our website at
www.bostonscientific.com
. These materials are also available in print free of charge to stockholders, upon written request to
Boston Scientific Corporation, Investor Relations, 300 Boston Scientific Way, Marlborough, Massachusetts 01752.
Our
Board believes that good corporate governance is fundamental to the overall success of our business. To that end, our Board evaluates our corporate governance practices in light of applicable
changes in Delaware law, the rules and listing standards of the NYSE, the rules and regulations of the SEC and the rules and regulations under the Internal Revenue Code, as well as best practices
suggested by recognized governance authorities, and makes modifications to our corporate governance practices that it determines are warranted.
Under
the NYSE's Corporate Governance Standards, a majority of the Board must qualify as independent directors. However, our Corporate Governance Guidelines require that a
significant majority of the Board qualify as independent directors. The NYSE Corporate Governance Standards define specific relationships that disqualify directors from being independent and further
require that for a director to qualify as independent, the Board must affirmatively determine that the director has no material relationship with our Company (either directly or as a partner,
stockholder or officer of an organization that has a relationship with our Company).
In
making determinations regarding independence, the Board applies the NYSE standards and broadly considers all relevant facts and circumstances known to it. In addition, in making independence
determinations with respect to directors who will serve on the Compensation Committee, the Board considers all factors specifically relevant to determining whether a director has a relationship with
our Company that is material to that director's ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to:
(i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by our Company to such director, and (ii) whether such director is
affiliated with our Company, a subsidiary of our Company or an affiliate of a subsidiary of our Company — as required by the NYSE independence standards for compensation committee
members.
The
Board has determined that the following directors are independent under the independence standards set forth in the NYSE Corporate Governance Standards: Nelda J. Connors, Charles J.
Dockendorff, Yoshiaki Fujimori, Donna A. James, Kristina M. Johnson, Edward J. Ludwig, Stephen P. MacMillan, David J. Roux, John E. Sununu and Ellen M. Zane.
The
Board monitors its compliance with NYSE requirements for director independence on an ongoing basis, including through an annual review of director questionnaires and consideration of transactions
and relationships between each director or any member of his or her immediate family and the Company as well as other relevant facts and circumstances. The Board and the Nominating and
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Governance
Committee considered the directors' responses to a questionnaire asking about their relationships with the Company (and their immediate family members' relationships with the Company) and
other potential conflicts of interest, as well as material provided by management related to transactions, relationships, or arrangements between the Company and the directors or parties related to
the directors. The Board made its determination as to whether any relationship between a director and our Company is a material relationship based on the facts and circumstances of the relationship,
the amounts involved in the relationship, the director's interest in such relationship, if any, and such other factors as the Board, in its judgment, deemed appropriate.
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Director Nomination Process
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The
Nominating and Governance Committee is responsible for determining the appropriate skills and characteristics required of new Board members in the context of the current make-up
of the Board. In so doing, the Nominating and Governance Committee considers, with input from the Board, those factors it deems appropriate, such as independence, experience, strength of character,
judgment, technical skills, diversity, years of experience and the extent to which the individual would fill a present need on the Board. The aim is to assemble a Board that is strong in its
collective knowledge and that consists of individuals who bring a variety of complementary attributes and who, taken together, have the appropriate skills and experience to oversee the Company's
business. The Nominating and Governance Committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The
Nominating and Governance Committee views diversity broadly to include diversity of experience, skills and viewpoint as well as other diversity concepts such as ethnicity and gender.
Director
nominees must, at a minimum, meet the general criteria outlined in our Corporate Governance Guidelines. Generally, directors should be individuals who have succeeded in their particular field
and who demonstrate integrity, reliability, knowledge of corporate affairs and an ability to work well with others, and should also satisfy at least one of the following
criteria:
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demonstrated management ability at senior levels in successful organizations;
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•
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current or recent employment in positions of significant responsibility and decision making;
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•
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expertise in leading rapidly growing multi-national organizations; or
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•
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current and prior experience related to anticipated board and committee responsibilities in other areas of importance to our Company.
The
Nominating and Governance Committee receives suggestions for new directors from a number of sources, including Board members and our Chief Executive Officer. It also may, in its discretion, employ
a third-party search firm to assist in identifying candidates for director.
The
Nominating and Governance Committee will also consider recommendations for Board membership submitted by our stockholders and other sources in accordance with the advance notice provisions of our
By-Laws. The qualifications of candidates recommended by stockholders will be reviewed and considered by the Nominating and Governance Committee with the same degree of care and consideration as
candidates for nomination to the Board submitted by Board members and our Chief Executive Officer.
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The
full Board is responsible for final approval of new director candidates, as well as the nomination of existing directors for reelection. With respect to existing directors, prior to making its
recommendation to the full Board, the Nominating and Governance Committee, in consultation with the Chairman of the Board, reviews each director's continuation on the Board as a regular part of the
annual nominating process.
Under
the advance notice provisions of our By-Laws, director nominations and proposals to bring any other business before the 2018 Annual Meeting of Stockholders by our stockholders must be received
by our Secretary at our principal executive offices on or before November 28, 2017. Director nominations by our stockholders must also satisfy the other procedures set forth in the advance
notice provisions of our By-Laws. Should you wish to submit a director recommendation or nomination, have it addressed to our Secretary at Boston Scientific Corporation, 300 Boston Scientific Way,
Marlborough, Massachusetts 01752.
We
maintain a Code of Conduct, which has been approved by our Board, to ensure that our directors, employees, and officers, including our Chief Executive Officer and Chief Financial
Officer, understand the basic principles that govern our corporate conduct. The Code of Conduct is available under "
Corporate Governance
" in the
"
Investor Relations
" section of our website at
www.bostonscientific.com
. A stockholder may request a
copy of the Code of Conduct by contacting our Secretary at Boston Scientific Corporation, 300 Boston Scientific Way, Marlborough, Massachusetts 01752. Any waivers or substantive amendments of the Code
of Conduct will be disclosed on our website at
www.bostonscientific.com
.
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Chief Executive Officer Succession
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Pursuant
to our Corporate Governance Guidelines, the Nominating and Governance Committee reports to the full Board periodically on succession planning for our Chief Executive Officer
(and other executive officers, as appropriate). Our Chief Executive Officer discusses with the Board and the Nominating and Governance Committee at least once per year, his recommendations and
evaluations of potential successors to his position, including in the event of an unexpected emergency, and reviews development plans, if any, recommended for such individuals.
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Board Leadership Structure
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Our
Board believes that it is important that it retain flexibility to make the determination as to whether the interests of the Company and our stockholders are best served by having
the same individual serve as both Chief Executive Officer and Chairman of the Board or whether the roles should be separated based on the circumstances at any given time. Under our Corporate
Governance Guidelines, the Board will appoint a Lead Independent Director when the Chief Executive Officer and Chairman of the Board roles are combined or if the Chairman is not otherwise independent.
The Lead Independent Director will preside over meetings of our non-management directors, serve as liaison between our Chairman and the independent directors, work with the Chairman to establish
agendas for Board and committee meetings, raise issues with management on behalf of the independent directors, consult with committee leadership, and carry out other duties as requested by the Board.
Mr. Mahoney
has been our President and Chief Executive Officer since November 2012 and Chairman since May 2016. In light of the fact that the Chief Executive Officer and Chairman of the Board
roles have been combined since May 2016, the Board appointed Mr. Ludwig at that time to serve as Lead
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Independent
Director. Our Board believes that this leadership structure, coupled with a commitment to Board independence, provides effective independent oversight of management, while fostering a
constructive and cooperative relationship between the Board and management and allowing both the Board and management to benefit from Mr. Mahoney's day-to-day familiarity with our business
operations.
Our
Board oversees an enterprise-wide approach to risk management, designed to support the achievement of our strategic and organizational objectives, to improve long-term
organizational performance and to enhance stockholder value. A fundamental part of risk oversight is to understand the individual risks our Company faces, the steps management is taking to manage
those risks, including the framework used by management for the coordinated oversight, control, and continuous improvement of processes used to manage risk, and to assess management's appetite for
risk. It is management's responsibility to manage risk and bring to the Board's attention material risks facing our Company. Our Board receives regular reports from management on matters relating to
strategic and operational initiatives, financial performance and legal developments, which are each integrated with enterprise-risk exposures. The involvement of the full Board in approving our
strategic plan is a key part of its assessment of the risks inherent in our corporate strategy.
While
the Board has the ultimate responsibility for risk oversight, each committee of the Board also oversees risk to the extent that it relates to the committee's responsibilities, as outlined
below:
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The Audit Committee focuses on financial risk, including internal controls, legal and regulatory risks, as well as compliance risks of a
financial nature, including those related to federal healthcare programs and healthcare providers, and receives an annual risk assessment report from our internal auditors. It also assists the Board
in fulfilling its oversight responsibility with respect to compliance risks of a non-financial nature, including those related to federal healthcare programs and healthcare providers, and regulatory,
quality and product safety issues that affect us. The Audit Committee receives an annual risk assessment from our global compliance group.
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•
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The Finance Committee focuses on risk exposure and risk management strategies associated with our strategic initiatives, current and potential
investments, as well as cash, debt and equity management and our ongoing ability to access capital markets. In addition, the Finance Committee consults with the Audit Committee, as necessary, to share
information pertinent to the Audit Committee's consideration and oversight of the Company's risk and risk management programs and policies.
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•
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The Executive Compensation and Human Resources Committee evaluates and sets compensation programs that encourage decision-making predicated
upon a level of risk consistent with our business strategy. The Executive Compensation and Human Resources Committee also reviews compensation and benefit plans affecting employees in addition to
those applicable to executive officers.
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•
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The Nominating and Governance Committee oversees governance and succession risk, including Board and Chief Executive Officer succession, and
evaluates director skills and qualifications to ensure the appropriate appointment of particular directors to our standing committees based upon the needs of that committee. Each committee makes
reports in its respective area of responsibility to the Board at the next regularly scheduled Board meeting
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Since
the 2016 Annual Meeting, the offices of Chief Executive Officer and Chairman of the Board have been held by Mr. Mahoney, and Mr. Ludwig, an independent director, has served as Lead
Independent Director. Given the Board's role in risk oversight, it believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to
our operations. Although there are different leadership structures that could allow our Board to oversee the management of such risks effectively, and while our Board believes our current leadership
structure will enable it to manage such risks effectively, it was one factor among many considered by our Board in selecting this leadership structure over other potential alternatives. For a
discussion of the reasons why our Board has determined that its leadership structure is appropriate, please see the "
Board Leadership Structure
" above.
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Communications with the Board
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Stockholders
and other interested parties who wish to communicate directly with any member of our Board, or our non-management directors as a group, may do so by writing to the Board
of Directors or Non-Management Directors, Boston Scientific Corporation, c/o General Counsel, 300 Boston Scientific Way, Marlborough, Massachusetts 01752 or by contacting the Board via email at
BSCboardofdirectors@bsci.com or non-management directors via email at non-managementdirectors@bsci.com. The Board has authorized the office of our General Counsel to review and organize, but not
screen, communications from stockholders and other interested parties and deliver them to the Board or non-management directors, as applicable. We do screen commercial solicitations for
appropriateness.
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Board and Committee Service Limitation
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Without
the approval of the Nominating and Governance Committee, no director may sit on more than four public company boards (including our Board) and our Chief Executive Officer may
not sit on more than one public company board (in addition to our Board). No member of the Audit Committee may serve on the audit committee of more than three public companies, including our Company.
All of our Board members have complied with these limitations or procedures.
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Related Party Transactions
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Our
Board has adopted a written related party transaction policy to monitor transactions, arrangements or relationships in which the Company and any of the following have an
interest: (i) any person who is or was (since the beginning of 2016, even if they do not presently serve in that role) an executive officer or director or director nominee; (ii) any
person who is a director emeritus; (iii) any person or entity who holds more than a 5% beneficial ownership of our common stock; (iv) any immediate family member of any of the foregoing;
or (v) any entity in which any of the foregoing persons is employed or is a general partner or principal or acts in any similar position in which such person or persons collectively have a 10%
or greater beneficial ownership interest. The policy covers any related party transaction that meets the minimum threshold for disclosure under relevant SEC rules (generally, transactions involving
amounts exceeding $120,000 in which a related person has a direct or indirect material interest).
Related
party transaction oversight is the responsibility of our Nominating and Governance Committee. Our General Counsel is responsible for identifying any potential related party transactions and,
if he
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determines
that an existing or proposed transaction constitutes a related party transaction under the policy, he will provide relevant details and an analysis of the related party transaction to the
Nominating and Governance Committee. The General Counsel provides an annual summary to the Nominating and Governance Committee of all transactions or relationships which he considered under this
policy, including those that he determined do not constitute a related party transaction. If the General Counsel has an interest in a potential related party transaction, he will provide all relevant
information to the Chairperson of the Nominating and Governance Committee who will provide the information to the other members of such Committee. The Nominating and Governance Committee reviews
relevant information concerning any existing or proposed transaction contemplated by the Company with an entity that is the subject of a disclosed relationship, and approves or rejects the
transaction, with or without conditions or additional protections for the Company. Our related party transactions policy can be found in our Corporate Governance Guidelines available under
"
Corporate Governance
" in the "
Investor Relations
" section of our website at
www.bostonscientific.com
.
In
December 2013, following approval by the Nominating and Governance Committee, the Company entered into an arrangement with Mr. Pete M. Nicholas, our co-founder and former Chairman of the
Board, to provide office space in accordance with his founders' benefits to assist him in the performance of his duties as then Chairman and other services provided to the Company. This office
space is provided to Mr. Pete M. Nicholas at a monthly amount of $3,750 (for a total of $45,000 per year), subject to renewal annually at the same rate, and to reimburse up to $50,000 in
aggregate amount of documented renovation expenses, including for the installation of secure telephone- and data-lines and/or such other protections required by the Company.
21
Table of Contents
MEETINGS AND BOARD COMMITTEES
The
Board met six times in 2016. In 2016, each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of our Board of Directors (held
during the period for which he or she has been a director) and (2) the total number of meetings of all committees of our Board of Directors on which the director served (during the periods that
he or she served).
Directors
who qualify as independent directors within the meaning of the NYSE Corporate Governance Standards meet in executive sessions without management at every regularly
scheduled Board meeting and at such other times as they deem appropriate. Our independent directors meet in executive session at least once annually. In 2016, our independent directors met in
executive session without non-independent directors four times. The Chairman of the Board, if independent, or the Lead Independent Director, if the Chairman of the Board is not independent, will
preside at executive sessions of independent directors. In his absence, the Chairperson of the Nominating and Governance Committee presides at these executive sessions, and, in his absence, the
Chairperson of the Audit Committee presides.
|
Director Attendance at Board, Board Committee and Annual Meetings
|
Directors
are expected to prepare for and use reasonable efforts to participate in all Board meetings and meetings of the committees on which they serve. The Board and each committee
will meet as frequently as necessary to properly discharge their responsibilities, provided that the full Board will meet at least four times per year. Generally, the Board meets in February, May,
August, and November. In addition, directors are expected to use reasonable efforts to attend Annual
Meetings of Stockholders. At our 2016 Annual Meeting of Stockholders, all of our directors at the time of such meeting were in attendance.
|
Committees of the Board of Directors
|
Our
Board has standing Audit, Executive Compensation and Human Resources, Nominating and Governance, and Finance Committees. All of the members of the Audit Committee, Executive
Compensation and Human Resources Committee, and Nominating and Governance Committee meet the applicable independence requirements of the NYSE and the SEC. Our Board also establishes special committees
from time to time to address specific issues or discrete matters as the need arises.
22
Table of Contents
|
Board Committee Membership
|
As
of March 6, 2017, our committee membership was as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Audit
Committee
|
|
Executive
Compensation
and Human
Resources
Committee
|
|
Nominating and
Governance
Committee
|
|
Finance
Committee
|
|
|
|
|
|
|
|
|
|
|
|
Nelda J. Connors
|
|
|
|
*
|
|
|
|
*
|
|
Charles J. Dockendorff
|
|
+
|
|
|
|
|
|
*
|
|
Yoshiaki Fujimori
|
|
|
|
|
|
|
|
*
|
|
Donna A. James
|
|
|
|
*
|
|
*
|
|
|
|
Kristina M. Johnson
|
|
|
|
+
|
|
|
|
*
|
|
Edward J. Ludwig
|
|
*
|
|
*
|
|
|
|
|
|
Stephen P. MacMillan
|
|
|
|
*
|
|
*
|
|
|
|
Michael F. Mahoney
|
|
|
|
|
|
|
|
|
|
David J. Roux
|
|
*
|
|
|
|
|
|
+
|
|
John E. Sununu
|
|
*
|
|
|
|
+
|
|
|
|
Ellen M. Zane
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
Committee Member
|
|
+
|
|
Committee Chair
|
Our
Audit Committee met nine times in 2016. Our Audit Committee is comprised of Messrs. Dockendorff, Ludwig, Roux and Sununu and Ms. Zane, each of whom meets the
independence requirements of the NYSE and the SEC. The Board has also determined that each of Messrs. Dockendorff, Ludwig and Sununu and Ms. Zane is an "audit committee financial expert"
as that term is defined in the rules and regulations of the SEC.
The
Audit Committee is governed by a written charter approved by our Board, which is subject to review on an annual basis. As outlined in its written charter (which is available under
"
Corporate Governance
" in the "
Investor Relations
" section of our website at
www.bostonscientific.com
), the
primary purpose of the Audit Committee is to provide oversight of our accounting and financial reporting processes and
audits of our financial statements, as well as of our global compliance program, including matters related to compliance with financial, legal and regulatory requirements. The Audit Committee
primarily provides assistance to our Board in the areas of corporate accounting, internal control, independent audit and reporting practices, and maintains, by way of regularly scheduled meetings, a
direct line of communication among our directors, management, our internal auditors and our independent registered public accounting firm. The Audit Committee appoints our independent registered
public accounting firm, evaluates its qualifications, independence and performance, and reviews its reports and other services. In addition, the Audit Committee pre-approves audit, audit-related and
non-audit services performed for us by our independent registered public accounting firm and has the right to terminate our independent registered public accounting firm. The Audit Committee also
assists the Board in its oversight of financial, legal and regulatory compliance, including financial reporting, internal controls and financial risk exposure to the Company resulting from legal and
regulatory compliance matters, and all other areas of compliance. The Audit Committee Report can be found on page 96 of this Proxy Statement.
23
Table of Contents
|
Executive Compensation and Human Resources Committee
|
Our
Executive Compensation and Human Resources Committee (the "Compensation Committee") met four times in 2016. The Compensation Committee is, and has been during 2016, comprised
exclusively of "independent directors," as defined by the NYSE, including under the heightened independence standards applicable to compensation committee members, "non-employee directors" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), and "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code.
As
outlined in its written charter (which is available under "
Corporate Governance
" in the "
Investor
Relations
" section of our website at
www.bostonscientific.com
), the Compensation Committee has the authority, among other
things, to:
-
•
-
set the corporate goals and objectives relative to the Chief Executive Officer's compensation and evaluate the Chief Executive Officer's
performance against those goals and objectives;
-
•
-
determine and approve our Chief Executive Officer's compensation;
-
•
-
review, oversee and determine (or make recommendations to the Board regarding) the total compensation package for our other executive officers;
-
•
-
review and make recommendations to the Board regarding all new employment, consulting, retirement, severance and change in control agreements,
indemnification agreements and other arrangements proposed for our executive officers and periodically review and evaluate these arrangements for continuing appropriateness;
-
•
-
review and make recommendations to the Board regarding the compensation of our non-employee directors;
-
•
-
adopt and periodically review a comprehensive statement of executive compensation philosophy, strategy and principles; and
-
•
-
review and discuss with management how the Company's compensation policies and programs for all of its employees may create incentives that can
affect risk and the management of that risk, as well as whether the Company's compensation programs are appropriately aligned with the Company's risk management.
The
Compensation Committee may delegate its authority and duties to subcommittees or individual members of the Compensation Committee, as it deems appropriate in accordance with applicable laws and
regulations. The Compensation Committee has delegated authority to our Chief Executive Officer to make equity grants to new hires who are not executive officers within predetermined guidelines. These
grants are reviewed with the Compensation Committee at its next regularly scheduled meeting.
Pursuant
to its charter, the Compensation Committee has sole authority to retain or obtain advice from any compensation consultant, legal counsel or other advisor, as the Compensation Committee deems
appropriate to assist the Committee in the performance of its duties, including the sole authority to approve the compensation and other terms and conditions of retention. Prior to any such retention,
the Compensation Committee considers any factors relevant to such consultant's, legal counsel's or advisor's independence from management, including the factors specified in the NYSE Corporate
Governance Standards or other listing rules, to evaluate whether the services to be performed will
24
Table of Contents
raise
any conflict of interest or compromise the independence of such consultant, legal counsel or advisor. In May 2016, the Compensation Committee renewed the engagement of the independent
compensation consultant Frederic W. Cook & Co., Inc. (FW Cook) to provide advisory services, including a market perspective on executive and director compensation matters. During
2016, FW Cook provided the following compensation services to the Compensation Committee:
-
•
-
reviewed and recommended the peer group of companies used in evaluating executive and director compensation;
-
•
-
provided information and commentary on executive and director compensation trends as they related to our current compensation programs;
-
•
-
collected and analyzed market data on director and executive compensation;
-
•
-
reviewed and provided commentary and recommendations on our executive and director compensation arrangements in comparison to market; and
-
•
-
reviewed and provided commentary on developments regarding proxy disclosures and management proposals concerning executive pay.
For
additional information regarding the services provided by FW Cook, please see the Compensation Discussion & Analysis section.
In
2016, FW Cook and its affiliates did not provide additional services to the Company other than at the request of the Compensation Committee. After review and consultation with FW Cook, the
Compensation Committee determined that FW Cook is independent, and there is no conflict of interest resulting from retaining FW Cook currently or during 2016. In reaching these conclusions, the
Compensation Committee considered the factors set forth in the SEC rules and the NYSE listing standards.
In
accordance with its annual review of its compensation consultant engagement, the Compensation Committee will evaluate the engagement of FW Cook in May 2017.
The
Compensation Committee Report can be found on page 64 of this Proxy Statement.
|
Nominating and Governance Committee
|
The
Nominating and Governance Committee met four times in 2016. The Nominating and Governance Committee is comprised exclusively of non-employee directors, all of whom meet the
independence requirements of the NYSE.
As
outlined in its written charter (which is available under "
Corporate Governance
" in the "
Investor
Relations
" section of our website at
www.bostonscientific.com
), the Nominating and Governance Committee has responsibility for
recommending nominees for election and re-election to the Board, ensuring that Board nominees are qualified and consistent with our needs, monitoring significant developments in the law and practice
of corporate governance for directors of public companies, recommending Board committee assignments, reviewing and recommending Board policies and procedures, reviewing political contributions made by
the Company, monitoring compliance with our stock ownership guidelines and with our related party transactions and board service policies, and overseeing the Board and each committee of the Board in
their annual performance self-evaluations. In
25
Table of Contents
addition,
the Nominating and Governance Committee is responsible for recommending to the Board candidates for Chairperson and Chief Executive Officer and for reviewing and assessing a succession plan
for the Chief Executive Officer. For additional information on the nomination process conducted by the Nominating and Governance Committee and our policies regarding stockholder nominations of
directors, please see the Corporate Governance section titled "
Director Nomination Process.
"
The
Nominating and Governance Committee is responsible for reviewing with the Board, on an annual basis, the current size, structure and composition of the Board as a whole, and whether the Company is
being well served by the current directors taking into account the following: the directors' degree of independence; business background, including any areas of particular expertise, such as
accounting or related financial management expertise, marketing or technology; record of service (for incumbent directors), including attendance record; meeting preparation; overall contribution to
the Board; employment status; gender; ethnicity; years of experience; availability for service to us; and our anticipated needs.
The
Finance Committee met four times in 2016. The primary role of the Finance Committee is to provide a forum within the Board to review our overall financing plans and long-term
strategic objectives, as well as our shorter-term acquisition and investment strategies and how these shorter-term activities fit within our overall business objectives. As outlined in its written
charter (which is available under "
Corporate Governance
" in the "
Investor Relations
" section of our
website at
www.bostonscientific.com
), the Finance Committee is charged with providing Board oversight of the financial management of the Company,
approving strategic transactions for which the Board has delegated authority, making recommendations to the Board regarding larger transactions, and evaluating our financial strategies and policies.
The Finance Committee has responsibility to review periodically with management our strategic business objectives and the manner in which transactional activity can contribute to the achievement of
those objectives, and to review with management on a regular basis contemplated strategic opportunities. The Finance Committee conducts periodic reviews of completed transactions for the purposes of
assessing the degree of success achieved, testing the extent to which the projections and other assumptions relied upon in approving past transactions have borne out, identifying the factors
differentiating more successful transactions from less successful ones and evaluating the strategic contributions resulting from these transactions. The Finance Committee is further charged with
conducting periodic reviews of our cash investments and cash management policies, debt ratings and global financing objectives and strategies, including the review and approval of certain borrowing
arrangements, capital expenditures and dispositions, and activities that may impact our capital structure.
|
Compensation Committee Interlocks and Insider Participation
|
The
members of our Compensation Committee during 2016 were Ms. Connors, Ms. James, Dr. Johnson, Mr. Ludwig and Mr. MacMillan. None of these
Compensation Committee members is or has ever been an officer or employee of our Company. During 2016, no member of the Compensation Committee had a relationship that must be described under the SEC
rules relating to disclosure of related person transactions. In 2016, none of our executive officers served on the board of directors or compensation committee (or other board committee performing
equivalent functions) of any entity that had one or more of its executive officers serving on the Board or the Compensation Committee of the Company.
26
Table of Contents
DIRECTOR COMPENSATION
|
Elements of Director Compensation
|
The
Compensation Committee evaluates the appropriate level and form of compensation for non-employee directors at least annually and recommends changes to our Board when appropriate.
Non-employee directors receive a combination of cash and equity compensation for their service on our Board. To determine the appropriate level of compensation for 2016, the Compensation Committee
relied on the consulting services of FW Cook, as well as publicly available data describing director compensation in our peer group companies. The Compensation Committee also took into consideration
the significant amount of time and dedication required by our directors to fulfill their duties on our Board and Board committees as well as the need to continue to attract highly qualified candidates
to serve on our Board. Our director compensation is as follows:
Non-Employee Directors
2016 Compensation
In 2016, we compensated our non-employee directors (other than our former Chairman of the Board) as described
below:
-
•
-
an annual cash retainer of $90,000;
-
•
-
an annual grant of equity with a value of $185,000; and
-
•
-
an annual cash fee of $20,000 for the chair of each of our Board committees.
The
equity granted to our non-employee directors may be granted in one of three forms, as discussed in greater detail below, and vests on the date of the annual meeting of stockholders immediately
following the date of grant, subject to the director's continuation of service during such term. The grants are also subject to the terms and conditions of our Long-Term Incentive Plans. The annual
equity grants are made on the date of each annual meeting of stockholders. If a non-employee director is appointed to the Board on a date other than the annual meeting of stockholders, however, an
equity grant in an amount equal to the then-current non-employee director annual award, prorated for the time period from the effective date of the appointment to the next annual meeting of
stockholders, is made on the first trading day of the month following the month in which the new director was appointed to the Board. Such awards made to new non-employee directors become free from
restriction upon the expiration of the new director's current term of office on the date of the annual meeting of stockholders immediately following the date of grant, subject to the director's
continuation of service during such term. Additionally, if a non-employee director is appointed to the Board on a date other than the annual meeting of stockholders, the annual cash retainer for such
director will be prorated for the time period from the effective date of the appointment to the next annual meeting of stockholders.
Cash Compensation
Each non-employee director receives his or her cash retainers and fees, payable on a quarterly basis. Each non-employee director, however, may elect to
convert all or a portion of his or her cash compensation into one or more of three equity alternatives, each to vest on the date of the annual meeting of stockholders immediately following the date of
grant, subject to the director's continuation
27
Table of Contents
of
service during such term: (i) restricted stock valued based on the closing price of our common stock on the date of grant; (ii) stock options valued based on a Black Scholes valuation
on the date of grant and exercisable for up to one year after a director's separation from Board service; and/or (iii) deferred stock units, valued based on the closing price of our common
stock on the date of grant (with shares of our common stock to be issued only after a director's separation from Board service in accordance with the Boston Scientific Non-Employee Director Deferred
Compensation Plan, as amended and restated, effective January 1, 2014 (the 2014 Non-Employee Director Deferred Compensation Plan)). Each non-employee director may also choose to defer receipt
of all or a portion of his or her annual cash compensation under the 2014 Non-Employee Director Deferred Compensation Plan, as described further below.
Equity Compensation
Each non-employee director may elect to receive their annual equity award as one or more of the following three equity compensation alternatives, each to vest
on the date of the annual meeting of stockholders immediately following the date of grant, subject to the director's continuation of service during such term: (i) restricted stock valued based
on the closing price of our common stock on the date of grant; (ii) stock options valued based on a Black Scholes valuation on the date of grant and exercisable until the earlier of ten years
from the date of grant or one year after a director's separation from Board service; and/or (iii) deferred stock units valued based on the closing price of our common stock on the date of grant
(with shares of our common stock to be issued only after a director's separation from Board service in accordance with the 2014 Non-Employee Director Deferred Compensation Plan).
Lead Independent Director
Beginning in March 2016, we have paid an annual cash fee of $40,000 to our Lead Independent Director. Mr. Ludwig currently serves as
Lead Independent Director. Please see the "
Board Leadership Structure
" above.
Employee Directors
Directors who are also employees of the Company receive no additional compensation for serving on the Board or its committees.
Other Payments and Benefits
We pay or reimburse our directors for transportation, hotel, meals and other incidental expenses incurred in connection with their performance
of services for us, including attending Board and committee meetings and participating in director education programs. Our corporate aircraft is made available to our directors for travel to and from
our Board meetings, as well as for certain other Company business travel. We also extend directors' and officers' indemnity insurance coverage to each of our directors.
Non-Employee Director Deferred Compensation Plans
Each non-employee director may, by written election, defer receipt of all or a portion of the annual cash retainer, annual cash committee
chair fees and equity compensation under our 2014 Non-Employee Director Deferred Compensation Plan. Cash amounts deferred can be invested in deemed investment options in which we credit the amount
deferred plus any earnings from the
chosen investment options. Investment options under the plan are generally the same as those offered under
28
Table of Contents
the
Company's 401(k) Plan through Vanguard, except that, among other things, directors may not elect to invest in the BSC Stock Fund. Deferred cash amounts are payable, at the non-employee director's
written election, in either a lump-sum or in annual installments after a director's separation from Board service or in a lump-sum on an earlier fixed date (each in accordance with the plan).
Director Stock Ownership Guidelines
Non-employee directors are required to hold a significant personal investment in the Company through their ownership of shares of our common
stock. Our director stock ownership guidelines provide that each non-employee director should own shares with a value equal to at least five times the director annual cash retainer (currently $90,000)
within five years of his or her joining the Board. For purposes of satisfying this obligation, stock units and stock or stock unit deferrals under a Company deferred compensation plan may be included
in the aggregate number of shares held by a director. We believe the stock ownership requirements for our non-employee directors align the interests of our directors with the long-term interests of
our stockholders. All of our non-employee directors either currently meet our director stock ownership guidelines or we expect that they will meet the guidelines within five years of becoming a
director. The Nominating and Governance Committee monitors compliance with these guidelines on an annual basis. For information regarding the stock ownership guidelines applicable to our Chief
Executive Officer, please see the Compensation Discussion & Analysis section titled
"Executive Stock Ownership Guidelines."
|
Director Compensation Table
|
The
table below summarizes the compensation we paid to our non-employee directors for the fiscal year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name(1)
|
|
Fees
Earned or
Paid in
Cash
($)(2)(3)
|
|
Stock
Awards
($)(2)(4)
|
|
Option
Awards
($)(2)(5)
|
|
Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)(6)
|
|
All Other
Compensation
($)(7)(8)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nelda J. Connors
|
|
$90,000
|
|
$184,999
|
|
$0
|
|
$4,112
|
|
$0
|
|
$279,111
|
|
Charles J. Dockendorff
|
|
$103,333
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$288,332
|
|
Yoshiaki Fujimori
|
|
$43,811
|
|
$150,073
|
|
$0
|
|
$0
|
|
$0
|
|
$193,884
|
|
Donna A. James
|
|
$89,160
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$274,159
|
|
Kristina M. Johnson
|
|
$103,333
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$288,332
|
|
Edward J. Ludwig
|
|
$122,583
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$307,582
|
|
Stephen P. MacMillan
|
|
$89,943
|
|
$138,739
|
|
$46,264
|
|
$0
|
|
$0
|
|
$274,946
|
|
Ernest Mario*
|
|
$36,667
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$36,667
|
|
N.J. Nicholas, Jr.*
|
|
$36,649
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$36,649
|
|
Pete M. Nicholas*
|
|
$69,983
|
|
$0
|
|
$0
|
|
$0
|
|
$249,358
|
|
$319,341
|
|
David J. Roux
|
|
$120,000
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$304,999
|
|
John E. Sununu
|
|
$103,333
|
|
$184,999
|
|
$0
|
|
$0
|
|
$0
|
|
$288,332
|
|
Ellen M. Zane
|
|
$64,698
|
|
$194,635
|
|
$0
|
|
$0
|
|
$0
|
|
$259,333
|
|
|
|
|
|
*
|
|
Dr. Mario and Messrs. N.J. Nicholas, Jr. and Pete M. Nicholas retired from our Board at our Annual Meeting on May 3, 2016, when their terms ended.
|
(1)
|
|
Mr. Mahoney, our Chairman of the Board, President and Chief Executive Officer, is an employee of the Company and is not included in this table. Mr. Mahoney did not receive any compensation for his services
as a director in 2016, and his compensation as an executive of the Company is discussed in the Compensation Discussion & Analysis and Executive Compensation sections.
|
29
Table of Contents
|
|
|
|
(2)
|
|
The "Stock Awards" and "Option Awards" columns and, to the extent a director received equity in lieu of cash compensation, the "Fees Earned or Paid in Cash" column, present grant date fair value (and the notes below
present the individual grant date fair values) of each director's equity award computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. For a description of the assumptions used for
purposes of determining grant date fair value, please see
Note M — Stock Ownership Plans
to our 2016 consolidated financial statements included in Item 8 of our Annual Report filed on
Form 10-K for the year ended December 31, 2016.
|
(3)
|
|
The annual cash retainer paid to Mr. Fujimori and Ms. Zane for their service as directors in 2016 was prorated to reflect their appointments to the Board on July 13, 2016 and April 15, 2016,
respectively. For Mr. Roux, the amount includes $10,000 paid in 2016 for his service as chair of the Finance Committee in 2015.
|
|
|
Messrs. MacMillan, N.J. Nicholas, Jr. and Pete Nicholas elected to receive equity for all or a portion of their cash retainer earned or paid in 2016. Mr. MacMillan's annual cash retainer was paid in the
form of 69% deferred stock units and 31% stock options. Mr. N.J. Nicholas, Jr.'s annual cash retainer was paid in the form of $9,167 of cash and the remainder in deferred stock units. Mr. Pete Nicholas's annual cash retainer was paid in the
form of $17,500 of cash and the remainder in restricted stock. The following table reports the equity granted to Messrs. MacMillan, N.J. Nicholas, Jr. and Pete Nicholas in lieu of cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Equity Award
|
|
Grant Date
|
|
Number of
Shares/Units/
Options
|
|
Grant Date
Fair Value
|
|
Vesting Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen P. MacMillan
|
|
Stock Options
Deferred Stock Units
Stock Options
Deferred Stock Units
Stock Options
Deferred Stock Units
Stock Options
Deferred Stock Units
|
|
April 1, 2016
April 1, 2016
July 1, 2016
July 1, 2016
October 3, 2016
October 3, 2016
January 3, 2017
January 3, 2017
|
|
1,970
593
810
720
796
718
814
771
|
|
$11,252
$11,231
$5,622
$16,855
$5,615
$16,873
$5,625
$16,869
|
|
May 9, 2017
May 9, 2017
May 9, 2017
May 9, 2017
May 9, 2017
May 9, 2017
May 9, 2017
May 9, 2017
|
|
N.J. Nicholas, Jr.
|
|
Deferred Stock Units
|
|
April 1, 2016
|
|
1,451
|
|
$27,482
|
|
May 3, 2016
|
|
Pete M. Nicholas
|
|
Restricted Stock
|
|
April 1, 2016
|
|
2,771
|
|
$52,483
|
|
May 3, 2016
|
|
|
|
|
(4)
|
|
Each non-employee director elected at our 2016 Annual Meeting of Stockholders was granted an equity award with a value of $185,000. For each director that elected to receive restricted stock or stock options, the
restricted stock and stock options vest upon the expiration of the director's current term of office, subject to continued service. For each director that elected to receive deferred stock units, the deferred stock units vest upon the expiration of
the director's current term of office, subject to continued service, and vested shares of stock will be issued to the director upon his or her separation from Board service in accordance with the 2014 Non-Employee Director Deferred Compensation
Plan.
|
|
|
The annual equity awards to our directors during 2016 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Equity Award
|
|
Grant Date
|
|
Number of
Shares/Units
|
|
Grant Date
Fair Value
|
|
Vesting Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nelda J. Connors
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Charles J. Dockendorff
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Yoshiaki Fujimori*
|
|
Restricted Stock
|
|
August 1, 2016
|
|
6,143
|
|
$150,073
|
|
May 9, 2017
|
|
Donna A. James
|
|
Deferred Stock Units
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Kristina M. Johnson
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Edward J. Ludwig
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Stephen P. MacMillan*
|
|
Stock Options
Deferred Stock Units
|
|
May 3, 2016
May 3, 2016
|
|
7,039
6,370
|
|
$46,264
$138,739
|
|
May 9, 2017
May 9, 2017
|
|
David J. Roux
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
John E. Sununu
|
|
Restricted Stock
|
|
May 3, 2016
|
|
8,494
|
|
$184,999
|
|
May 9, 2017
|
|
Ellen M. Zane*
|
|
Restricted Stock
Restricted Stock
|
|
May 2, 2016
May 3, 2016
|
|
438
8,494
|
|
$9,636
$184,999
|
|
May 3, 2016
May 9, 2017
|
|
|
|
|
|
*
|
|
The award granted on May 2, 2016 to Ms. Zane represents the annual equity award for the 2015 Board term, prorated for the time period from the effective date of her appointment to the date of the 2016 annual
meeting of stockholders. The award to Mr. Fujimori represents the annual equity award for the 2016 Board term, prorated for the time period from the effective date of his appointment to the date of the 2017 annual meeting of stockholders.
Mr. MacMillan elected to receive his annual equity awards for the 2016 Board term in the form of 75% deferred stock units and 25% stock options.
|
|
|
The outstanding Restricted Stock and Deferred Stock Units held by the non-employee directors at December 31, 2016 are shown below:
|
|
|
|
|
|
|
Name
|
|
Outstanding
Restricted Stock
|
|
Outstanding Deferred
Stock Units
|
|
|
|
|
|
|
|
Nelda J. Connors
|
|
8,494
|
|
77,569
|
|
Charles J. Dockendorff
|
|
8,494
|
|
0
|
|
Yoshiaki Fujimori
|
|
6,143
|
|
0
|
|
Donna A. James
|
|
0
|
|
8,494
|
|
Kristina M. Johnson
|
|
8,494
|
|
95,677
|
|
Edward J. Ludwig
|
|
8,494
|
|
18,502
|
|
Stephen P. MacMillan
|
|
0
|
|
15,446
|
|
David J. Roux
|
|
8,494
|
|
0
|
|
John E. Sununu
|
|
8,494
|
|
81,757
|
|
Ellen M. Zane
|
|
8,494
|
|
0
|
30
Table of Contents
|
|
|
|
(5)
|
|
Mr. MacMillan elected to receive 25% of his annual equity awards for the 2016 Board term in the form of stock options. Accordingly, on May 3, 2016, we granted an award of 7,039 stock options with a per share
exercise price of $21.78 and a grant date fair value of $46,264 to Mr. MacMillan. The outstanding unexercised stock options, pursuant to stock option awards previously granted to non-employee directors, at December 31, 2016, are shown
below:
|
|
|
|
|
Name
|
|
Outstanding
Stock Options
|
|
|
|
|
|
Edward J. Ludwig
|
|
16,818
|
|
Stephen P. MacMillan
|
|
32,852
|
|
|
|
|
(6)
|
|
The amounts in this column represent the "above-market" portion of 2016 earnings under the interest crediting investment option available under the Non-Employee Director Deferred Compensation Plan. The interest rate
used under the plan each year is the Moody's Composite Yield on Seasoned Corporate Bonds for the month of September of the preceding year. For 2016, the interest rate used under the plan was 4.59%, the Moody's rate in September 2015. Under SEC rules,
interest on non-qualified deferred compensation is considered "above-market" if the interest rate exceeds 120% of the federal long-term interest rate, with compounding at the rate that corresponds most closely to the rate under the plan, at the time
the interest rate or formula is set. For 2016, 120% of the applicable federal long-term interest rate was 3.16%.
|
(7)
|
|
The amount in this column represents all other compensation earned by the following non-employee director in fiscal year 2016:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Annual
Founders
Benefits(a)
|
|
Medical
Benefits(a)
|
|
Other
Amounts(b)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Pete M. Nicholas
|
|
$225,000
|
|
$13,648
|
|
$10,710
|
|
$249,358
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The amounts included in these columns represent 2016 payments to Mr. Pete M. Nicholas pursuant to his founder retirement arrangements described in the section titled "
Founders'
Benefits
" below.
|
|
|
(b)
|
|
This amount represents ground transportation services.
|
|
|
|
|
(8)
|
|
The amount in this column excludes $21,777 and $19,380 of disallowed Company tax deductions attributable to Messrs. MacMillan and Ludwig, respectively, for personal use of the corporate aircraft during the year,
where, in both cases, the incremental costs to the Company of the limited personal use of the aircraft was less than $1,500.
|
|
Former Chairman of the Board
|
Mr. Pete
M. Nicholas served as our Chairman of the Board until the 2016 annual meeting of stockholders. In such capacity, Mr. Pete M. Nicholas received an annual cash
retainer of $210,000, which was prorated for the time period from January 1, 2016 until May 3, 2016, the date of the 2016 annual meeting of stockholders. With respect to his annual cash
retainer, Mr. Pete M. Nicholas was entitled to elect to convert it into, and, with respect to his annual equity compensation he was
entitled to elect to receive, one or more of the three equity alternatives described under the section titled "Non-Employee Directors" above. Mr. Pete M. Nicholas also received certain benefits
under his founders' retirement arrangements, including continued medical coverage under our benefit policies. For additional information, please see the section titled
"
Founders' Benefits
" below and the "Director Compensation" table and related footnotes.
Under
our Corporate Governance Guidelines, each of our co-founders is eligible, at the Board's discretion, to become a director emeritus of the Company. In connection with his
retirement from the Board in 2011, Mr. Abele agreed to serve as director emeritus at the request of the Board. Mr. Abele does not receive any compensation for his role as director
emeritus. However, Mr. Abele receives certain benefits under his founders' retirement arrangements, including continued medical coverage under our benefit policies, for as long as he remains a
director or director emeritus of our Company. For additional information regarding Mr. Abele's founders' benefits, please see the section titled "
Founders'
Benefits
" below.
31
Table of Contents
In
May 2005, Mr. Pete M. Nicholas, our co-founder and former Chairman of the Board, and Mr. Abele, our co-founder and director emeritus, retired as employees of the
Company. In connection with their retirement, the Board approved the following arrangements for Messrs. Pete M. Nicholas and Abele in May 2005:
-
•
-
Mr. Pete M. Nicholas receives $225,000 on an annualized basis and medical coverage under our benefit policies for life, and continued
provision of an office space and secretarial and administrative support to assist him in the services he provides to the Company. During 2016, Mr. Pete M. Nicholas continued to have secretarial
and administrative support to assist him in the performance of the services he provides to the Company. In December 2013, the Company entered into an arrangement with Mr. Pete M. Nicholas to
provide an office space in accordance with his founders' benefits to assist him in the performance of his duties as then Chairman and other services provided to the Company. For additional information
regarding the arrangement between the Company and Mr. Pete M. Nicholas, please see the "
Related Party Transactions
" section above.
Mr. Pete M. Nicholas also receives ground transportation services on an as-needed basis.
-
•
-
Mr. Abele receives $150,000 on an annualized basis for life, and medical coverage under our benefit policies for as long as he remains a
director or director emeritus, and continued provision of an office space and secretarial and administrative support to assist him in the performance of the services he provides to the Company, as may
be required.
32
Table of Contents
EXECUTIVE OFFICERS
As
of March 6, 2017, our executive officers were as follows:
|
|
|
|
|
|
Name
|
|
Age
|
|
Title
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
52
|
|
Chairman of the Board, President and Chief Executive Officer
|
|
Kevin J. Ballinger
|
|
44
|
|
Executive Vice President and President, Interventional Cardiology
|
|
Supratim Bose
|
|
64
|
|
Executive Vice President and President, Asia-Pacific, Middle East and Africa
|
|
Daniel J. Brennan
|
|
51
|
|
Executive Vice President and Chief Financial Officer
|
|
Arthur C. Butcher
|
|
46
|
|
Senior Vice President and President, Endoscopy
|
|
Wendy Carruthers
|
|
48
|
|
Senior Vice President, Human Resources
|
|
Keith D. Dawkins, M.D.
|
|
66
|
|
Executive Vice President and Global Chief Medical Officer
|
|
Joseph M. Fitzgerald
|
|
53
|
|
Executive Vice President and President, Rhythm Management
|
|
Edward F. Mackey
|
|
54
|
|
Executive Vice President, Operations
|
|
Professor Ian T. Meredith AM
|
|
60
|
|
Executive Vice President and Global Chief Medical Officer
|
|
Jeffrey B. Mirviss
|
|
51
|
|
Senior Vice President and President, Peripheral Interventions
|
|
Maulik Nanavaty
|
|
55
|
|
Senior Vice President and President, Neuromodulation
|
|
Michael P. Phalen
|
|
57
|
|
Executive Vice President and President, MedSurg
|
|
David A. Pierce
|
|
53
|
|
Senior Vice President and President, Urology and Pelvic Health
|
|
Timothy A. Pratt
|
|
67
|
|
Executive Vice President, Chief Administrative Officer, General Counsel and Secretary
|
|
John Bradley Sorenson
|
|
49
|
|
Senior Vice President, Manufacturing and Supply Chain
|
|
Eric Thépaut
|
|
55
|
|
Senior Vice President and President, Europe
|
|
Biographical Information About Our Executive Officers
|
For
Michael F. Mahoney, please see his biography in
Proposal 1: Election of Directors
.
Kevin J. Ballinger
has been our Executive Vice President since March 2017, having previously served as Senior Vice President from January 2013, and
President, Interventional Cardiology since July 2011. In his current role, Mr. Ballinger is responsible for developing and bringing to market innovative solutions that diagnose and treat
coronary artery disease and structural heart disorders. Mr. Ballinger has more than 20 years of interventional cardiology experience. Prior to serving as our President, Interventional
Cardiology, he held a variety of engineering and general management positions within our Interventional Cardiology and Peripheral Interventions business units, including Vice President and General
Manager, Group Program Management, Cardiology, Rhythm and Vascular from January 2010 to July 2011; Vice President of Research and Development, Peripheral Interventions from September 2008 to January
2010; and Vice President of Program Management, Cardiovascular from September 2006 to
33
Table of Contents
September
2008. Mr. Ballinger earned a B.S. in Mechanical Engineering from Michigan Technological University and an M.B.A. from the University of Minnesota.
Supratim Bose
is our Executive Vice President and President, Asia-Pacific, Middle East and Africa, a position he has held since January 2013.
Mr. Bose joined Boston Scientific in December 2011 as our Executive Vice President and President, Asia-Pacific and served in that role until he also assumed responsibility for the Middle East
and Africa units. Before joining Boston Scientific, Mr. Bose was founder and Chief Executive Officer of Singapore-based Bose Consulting Group, which specialized in strategic management
consulting services for the healthcare industry, from January 2010 to December 2011. He previously worked for nearly thirty years at Johnson & Johnson where he concluded his tenure as Company
Group Chairman of its Medical Devices and Diagnostics business in 2009. Mr. Bose joined Johnson & Johnson Ltd. India in 1981, and held a variety of management positions of
increasing responsibility. He earned a B.S. in Chemistry/Physics, an M.S. in Biophysics and a Masters in Management Studies from the Jamnalal Bajaj Institute for Management Studies at the University
of Bombay. He has served as a member of the board of directors at Quattro Vascular Pte. Ltd. and Trireme Medical, and as a member of the advisory board at Singapore Management University's Lee
Kong Chian School of Business. He served as a member of the board of directors of CareFusion Corporation, a role that he held from May 2014 until that company's acquisition by Becton, Dickinson and
Company in March 2015.
Daniel J. Brennan
is our Executive Vice President and Chief Financial Officer, a position he has held since January 2014. In this role, he is
responsible for several Company functions, including Global Controllership, Global Internal Audit, Corporate Finance, Treasury, Corporate Tax, Investor Relations, and Corporate Business Development.
Prior to that, he was the Company's Senior Vice President and Corporate Controller, a role he served in since January 2010. Since joining Boston Scientific in December 1996, Mr. Brennan has
held roles with increased responsibilities. For 2009, Mr. Brennan served as Vice President and Assistant Corporate Controller. From 2001 through 2008, he served as Vice President of Finance and
Information Technology for Worldwide Financial & Strategic Planning (2008), Investor Relations (2006-2007), International Finance (2005-2006) and Cardiovascular (2001-2005). In 1999,
Mr. Brennan became Group Controller of the Non-Vascular business after previously serving as Controller of the Meditech Vascular business. He holds a B.S. degree in Finance and Investments and
an M.B.A from Babson College. Mr. Brennan is also a certified public accountant and a member of the Board of Overseers of Babson College.
Arthur C. Butcher
is our Senior Vice President and President, Endoscopy, a position he has held since July 2016. Prior to his current role,
Mr. Butcher served as Vice President & General Manager, Japan Endoscopy. Since joining Boston Scientific in 1997, Mr. Butcher has held a variety of marketing and strategic
planning management positions within the Endoscopy and Urology and Pelvic Health businesses. He holds a B.A. in International Relations from the University of Pennsylvania and an M.B.A. from Columbia
University.
Wendy Carruthers
has been our Senior Vice President, Human Resources since December 2012 and served as the head of Human Resources on an interim basis
from August 2012 to November 2012. In her current role, Ms. Carruthers oversees the Company's human resources activities globally, including Human Resources operations and services, total
rewards, talent management, and diversity and inclusion. Prior to her current role, she served as our Vice President of Global Talent Management from January 2011 to November 2012, responsible for all
aspects of global talent management, including the design, development and implementation of global processes and systems to enable managers to identify, attract, leverage and develop people.
Ms. Carruthers has been with Boston
Scientific since 2004 and was previously Vice President of Human Resources for our Europe, Middle East and Africa region, based in Paris, from June 2007 to December 2010; our Vice President of
34
Table of Contents
Human
Resources for Europe from January 2006 to June 2007; and our Director of Human Resources for Europe from March 2004 to December 2005. Prior to joining Boston Scientific, Ms. Carruthers
was Vice President of Human Resources, Europe for global telecommunications company Cable & Wireless. She also previously worked in human resources for Diageo, a food and beverage company, and
Tesco, a U.K. supermarket chain. Ms. Carruthers holds a B.A. First Class Honors Degree in Modern Languages from the University of Salford and is a Fellow of the Chartered Institute of Personnel
and Development.
Keith D. Dawkins, M.D.
has been our Executive Vice President and Global Chief Medical Officer since January 2012. Dr. Dawkins has announced his
retirement and will be retiring from Boston Scientific effective May 31, 2017. Prior to January 2012, he was Senior Vice President and Chief Medical Officer of our Cardiology, Rhythm and
Vascular Group. From 2008 until May 2010, he was our Senior Vice President and Associate Chief Medical Officer of our Cardiovascular business. Prior to joining Boston Scientific in 2008,
Dr. Dawkins was a practicing interventional cardiologist for more than 20 years in England. He has earned a series of clinical, research and academic distinctions, including a
Post-Doctoral Research Fellowship at Stanford University as a Fulbright Scholar. He served as President of the British Cardiovascular Intervention Society, and held numerous appointments on hospital,
regional and national committees, including the National Institute for Health and Clinical Excellence. He has been an author on more than 750 academic publications and presentations on a variety of
cardiac topics. Dr. Dawkins was educated at London University and Guys Hospital, earning a First Class Honors degree in Pathology. He trained in cardiology at Oxford and at the
Brompton & St. George's Hospital in London.
Joseph M. Fitzgerald
has been our Executive Vice President and President, Rhythm Management since February 2014, having previously served as Senior Vice
President and President, Cardiac Rhythm Management from July 2011. He served as Senior Vice President and President, Endovascular from February 2010 until July 2011. Prior to that,
Mr. Fitzgerald was President and General Manager of Peripheral Interventions from June 2008 to February 2010 and President of Electrophysiology from 2005 to 2008. Previously, he held a variety
of management positions in our Neurovascular and Peripheral Interventions businesses. These included numerous regional and divisional sales management assignments up to and including his roles as Vice
President, Global Marketing for the Neurovascular business from January 2001 to July 2005 and Vice President of U.S. Sales for the Neurovascular business from 1997 to January 2001. Prior to joining
Boston Scientific in 1990 as a sales representative, Mr. Fitzgerald was with Anheuser Busch, Inc., where he held a variety of sales, marketing and training assignments.
Mr. Fitzgerald holds a B.S. in Business from Indiana University and an M.B.A. from Southern Illinois University with a concentration in Marketing and Finance.
Edward F. Mackey
has been our Executive Vice President, Operations since February 2015. Prior to joining Boston Scientific, Mr. Mackey was
Worldwide President of DePuy Synthes Power Tools, a division of Johnson & Johnson from November 2012 to January 2015, and Vice President of Integration for Johnson & Johnson's
acquisition of Synthes from June 2010 to November 2012. Early in his career, Mr. Mackey held management positions in Operations, Quality and Product Development at Raytheon's Mille Systems
division. In 1995, he moved to Johnson & Johnson Orthopaedics as a plant manager and progressed through a series of manufacturing and supply chain leadership roles, becoming Worldwide Vice
President of Supply Chain and Manufacturing for DePuy in 2007, a position he held until 2010. Mr. Mackey holds a Bachelor's degree in Mechanical Engineering from Worcester Polytechnic Institute
and an M.B.A from the University of Massachusetts.
Professor Ian T. Meredith AM
has been our Executive Vice President and Global Chief Medical Officer since January 2017. Prior to joining Boston
Scientific, Professor Meredith served as a Professor and Director of MonashHeart, the cardiology service within Monash Health, and Executive Director of the
35
Table of Contents
Monash
Cardiovascular Research Centre at Monash University in Melbourne, Australia, from September 2005 to December 2016. Professor Meredith has over 25 years of experience as a clinical and
interventional cardiologist. Prior to becoming the Director of MonashHeart, Professor Meredith was a Director of the Cardiac Catheterization Laboratories and Interventional Cardiology at Monash
Medical Centre, Southern Health in Melbourne from December 1993 to August 2005. Professor Meredith has been a member of the Board of the National & Victorian Heart Foundation (Australia) and a
member of the Cardiac Society of Australia and New Zealand National Board. He is currently an Executive Director of the Monash Cardiovascular Research Centre. Professor Meredith received a Ph.D. from
the Baker Institute in Melbourne and an Order of Australia (AM) in the General Division for service to medicine in the field of Cardiology as a clinician and researcher.
Jeffrey B. Mirviss
has been our Senior Vice President and President, Peripheral Interventions since January 2013 and was our President, Peripheral
Interventions from July 2011 to January 2013. Mr. Mirviss has more than 27 years of experience in medical device and pharmaceutical general management, marketing and sales. Since joining
Boston Scientific in 1997, Mr. Mirviss also served as our Vice President, Group Global Marketing, Cardiology, Rhythm and Vascular from July 2009 to July 2011 and Vice President, Global
Cardiology Marketing from December 2004 to July 2009. In addition to his positions at Boston Scientific, Mr. Mirviss has worked for companies ranging in size from a pre-revenue venture-backed
medical device startup to Dow 30 companies. He holds a Bachelor's degree from the University of Minnesota and an M.B.A. from the University of St. Thomas.
Maulik Nanavaty
became our Senior Vice President and President, Neuromodulation in September 2011. Prior to his current role, Mr. Nanavaty was
President of Boston Scientific Japan from December 2007 until September 2011. From January 2007 through November 2007, he served as Vice President and General Manager, Interventional Cardiology,
Boston Scientific Japan. Mr. Nanavaty joined Boston
Scientific in 2005 as Vice President, Corporate Strategy, Boston Scientific Japan and served in that capacity through December 2006. Prior to joining the Company, Mr. Nanavaty spent
16 years working in various executive positions at Baxter International, Inc. and Baxter Japan. Mr. Nanavaty earned a Ph.D. in Pharmaceutical Sciences from the University of
Illinois and an M.B.A. from the University of Chicago.
Michael P. Phalen
has been our Executive Vice President and President, MedSurg since January 2012. Prior to his current role, he served as Executive
Vice President and President, International from January 2011. Mr. Phalen served as Senior Vice President and President, Endoscopy from 2010 to 2011 and Vice President and President of
Endoscopy from 2001 to 2010. Mr. Phalen joined Boston Scientific in 1988 and has held a variety of management positions. Prior to becoming President, Endoscopy, he was Vice President, Business
Unit Manager for Endoscopic Surgery and Vice President of Global Marketing for Endoscopy. Prior to these appointments, Mr. Phalen held positions as Director of Marketing, Group Product Manager,
Regional Sales Manager, Product Manager and Territory Manager. Before joining the Company, he held management positions with MD Technology, Kendall Healthcare and Pennwalt Pharmaceuticals. He earned a
B.S. in General Science from Villanova University and an M.B.A. from Fairleigh Dickinson University.
David A. Pierce
has served as our Senior Vice President and President, Urology and Pelvic Health since July 2016. Prior to his current role,
Mr. Pierce served as Senior Vice President and President, Endoscopy since 2011, and Vice President, Marketing for Endoscopy from April 2006 until January 2011. From December 2004 until March
2006, Mr. Pierce was the Group Marketing Director in the Endoscopy business. He joined Boston Scientific in 1991 as a Territory Manager before assuming management-level positions of increasing
responsibility. Before joining the Company, Mr. Pierce worked as a Senior Sales Representative for Airborne Express and served as a Captain in the United States
36
Table of Contents
Army.
He earned a B.S. in Business Administration from Norwich University and an M.B.A. from Boston University.
Timothy A. Pratt
is our Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, a position he has held since February
2010. He is responsible for the worldwide management of our Legal functions, Global Compliance, Global Security, Aviation Services, and Government Affairs. Mr. Pratt joined Boston Scientific in
May 2008 as our Executive Vice President, General Counsel and Secretary. Previously, Mr. Pratt worked for the law firm of Shook, Hardy & Bacon. He joined the firm in 1977 and became
partner in 1981. He concentrated his practice in the defense of pharmaceutical and medical device litigation and toxic tort cases. Mr. Pratt served as a director on the board of
DRI — The Voice of the Defense Bar, and is currently serving on the boards of the New England Legal Foundation and Lawyers for Civil Justice. He is also active in the Federation of
Defense and Corporate Counsel, where he has served as President and Chairman of the board. Mr. Pratt has served as a member of the board of directors and executive committee of AdvaMed.
Mr. Pratt earned a B.A. degree at Tarkio College and graduated Order of the Coif from Drake University Law
School, where he served as editor-in-chief of the
Drake Law Review
. After graduating, Mr. Pratt was law clerk to Judge Floyd R. Gibson of the
U.S. Court of Appeals for the Eighth Circuit.
John Bradley Sorenson
is our Senior Vice President, Manufacturing and Supply Chain, a position he has held since November 2014. In this role, he is
responsible for the global manufacturing and distribution of our products. Mr. Sorenson has more than 17 years of medical device manufacturing experience. Prior to his current role, he
held a variety of Operations positions at Boston Scientific, supporting the Cardiac Rhythm Management, Neuromodulation, Interventional Cardiology, Peripheral Interventions and Structural Heart
businesses. For six years prior to his current appointment, he served as Multi-Site Vice President, Operations. Before joining Boston Scientific, he was president and COO of QRS Diagnostic and held
manufacturing management positions at Federal Cartridge. Mr. Sorenson earned a B.A. in Economics from Gustavus Adolphus College and an M.B.A. from the University of Minnesota.
Eric Thépaut
is our Senior Vice President and President, Europe, a position he has held since January 2015. Prior to his current role,
Mr. Thépaut was Vice President Interventional Cardiology & Structural Heart, Europe, a position he held since 2012. He joined Boston Scientific Europe, in 1996, as a
business finance manager and earned roles of increasing responsibility in marketing and finance, becoming Vice President, Finance, Europe, from 2002 to 2005, General Manager and Vice President,
France, from 2005 to 2008, and General Manager and Vice President of the France Group, comprised of France, Benelux and Middle East North Africa, from 2009 to 2011. Before joining Boston Scientific,
Mr. Thépaut held management positions in treasury operations and auditing at Nestlé and financial planning and analysis at Apple Computer.
Mr. Thépaut earned his M.B.A. at Paris Dauphine University.
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Table of Contents
CERTAIN BENEFICIAL OWNERSHIP MATTERS
|
Security Ownership of Principal Stockholders
|
Set
forth below are stockholders known by us to be the beneficial owner of more than 5% of our common stock as of March 6, 2017. As of March 6, 2017, there were
1,368,869,969 shares of our common stock outstanding.
|
|
|
|
|
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Name and Address
|
|
Number of Shares
Beneficially Owned
|
|
Percent of Shares
Outstanding
|
|
|
|
|
|
|
|
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BlackRock, Inc.
|
|
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96,491,091
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(1)
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7.05%
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|
40 East 52nd Street, New York, NY 10022
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|
|
|
|
|
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Capital World Investors
|
|
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86,245,572
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(2)
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6.30%
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333 South Hope Street, Los Angeles, CA 90071
|
|
|
|
|
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FMR LLC/Abigail P. Johnson
|
|
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171,602,794
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(3)
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12.54%
|
|
245 Summer Street, Boston, MA 02210
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|
|
|
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The Vanguard Group
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|
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87,630,779
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(4)
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6.40%
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|
100 Vanguard Blvd., Malvern, PA 19355
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|
|
|
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Wellington Entities (as defined below)
|
|
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69,587,952
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(5)
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5.08%
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|
c/o Wellington Management Company LLP
280 Congress Street, Boston, MA 02210
|
|
|
|
|
|
-
(1)
-
Based
solely on an Amendment to Schedule 13G filed with the SEC on January 19, 2017, BlackRock, Inc. (BlackRock) reported aggregate
beneficial ownership of 96,491,091 shares of Boston Scientific common stock as of December 31, 2016. BlackRock reported that it possessed sole voting power with respect to 83,510,632
shares, sole dispositive power with respect to 96,438,655 shares, shared voting power with respect to 52,436 shares and shared dispositive power with respect to 52,436 shares.
-
(2)
-
Based
solely on an Amendment to Schedule 13G filed with the SEC on February 13, 2017, Capital World Partners reported aggregate beneficial
ownership of 86,245,572 shares of Boston Scientific common stock as of December 31, 2016, as to which it disclaims beneficial ownership. Capital World Partners reported that it
possessed sole voting power with respect to 86,245,572 shares and sole dispositive power with respect to 86,245,572 shares. Capital World Partners also reported that it did not possess shared
voting or dispositive power over any shares beneficially owned.
-
(3)
-
Based
solely on an Amendment to Schedule 13G jointly filed by FMR LLC and Abigail P. Johnson with the SEC on February 14, 2017,
FMR LLC and Abigail P. Johnson each reported aggregate beneficial ownership of the same 171,602,794 shares of Boston Scientific common stock. FMR LLC reported sole voting power
with respect to 11,409,593 shares of Boston Scientific common stock and each of FMR LLC and Abigail P. Johnson reported sole dispositive power with respect to the same 171,602,794
shares, in each case, as of December 31, 2016. FMR LLC and Abigail P. Johnson reported that the following subsidiaries of FMR LLC beneficially own shares of the Company:
(i) FIAM LLC; (ii) Fidelity Institutional Asset Management Trust Company; (iii) Fidelity Management Trust Company, Inc.;
(iv) FMR Co., Inc.; and (v) Strategic Advisors Inc.
-
(4)
-
Based
solely on an Amendment to Schedule 13G filed with the SEC on February 10, 2017, The Vanguard Group (Vanguard) reported aggregate
beneficial ownership of 87,630,779 shares of Boston Scientific common stock as of December 31, 2016. Vanguard reported that it possessed sole voting power with respect to 2,128,167
shares, sole dispositive power with respect to 85,315,911 shares, shared voting power with respect to 254,165 shares and shared dispositive power with respect to 2,314,868 shares. Vanguard
also reported that (i) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 1,739,686 shares as a result of its serving as investment
manager of collective trust accounts and (ii) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 963,663 shares as a result
of its serving as investment manager of Australian investment offerings.
-
(5)
-
Based
solely on an Amendment to Schedule 13G jointly filed by Wellington Management Group LLP, Wellington Group Holdings LLP and
Wellington Investment Advisors Holdings LLP (collectively, the Wellington Entities) with the SEC on February 9, 2017, Wellington Management Group LLP, Wellington Group
Holdings LLP and Wellington
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Table of Contents
Investment
Advisors Holdings LLP reported aggregate beneficial ownership of 69,587,952 shares of Boston Scientific common stock as of December 31, 2016. The same entities
reported that they shared voting power with respect to 18,824,570 shares and shared dispositive power with respect to 69,587,952 shares. The Wellington Entities also reported that they did not
possess sole voting power or sole dispositive power over any shares beneficially owned.
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Security Ownership of Directors and Executive Officers
|
The
following table shows, as of March 6, 2017, the amount of our common stock beneficially owned by:
-
•
-
our directors and director nominees;
-
•
-
our executive officers named in the Summary Compensation Table; and
-
•
-
all of our directors and executive officers as a group.
"Beneficial
ownership" includes those shares of our common stock the reporting person has the power to vote or transfer, stock options that are currently exercisable or exercisable within
60 days, and deferred stock units that may vest within 60 days. Unless otherwise indicated, the persons named below have sole voting and investment power over the shares listed.
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|
|
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Name
|
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Number of Shares
Beneficially Owned
|
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Percent of Shares
Outstanding
|
|
|
|
|
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Nelda J. Connors(1)
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109,890
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|
*
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Charles J. Dockendorff(2)
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50,092
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*
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Yoshiaki Fujimori(3)
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6,143
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*
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Donna A. James(4)
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17,252
|
|
*
|
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Kristina M. Johnson(5)
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104,171
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|
*
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Edward J. Ludwig(6)
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56,137
|
|
*
|
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Stephen P. MacMillan(7)
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41,372
|
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*
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David J. Roux(8)
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36,894
|
|
*
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John E. Sununu(9)
|
|
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100,901
|
|
*
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Ellen M. Zane(10)
|
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8,932
|
|
*
|
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Michael F. Mahoney(11)
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3,699,521
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*
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Daniel J. Brennan(12)
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511,181
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*
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Kevin J. Ballinger(13)
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298,154
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*
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Joseph M. Fitzgerald(14)
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759,597
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*
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Timothy A. Pratt(15)
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1,078,028
|
|
*
|
|
All directors and executive officers as a group (27 persons)(16)
|
|
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10,096,666
|
|
*
|
-
*
-
Reflects
beneficial ownership of less than one percent (1%) of our outstanding common stock.
-
(1)
-
Ms. Connors'
beneficial ownership includes 8,494 shares of restricted stock as to which she has sole voting but not investment power as the shares are
unvested until the Annual Meeting, and 77,569 shares of restricted stock deferred pursuant to our Non-Employee Director Deferred Compensation Plan the underlying shares of which she has
neither voting nor investment power until such shares are distributed in accordance with the plan.
-
(2)
-
Mr. Dockendorff's
beneficial ownership includes 8,494 shares of restricted stock as to which he has sole voting but not investment power as the shares
are unvested until the Annual Meeting.
-
(3)
-
Mr. Fujimori's
beneficial ownership includes 6,143 shares of restricted stock as to which he has sole voting but not investment power as the shares
are unvested until the Annual Meeting.
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Table of Contents
-
(4)
-
Ms. James'
beneficial ownership includes 8,494 deferred stock units deferred pursuant to our Non-Employee Director Deferred Compensation Plan the
underlying shares of which she has neither voting nor investment power until such shares are distributed in accordance with the plan.
-
(5)
-
Dr. Johnson's
beneficial ownership includes 8,494 shares of restricted stock as to which she has sole voting but not investment power as the shares
are unvested until the Annual Meeting, 85,027 shares of restricted stock deferred, and 10,650 deferred stock units deferred pursuant to our Non-Employee Director Deferred Compensation Plan as
to the underlying shares of which she has neither voting nor investment power until such shares are distributed in accordance with the plan. It excludes 9,815 common stock equivalents which
Dr. Johnson received under our Non-Employee Director Deferred Compensation Plan in connection with her deferral of certain director cash retainer amounts.
-
(6)
-
Mr. Ludwig's
beneficial ownership includes 8,494 shares of restricted stock as to which he has sole voting but not investment power as the shares are
unvested until the Annual Meeting, 18,502 deferred stock units deferred pursuant to our Non-Employee Director Deferred Compensation Plan as to the underlying shares of which he has neither
voting nor investment power until such shares are distributed in accordance with the plan, and 16,818 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017.
-
(7)
-
Mr. MacMillan's
beneficial ownership includes 16,217 deferred stock units deferred pursuant to our Non-Employee Director Deferred Compensation Plan
the underlying shares of which he has neither voting nor investment power until such shares are distributed in accordance with the plan, and 24,207 shares of common stock subject to stock
options exercisable within 60 days of March 6, 2017.
-
(8)
-
Mr. Roux's
beneficial ownership includes 8,494 shares of restricted stock as to which he has sole voting but not investment power as the shares are
unvested until the Annual Meeting.
-
(9)
-
Mr. Sununu's
beneficial ownership includes 8,494 shares of restricted stock as to which he has sole voting but not investment power as the shares are
unvested until the Annual Meeting, 68,580 shares of restricted stock deferred, and 13,177 deferred stock units deferred pursuant our Non-Employee Director Deferred Compensation Plan as to the
underlying shares of which he has neither voting nor investment power until such shares are distributed in accordance with the plan.
-
(10)
-
Ms. Zane's
beneficial ownership includes 8,494 shares of restricted stock as to which she has sole voting but not investment power as the shares are
unvested until the Annual Meeting.
-
(11)
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Mr. Mahoney's
beneficial ownership includes 1,846,381 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017.
-
(12)
-
Mr. Brennan's
beneficial ownership includes 296,221 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017.
-
(13)
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Mr. Ballinger's
beneficial ownership includes 211,524 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017.
-
(14)
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Mr. Fitzgerald's
beneficial ownership includes 550,904 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017 and 68,577 shares held in his 401(k) Plan account.
-
(15)
-
Mr. Pratt's
beneficial ownership includes 832,182 shares of common stock subject to stock options exercisable within 60 days of
March 6, 2017.
-
(16)
-
This
amount includes 5,836,563 shares of common stock subject to stock options exercisable within 60 days of March 6, 2017 and 73,563 shares
held in the 401(k) Plan accounts of our executive officers. Please refer to footnotes one through 15 above for additional details regarding the holdings of our directors, our director nominees
and our Named Executive Officers (NEOs).
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Section 16(a) Beneficial Ownership Reporting Compliance
|
Section 16(a)
of the Exchange Act requires our directors, executive officers and persons beneficially holding more than 10% of our common stock to file reports of their
ownership of our common stock and any changes in that ownership with the SEC. Specific due dates for these reports have been established and we are required to report any failure to file by these
dates during fiscal year 2016. To our knowledge, all of these filing requirements were timely satisfied by our directors, executive officers and 10% stockholders. In making these statements, we have
relied upon the written representations of our directors and executive officers and copies of reports that have been filed with the SEC.
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Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
This discussion and analysis describes material elements of our 2016 compensation program for our NEOs.
Under
applicable SEC rules, we are required to disclose certain compensation and other information regarding our Chief Executive Officer, our Chief Financial Officer, and our three
other most highly-compensated executive officers (referred to as our named executive officers or NEOs). Our named executive officers for the year ended December 31, 2016, are:
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|
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Michael F. Mahoney
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Chairman of the Board, President and Chief Executive Officer
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Daniel J. Brennan
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Executive Vice President and Chief Financial Officer
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Kevin J. Ballinger
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Executive Vice President and President, Interventional Cardiology
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Joseph M. Fitzgerald
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Executive Vice President and President, Rhythm Management
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Timothy A. Pratt
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Executive Vice President, Chief Administrative Officer, General Counsel and Secretary
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Company Strategic Imperatives and Select Business Results Linked to 2016 Executive Compensation
During 2016, we continued to focus on the five strategic imperatives we launched in 2013 to help drive innovation, accelerate profitable
revenue growth and increase stockholder value:
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•
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Strengthen execution to grow share in our served markets.
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•
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Expand into high growth adjacencies that complement our core businesses.
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•
-
Drive global expansion, including in emerging markets.
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•
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Fund the journey to fuel growth through optimization and cost reduction initiatives and a re-allocation of spending to support growth
initiatives.
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•
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Develop key capabilities to enable delivery of economic- and customer-focused products and solutions aligned with marketplace needs.
With
respect to our performance in 2016 relative to the financial performance metrics used in our short- and long-term incentive programs, we:
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•
-
Generated GAAP (as defined below) net sales of $8.386 billion and net sales on a constant currency basis (SFX net sales) of
$9.076 billion.
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•
-
Reported GAAP net income per share of $0.25 and adjusted net income per share (adjusted EPS) of $1.11.
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•
-
Generated GAAP cash flow from operating activities of $972 million and adjusted free cash flow of $1.607 billion.
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Table of Contents
SFX
net sales, adjusted EPS and adjusted free cash flow are not prepared in accordance with generally accepted accounting principles in the United States (GAAP). For a reconciliation of these non-GAAP
financial measures to the most directly comparable GAAP financial measures and insight into how these non-GAAP measures are considered by management, please see Annex A.
Pay for Performance
Our executive compensation philosophy is to provide appropriate competitive compensation opportunities to our executives with actual pay
outcomes heavily influenced by achievement of Company and individual performance targets in support of our business strategy and creation of long-term stockholder value.
CEO's Realizable Total Direct Compensation Aligns with Company Performance
The following chart shows the value of the primary elements of total direct compensation (TDC), consisting of base salary and annual short- and long- term
incentives, for our Chief Executive Officer in 2016 (i) at "target" opportunity as considered by our Compensation Committee; (ii) as disclosed in our Summary Compensation Table; and
(iii) as "realizable" at December 31, 2016. These values were calculated using the 2016 base salary, annual equity incentives, and Annual Bonus Plan award amounts for our Chief Executive
Officer as set forth in the footnotes to the chart below.
CEO Compensation
Target vs. Summary Compensation Table vs. Realizable
Amounts in the "Target" column consist of the following:
-
•
-
the annual equity awards granted on February 22, 2016, with (a) stock options valued in accordance with Financial Accounting
Standards Board Accounting Standards Codification (FASB ASC) Topic 718, as described in the footnotes to the Executive Compensation section titled "
Summary Compensation
Table,"
and (b) service-based deferred stock
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Table of Contents
Amounts in the "Summary Compensation Table" column consist of the following:
-
•
-
the annual equity awards granted on February 22, 2016, with the value of each award determined in accordance with FASB ASC Topic 718, as
described in the footnotes to the Executive Compensation section titled "
Summary Compensation Table"
;
-
•
-
the actual 2016 Annual Bonus Plan award; and
-
•
-
the annual base salary earned in 2016.
Amounts in the "Realizable" column consist of the following:
-
•
-
the annual equity awards granted on February 22, 2016, with (a) stock options valued at their intrinsic value (number of options
awarded multiplied by the closing price of our common stock on December 31, 2016 less the exercise price of such options), (b) service-based DSUs valued using the number of units awarded
multiplied by the closing price of our common stock on December 31, 2016, (c) Total Shareholder Return (TSR) performance-based DSUs valued using 165% of the target TSR performance-based
DSUs due to the Company's TSR rank being tenth out of 54 in 2016 (165% of the target number of units multiplied by the closing price of our common stock on December 31, 2016), and
(d) the free cash flow (FCF) performance-based DSUs valued using 114.2% of the target FCF performance-based DSUs (the actual percentage of target units earned under the program) multiplied by
the closing price of our common stock on December 31, 2016;
-
•
-
the actual 2016 Annual Bonus Plan award; and
-
•
-
the annual
base salary earned in 2016.
The significant difference in value of the long-term incentive compensation portion of our Chief Executive Officer's TDC reflected in the "Realizable" column of
the chart above relative to the values reflected in the "Target" and "Summary Compensation Table" columns is primarily due to:
-
•
-
the increase in the closing price of our common stock on December 30, 2016 ($21.63) compared to the closing price of our common stock on
February 22, 2016 ($17.26), the date of grant for the 2016 annual equity awards;
-
•
-
the 2016 TSR performance-based DSUs being valued at 165% of target as a result of the Company's TSR performance in 2016 relative to that of the
other companies in the S&P 500 Healthcare Index (
i.e.
, being ranked tenth out of 54 for the 2016 performance period); and
-
•
-
the 2016 FCF performance-based DSUs being valued at 114.2% of target as a result of the Company's FCF performance in 2016.
We
believe that our CEO's "Realizable" TDC in light of the Company's stock price increase and TSR and FCF performance during 2016 demonstrates the alignment of our CEO's pay with Company performance
and the long-term interests of our stockholders.
A Significant Portion of our NEOs' 2016 Target TDC is At-Risk, Performance-Based Compensation
Our Compensation Committee ties a significant portion of the primary elements of our executives' target TDC to at-risk, performance-based incentive
opportunities. For 2016, 84% of the target value of
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the
primary elements of TDC for our NEOs as a group (including our CEO) consisted of at-risk, performance-based incentive compensation, which was comprised of the
following:
-
•
-
15% Short-Term Cash Incentive Awards, with:
-
Ø
-
Funding
of the Total Bonus Pool tied to Company performance measured against adjusted EPS and SFX net sales performance
targets.
-
Ø
-
Allocation
of the Total Bonus Pool, as funded, based on business and functional performance measured against their
respective financial and/or operational performance targets.
-
Ø
-
Actual
payout adjusted based on each individual's performance.
-
•
-
69% Long-Term Equity Incentive Awards, with mix of opportunity comprised of:
-
Ø
-
25%
Company performance-based deferred stock units (DSUs), a percentage of which is earned based on the total shareholder
return (TSR) of our common stock relative to that of the other companies in the S&P 500 Healthcare Index over a three-year performance period.
-
Ø
-
25%
Company performance-based DSUs, a percentage of which is earned based on our adjusted free cash flow (FCF) measured
against our target performance over a one-year performance period and subject to service-based vesting over a three-year period (inclusive of the performance period).
-
Ø
-
25%
stock options, with ultimate value tied to the performance of our stock price.
-
Ø
-
25%
service-based DSUs, with ultimate value tied to the performance of our stock price.
The
percentages above were calculated using the 2016 base salary, target equity values and target Annual Bonus Plan award amounts for our NEOs set forth in the footnote to the charts below. The
allocation of the target value of the primary elements of TDC for our Chief Executive Officer and for our other NEOs as a group in 2016 was as follows:
-
(1)
-
The
charts reflect the value of the primary elements of 2016 TDC opportunity as considered by the Compensation Committee as follows: (i) the annual equity
awards granted to our CEO/other NEOs on February 22, 2016, with stock options valued in accordance with FASB ASC Topic 718, as described in the footnotes to the Executive Compensation section
titled "
Summary Compensation Table"
and with both service-based DSUs and Company performance-based DSUs valued at target (using the number of units and
target units awarded multiplied by the closing price of our common stock on the date of grant); (ii) the target Annual Bonus Plan awards; and (iii) the annual base salaries approved for
Messrs. Mahoney, Brennan, Fitzgerald and Pratt in February 2016 and Mr. Ballinger in July 2016.
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Table of Contents
We
believe our emphasis on at-risk, performance-based incentive compensation — consisting of our Annual Bonus Plan awards and long-term equity awards — aligns our
executives with our business strategy and the short- and long-term interests of our stockholders, providing "pay for performance" and putting a significant portion of our executives' pay "at risk."
Executive Compensation Program Best Practices
Our Compensation Committee believes that a strong foundation for our compensation program is necessary to execute our executive compensation
philosophy effectively. The
following key aspects of executive compensation best practices serve as the foundation for our compensation program:
-
ü
-
Use
a mix of short- and long-term incentive compensation, with an emphasis on long-term compensation.
-
ü
-
Use
a mix of fixed and variable compensation, with an emphasis on variable, at-risk performance-based
compensation.
-
ü
-
Require
a "double-trigger" (both a change in control and termination without cause or for good reason)
for cash payments and accelerated vesting of equity awards where the surviving or acquiring entity substitutes or assumes outstanding equity awards.
-
ü
-
Do
not provide income tax gross-ups (except on relocation benefits).
-
ü
-
Do
not provide any excise tax gross-ups on severance or other payments in the event of a change in
control.
-
ü
-
Maintain
stock ownership guidelines for our executives and directors.
-
ü
-
Have
a policy for the recovery, commonly referred to as a "claw-back," of all or a portion of certain
incentive compensation awards under certain circumstances.
-
ü
-
Use
internal pay equity analysis.
-
ü
-
Use
peer group company comparative analysis.
-
ü
-
Engage
an independent compensation consultant reporting directly to the Compensation Committee.
-
ü
-
Perform
risk assessment of incentive compensation policies and programs.
-
ü
-
Do
not pay dividend equivalents on unvested performance-based DSUs or service-based DSUs.
-
ü
-
Do
not permit repricing of underwater stock options without stockholder approval.
-
ü
-
Prohibit
pledging or hedging of the economic value of our common stock by our executives and directors.
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Table of Contents
At
our 2016 Annual Meeting of Stockholders, we asked our stockholders to vote, on an advisory basis, on the 2015 compensation of our then named executive officers as disclosed in our
2016 Proxy Statement, commonly referred to as a "say-on-pay" advisory vote. Our stockholders approved the compensation of our then-named executive officers with approximately 97.9% of the votes cast
voting in favor of the proposal. In connection with its review of our compensation program against our executive compensation philosophy and business objectives, our Compensation Committee took into
consideration the modifications it had already made in prior years to our compensation programs in support of our executive compensation philosophy and best practices, the results of the say-on-pay
advisory vote, as well as feedback the Company received on the matter from its stockholders in prior years. As a result, our Compensation Committee concluded that it would retain our compensation
program's emphasis on at-risk, performance-based incentive compensation.
|
How We Determine Executive Compensation
|
Executive Compensation Philosophy and Objectives
Our executive compensation philosophy is to provide appropriate competitive compensation opportunities to our executives with actual pay
outcomes heavily influenced by achievement of Company, business and individual performance targets/objectives in support of our business strategy and creation of long-term stockholder value. The core
objectives of our compensation program are to:
-
•
-
Attract, retain, and engage top talent.
-
•
-
Reinforce our culture of quality.
-
•
-
Align management's interests with the long-term interests of our stockholders.
-
•
-
Incentivize achievement of key Company, business and individual targets/objectives to support our business strategy.
-
•
-
Appropriately manage compensation risk in light of our business strategy.
Our
Compensation Committee evaluates executive compensation best practices and makes modifications to our compensation program that it determines are appropriate to support our executive compensation
philosophy.
Competitive Market Analysis
Our Compensation Committee considers executive compensation comparative data of our peer group companies in order to facilitate an
understanding of trends and comparative practices in executive compensation generally, as well as with respect to the specific levels and mix of target compensation opportunities provided to our
executives and program design in the market within which we compete for top talent. Our peer group includes companies (i) generally focused on a comparable industry (customer base and product
offerings) such as pharmaceuticals, biotechnology & life sciences, and healthcare equipment & services companies, and (ii) that generally have a comparable size (0.5x to 2x) in
relation to one or both of our revenue and market capitalization. Additional characteristics used to evaluate our peer companies may include being listed in three or more of our comparable companies'
peer groups and being in the healthcare equipment industry.
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Our Compensation Committee reviews the composition and appropriateness of our peer group companies for executive compensation comparative purposes annually. Following a review
in February 2016, our Compensation Committee approved the removal of Hospira, Inc., in light of its acquisition by Pfizer. Our 2016 peer group companies are listed below. At the time of review,
our revenue and market capitalization were within the guidelines for our peer group companies set forth in the preceding paragraph.
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|
|
|
|
|
|
Abbott Laboratories
|
|
Medtronic, Inc.
|
|
Thermo Fisher Scientific, Inc.
|
|
Baxter International Inc.
|
|
Mylan, Inc.
|
|
Varian Medical Systems, Inc.
|
|
Becton, Dickinson and Company
|
|
Quest Diagnostics Incorporated
|
|
Zimmer Biomet Holdings, Inc.
|
|
C.R. Bard
|
|
St. Jude Medical, Inc.
|
|
|
|
Edwards Lifesciences
|
|
Stryker Corporation
|
|
|
For
2016, general industry survey data was also used for executive compensation comparative purposes for positions where sufficient peer group proxy data was not available. When making its
determinations, the Compensation Committee was not aware of the constituent companies used in the general industry survey.
Internal Pay Equity and Other Considerations
Our Compensation Committee considers the primary elements of each executive's TDC opportunity compared to that of our other executives as well
as the economic and retentive value of prior equity awards received by our executives in determining their current and future compensation.
Risk Considerations
Our Compensation Committee considers whether our executive compensation program is appropriately aligned with business risk by examining the
potential effects that elements of our executive compensation program may have on such business risk. This includes, among other
things, the mix of fixed and variable compensation; the mix of short- and long-term compensation; the mix of long-term equity incentives; mix of performance metrics, weighting, measurement, and payout
timing; discretion and caps on short-term incentives; award size, vesting schedules and performance and other terms of long-term equity incentives; and other incentive opportunities and their
features. Our Compensation Committee also considers mitigating design elements, including among other things, our recovery of incentive compensation awards policy and other recovery and forfeiture
provisions relating to incentive compensation awards and other benefits, executive stock ownership guidelines, and hedging/pledging prohibition. For more details on these policies and guidelines,
please see "
Recovery of Incentive Compensation Awards Policy and Provisions
," "
Executive Stock Ownership
Guidelines
" and "
Prohibition on Pledging and Hedging the Economic Value of our Common Stock
". For more information about our
assessment of compensation policies and practices as they relate to our risk management, please see "
Risk Assessment of our Compensation Programs
".
Performance Considerations
We utilize a performance, development and coaching (PDC) process to help guide individual development and performance discussions and assess
annual performance. With respect to each of our executives that report directly to him, our Chief Executive Officer undertakes his or her annual PDC reviews, assesses his or her performance results
and makes related compensation recommendations to our Compensation Committee for its consideration. Our Compensation Committee reviews our Chief Executive Officer's performance objectives and oversees
the evaluation of our Chief Executive Officer's performance in relation to those objectives. For 2016, the overall performance of our executives,
47
Table of Contents
including
our NEOs, was rated on a 3-point scale designed to support a culture of high performance and accountability with clear expectations. This scale consisted of "outstanding," "successful" and
"improvement required." These performance achievement indicators, among the other considerations reviewed in this discussion and analysis, influence our executives' base salaries, the individual
component of their Annual Bonus Plan awards and, as an indication of future performance potential, their long-term equity incentive awards.
Chief Executive Officer and Compensation Committee Judgment
The application of Chief Executive Officer and Compensation Committee judgment is an important factor in setting and determining executive
pay. We do not employ a purely formulaic approach to our executive compensation program. Target market guidelines and individual target TDC, financial and operational targets, individual performance
objectives and funding formulae are established in advance; however, other Company and individual performance and other considerations (such as budgets, costs to the Company, our quality objectives,
changes in executive roles or responsibilities and current economic conditions) may also be taken into account. For example, while the funding formula tied to Company-level financial performance
targets are set in advance under our Annual Bonus Plan, our Compensation Committee is able to reduce the Total Bonus Pool funding percentage (to not less than 50% of the target) based on its
assessment of the Company's progress toward achievement of our quality objectives.
Participants in the Compensation Process
Our Compensation Committee bears principal responsibility for, among other things, structuring our executive compensation program and making
individual executive compensation determinations. To help facilitate informed determinations with respect to its responsibilities, our Compensation Committee engages an independent compensation
consultant, Frederic W. Cook & Co. (FW Cook), which serves at the direction and under the supervision of our Compensation Committee. For further information about our Compensation
Committee and its composition, processes and responsibilities and about the services provided by FW Cook, please see the Meetings and Board Committees section titled "
Executive
Compensation and Human Resources Committee.
" FW Cook and certain members of management support our Compensation Committee with respect to the following, among other things:
|
|
|
|
Frederic W. Cook & Co.
(independent compensation consultant)
|
|
•
Expertise-based advice,
research and analytical services, including peer group composition and trends and comparative practices in executive compensation, program design and non-employee director compensation.
•
Commentary and/or recommendations as to the foregoing.
•
Participation in Compensation Committee
meetings.
|
Management
|
|
|
|
Senior Vice President, Human Resources and other Total Rewards Management
|
|
•
Expertise-based advice,
research and analytical services, including trends and comparative practices in executive compensation and program design.
•
Commentary and/or recommendations as to the foregoing.
•
Participation in Compensation Committee meetings.
|
|
Chief Executive Officer and other Executives
|
|
•
Individual executive PDC
performance reviews for direct reports.
•
Through our Chief Executive Officer, performance assessment for executives (other than the Chief Executive Officer) and recommendations as to payments and adjustments.
•
Participation in Compensation Committee meetings.
|
48
Table of Contents
|
Elements of 2016 Executive Compensation
|
Primary Elements of Total Direct Compensation
We compensate our executives primarily through total direct compensation, namely in the form of base salary and short- and long-term
incentives (the primary elements of TDC). Our primary elements of TDC are heavily weighted towards variable, at-risk performance-based elements, which are reflected in the charts under the section
above titled
"A Significant Portion of our NEOs' 2016 Target TDC is At-Risk, Performance-Based Compensation."
For 2016, only 16% of the target value of
the primary elements of TDC for our NEOs as a group (including our CEO) consisted of fixed compensation in the form of base salary, while variable, at-risk performance-based compensation accounted for
the remaining 84% of the primary elements of TDC. These percentages were calculated using the 2016 base salary, target equity values and target Annual Bonus Plan award amounts for our
NEOs set forth in the footnotes to the charts under the section titled
"A Significant Portion of our NEOs' 2016 Target TDC is At-Risk, Performance-Based
Compensation."
The
key features and objectives of the primary elements of our NEOs' 2016 TDC are summarized in the table below.
|
|
|
|
|
|
TDC Elements
|
|
Key Features
|
|
Objectives
|
|
|
|
|
|
|
|
Base Salary
|
|
Fixed annual cash amount, paid at regular intervals.
|
|
Provide stable source of income.
|
Short-Term Incentives — Annual Bonus Plan Awards
|
|
At risk, performance-based annual cash incentive opportunity.
|
|
Align executive compensation with our business strategy and quality objectives.
|
|
|
Funding of Total Bonus Pool based on Company performance against two important financial performance targets; allocation of Total Bonus Pool, as funded, based on regional, business and functional performance against
their specific financial and/or operational performance targets; and actual payout based on individual performance.
|
|
Focus talent/organization and reward based on important Company-wide financial measures; specific regional, business or functional unit financial and/or operational measures; and individual performance
objectives.
|
Long-Term Incentives — Equity Awards
|
|
At risk, performance-based equity incentive opportunity.
|
|
Focus talent/organization on important financial measures and long-term stockholder value.
|
|
|
Mix of opportunity comprised of:
|
|
Reward based on:
|
|
|
—25% target TSR performance-based DSUs
|
|
—Our TSR relative to that of other S&P 500 Healthcare Index companies
|
|
|
—25% target FCF performance-based DSUs
|
|
—Our adjusted free cash flow measured against our target performance
|
|
|
—25% stock options
|
|
—Our stock price
|
|
|
—25% service-based DSUs
|
|
—Our stock price
|
While
our Compensation Committee considers the median market position relative to our peer group companies for comparable positions, individual target opportunities may vary based on our Compensation
Committee's consideration of other factors, including those discussed under "
How We Determine Executive Compensation.
" The target value of the primary
elements of the TDC for our NEOs as a group for 2016 was below the market median. The primary elements of NEO TDC for 2016 is
discussed below and reported in the Executive Compensation section titled "
Summary Compensation Table
" under the Salary, Stock Awards, Option Awards and
Non-Equity Incentive Plan Compensation columns.
49
Table of Contents
Base Salary
In setting base salaries for our executives, our Compensation Committee generally considers their market position relative to our peer group
companies' executives with comparable positions and scope of responsibilities, our annual merit-increase budget, our performance for the prior year, the executive's experience and scope of
responsibilities, internal pay equity relative to other executives and the executive's performance evaluation under the prior year's PDC process.
2016 NEO Base Salaries
In determining the 2016 base salaries of our NEOs (other than our Chief Executive Officer), our Compensation Committee also considered the recommendations of
our Chief Executive Officer in light of the general factors discussed above, including their overall performance ratings for the prior year — with Messrs. Brennan, Fitzgerald
and Pratt successfully meeting the high expectations of each of them for 2016 and Mr. Ballinger delivering outstanding performance for 2016. In addition to the merit increases, with respect to
Messrs. Brennan and Ballinger, the Compensation Committee included a market adjustment based on their market position relative to our peer group companies' executives with comparable positions
and scope of responsibilities in determining the total increases of their base salaries from 2015 to 2016. In determining the 2016 base salary of Mr. Mahoney, our Compensation Committee
considered the general factors discussed above, including his delivering outstanding performance for 2016 as our President and Chief Executive Officer.
The
2016 base salaries (rounded to the nearest thousand) of our NEOs as well as the percentage increase from their 2015 base salaries are set forth below:
|
|
|
|
|
|
|
|
Name
|
|
2015 Base Salary
|
|
2016 Base Salary
|
|
% Increase
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
$975,000
|
|
$1,050,000
|
|
7.7%
|
|
Daniel J. Brennan
|
|
$500,000
|
|
$550,000
|
|
10.0%
|
|
Kevin J. Ballinger
|
|
$430,000
|
|
$500,000
|
|
16.3%
|
|
Joseph M. Fitzgerald
|
|
$485,000
|
|
$500,000
|
|
3.1%
|
|
Timothy A. Pratt
|
|
$640,000
|
|
$640,000
|
|
0.0%
|
Short-Term Incentives
Our Compensation Committee annually reviews the design of our Annual Bonus Plan to help ensure that the program continues to support our
executive compensation philosophy and core compensation program objectives. In finalizing the design for 2016, our Compensation Committee retained the provisions of our 2015 Annual Bonus Plan, which
was designed to reinforce the concept of "pay for performance," align our short-term incentives with important financial and operational measures and the long-term interests of our stockholders, and
to incentivize and reward individual performance.
Total Bonus Pool Funded Based on Company Performance
Under the 2016 Annual Bonus Plan, a single Company-wide Total Bonus Pool is funded by the Company's performance measured against important Company-level
financial performance metric targets, thereby reinforcing the importance of the Company's performance as a whole (which reflects the performance of our regions, businesses and functions). For 2016,
our Compensation Committee:
-
•
-
Selected adjusted EPS and SFX net sales as our Company-level financial performance metrics, which measures were used to set important Company
financial and operational performance goals for the year.
50
Table of Contents
-
•
-
Set Company performance level targets for those metrics at $1.04 and $8.735 billion, respectively.
For
a description of how we calculate these non-GAAP financial measures as well as a reconciliation of these measures to the most directly comparable GAAP measures and insight into how these non-GAAP
measures are considered by management, please see the Executive Compensation section titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards
Table
—
2016 Annual Bonus Plan
" and Annex A, respectively.
In
February 2016, our Compensation Committee approved the Total Bonus Pool funding scale for the Company's 2016 performance measured against our 2016 Company-level performance metric targets for
adjusted EPS and SFX net sales set forth in the table below. Each metric has a 50% weighting.
|
|
|
|
Adjusted EPS
(As a Percent of Target)
|
|
Total Bonus
Pool Funding Range
|
|
|
|
|
|
<90%
|
|
50%
|
|
90% to <95%
|
|
50% to 75%
|
|
95% to <105%
|
|
75% to 125%
|
|
105%+
|
|
125% to 150%
|
|
|
|
|
SFX Net Sales
(As a Percent of Target)
|
|
Total Bonus
Pool Funding Range
|
|
|
|
|
|
<97%
|
|
50%
|
|
97% to < 98.5%
|
|
50% to 90%
|
|
98.5% to <101.5%
|
|
90% to 110%
|
|
101.5% to <103%
|
|
110% to 130%
|
|
103%+
|
|
130% to 150%
|
However,
in order to reinforce the importance of "top line" growth to the Company, Total Bonus Pool funding is capped at 90% in the event that the Company's SFX net sales are below 97% of target. In
addition, our Compensation Committee has the discretion to decrease the Total Bonus Pool funding percentage (to not less than 50% of the target) based on its assessment of the Company's performance
relative to our quality objectives. For 2016, our quality objectives related to our quality culture, training, audits, reporting, compliance environment, and quality systems operations. Our
Compensation Committee considers quality objectives to be appropriate in emphasizing our commitment to continually improving and sustaining our quality systems, our quality compliance and product
performance, thereby enhancing stockholder value.
For
2016, based on our adjusted EPS of $1.11 per share and SFX net sales of $9.076 billion, we achieved 106.7% of the target level for adjusted EPS (in the range of 105%+ of target, which
correlates to a bonus range of 125% to 150%) and 103.9% of the target level for SFX net sales (in the range of 103%+ of target, which correlates to a bonus range of 130% to 150%). Accordingly, the
funding range for our 2016 Total Bonus Pool was between 127.5% and 150%. In accordance with the terms of the plan and after taking into consideration the Company's overall 2016 financial performance
and performance against quality objectives, our Chief Executive Officer recommended, and our Compensation Committee approved, funding the 2016 Total Bonus Pool at 130%.
Funded Total Bonus Pool Allocated to Participating Units
Under the 2016 Annual Bonus Plan, the Total Bonus Pool, as funded, is allocated by the Compensation Committee to each participating regional, business, and
functional unit taking
into consideration our Chief Executive Officer's recommendations in light of that participating unit's performance measured
51
Table of Contents
against
its operational and/or financial performance metric targets (and other factors the Compensation Committee deems appropriate), thereby incentivizing and rewarding each participating unit's
performance contributions. Our NEOs received their 2016 Annual Bonus Plan awards from the allocation of the funded Total Bonus Pool to our Interventional Cardiology unit (Mr. Ballinger), Rhythm
Management unit (Mr. Fitzgerald), and to our corporate function unit (all other NEOs). For 2016:
-
•
-
Due to Interventional Cardiology's overall performance measured against SFX net sales, adjusted operating income and constant currency growth
compared to market targets coinciding with the business's operating plan for the year, the performance percentage for Interventional Cardiology was 140%.
-
•
-
Due to Rhythm Management's overall performance measured against SFX net sales, adjusted operating income and constant currency growth compared
to market targets coinciding with the business's operating plan for the year, the performance percentage for Rhythm Management was 105%.
-
•
-
Due to the Company's overall performance, the performance percentage for the corporate funding unit was 130%, consistent with the 2016 Total
Bonus Pool funding.
The
Company does not disclose the specific targets for business, regional and functional participating units' performance metrics as they are highly confidential. Disclosing such confidential
information would provide competitors and third parties with insight into the Company's internal planning processes that may allow them to predict certain of our business-, region- or
function-specific financial or operational strategies, which could cause us competitive harm. Business and regional unit targets related to SFX net sales, adjusted operating income and constant
currency growth compared to market are established in support of Company-wide targets such as sales, operating income, earnings per
share and growth. These are based on a range of factors, including growth outlooks for our product portfolio, the competitive environment, our internal budgets, external market economic conditions and
market expectations. For example, growth rates implicit in targets for any one business or regional unit may be above or below the growth rates targeted for the entire Company, due to faster or slower
growth in relevant markets or smaller or larger market shares. These considerations result in business and regional unit targets that are intended to coincide with Company-wide targets in their level
of difficulty to achieve and probability for success. Performance targets are set at levels that the Company believes are aggressive enough to inspire top performance but reasonable enough to be
achievable through the efficient and diligent execution of their operating plans.
Individual Target Incentive Award Opportunity
Each executive's target incentive award opportunity under the Annual Bonus Plan is expressed as a percentage of his or her annual base salary and is
determined based on the scope of the executive's responsibilities. For 2016, our Compensation Committee maintained the target award opportunities for Messrs. Brennan, Fitzgerald and Pratt at
their 2015 levels of 70%, 70% and 80%, respectively, of their base salaries. In setting Mr. Mahoney's target award opportunity at 150% of his base salary, our Compensation Committee considered
his market position relative to our peer group companies' executives with comparable positions and scope of responsibilities, internal pay equity relative to our other executives and his experience.
In setting Mr. Ballinger's target award opportunity at 60% of his base salary, our Compensation Committee considered the recommendations of our Chief Executive Officer, internal pay equity
relative to our other executives and his experience.
52
Table of Contents
Individual Performance Component
After year end, individual performance is considered pursuant to the PDC process described in the "Performance Considerations" section. Based on the
performance assessment rating under our annual PDC process, an individual performance percentage from 0% to 200% is applied as a multiplier to an executive's funded Annual Bonus Plan award to
determine the actual amount to be paid. Under our 2016 Annual Bonus Plan, a rating of (i) "outstanding" generally permits an individual performance percentage of at least 115%,
(ii) "successful" generally permits an individual performance percentage between 90% and 105%, and (iii) "improvement required" generally permits an individual performance percentage
between 0% and 75%.
Our
NEOs had certain performance objectives intended to support our strategic imperatives, as applicable to their roles, including (i) with respect to our NEOs who support corporate functions,
those aimed at driving Company-level financial performance objectives, and (ii) with respect to
Messrs. Ballinger and Fitzgerald, who each supports a business, those aimed at supporting business-level financial and operational performance objectives. The individual performance objectives
discussed below do not represent objective performance goals that must be achieved but rather factors that may be considered by the Compensation Committee and our Chief Executive Officer in
determining each NEO's individual performance percentage. Further, no single factor is determinative or required to be considered.
For
2016, Mr. Mahoney's individual performance objectives also included driving regional, business and functional performance, as well as strengthening overall company culture and developing
our people and our leadership pipeline. Mr. Mahoney's individual performance percentage was 115% due primarily to his overall outstanding performance for 2016, with notable performance in
accelerating our growth, diversifying our product portfolio, improving margin and ensuring a healthy leadership pipeline to meet our talent needs. Accordingly, his 2016 Annual Bonus Plan award was
149.5% of his target award.
For
2016, Mr. Brennan's individual performance objectives also included driving performance for the functional units over which he has responsibility, including achieving financial goals and
cost-savings, as well as objectives aimed at supporting strategic transactions, strengthening relationships with investors and credit rating agencies, and resolving certain tax matters.
Mr. Brennan's individual performance percentage was 100% due primarily to his overall performance successfully meeting the high expectations of him for 2016, with notable performance driving
disciplined focus on financial performance, including implementing cost-savings initiatives, executing the financing process to support strategic acquisitions, and continuing to strengthen
relationships with investors and credit rating agencies. Accordingly, his 2016 Annual Bonus Plan award was 130% of his target award.
For
2016, Mr. Ballinger's individual performance objectives also included driving business performance for Interventional Cardiology, achieving key product milestones, effectively executing
product launches and other objectives related to enhancing organizational capabilities. Mr. Ballinger's individual performance percentage was 115% due primarily to his overall outstanding
performance for 2016, with notable performance driving Interventional Cardiology's operating income results and executing on the global launch of the SYNERGY™ Everolimus-Eluting Platinum
Chromium Coronary Stent System. Accordingly, his 2016 Annual Bonus Plan award was 161% of his target award.
For
2016, Mr. Fitzgerald's individual performance objectives also included driving business performance for Rhythm Management, achieving key product milestones, effectively executing product
launches and other objectives related to enhancing organizational capabilities. Mr. Fitzgerald's individual performance percentage was 100% due primarily to his overall performance successfully
53
Table of Contents
meeting
the high expectations of him for 2016, with notable performance driving Rhythm Management's operating income results and executing on sales strategies for the Watchman™ Left Atrial
Appendage Closure device. Accordingly, his 2016 Annual Bonus Plan award was 105% of his target award.
For
2016, Mr. Pratt's individual performance objectives also included driving performance for the functional units over which he has responsibility, including achieving cost savings and
optimization initiatives, improving the structure and efficiency of Legal and Compliance, developing the culture within those functional units, managing and mitigating legal risk, and connecting with
customers, government officials and business and regional leaders. Mr. Pratt's individual performance percentage was 100% due primarily to his overall performance successfully meeting the high
expectations of him for 2016, with notable performance driving cost reductions, managing litigation risks, leading the advocacy efforts of the government affairs team, providing broad leadership
across the Company and improving the structure and efficiency of Legal and Compliance. Accordingly, his 2016 Annual Bonus Plan award was 130% of his target award.
2016 Annual Bonus Plan Awards Paid to Our NEOs
After funding the Total Bonus Pool, the actual amount of an executive's Annual Bonus Plan award is ultimately determined by (i) multiplying the product
of the executive's annual base salary for 2016 and his or her target award percentage by the executive's participating unit's performance percentage, and then (ii) multiplying the result of the
foregoing by his or her individual performance percentage, as illustrated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Base
Salary
x
Target Award
Percentage
|
|
x
|
|
Participating
Unit
Performance
Percentage
|
|
x
|
|
Individual
Performance
Percentage
|
|
=
|
|
Annual
Bonus
Plan
Award
|
Details
regarding the short-term incentive awards paid to our NEOs under our 2016 Annual Bonus Plan are set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Individual
Target Award
Opportunity
(As a % of
Base
Salary)
|
|
2016
Target Award*
|
|
Participating
Unit
Performance
Percentage
|
|
Individual
Performance
Percentage
|
|
2016
Actual Bonus
Plan Award
|
|
Actual
as % of
Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
150%
|
|
$1,575,000
|
|
130%
|
|
115%
|
|
$2,354,625
|
|
149.5%
|
|
Daniel J. Brennan
|
|
70%
|
|
$385,000
|
|
130%
|
|
100%
|
|
$500,500
|
|
130%
|
|
Kevin J. Ballinger
|
|
60%
|
|
$300,000
|
|
140%
|
|
115%
|
|
$483,000
|
|
161%
|
|
Joseph M. Fitzgerald
|
|
70%
|
|
$350,000
|
|
105%
|
|
100%
|
|
$367,500
|
|
105%
|
|
Timothy A. Pratt
|
|
80%
|
|
$512,000
|
|
130%
|
|
100%
|
|
$665,600
|
|
130%
|
-
*
-
2016
Target Awards are rounded to the nearest thousand.
Long-Term Incentives
Our Compensation Committee annually reviews the design of our Long-Term Incentive Program (LTI Program) to help ensure that the program
continues to support our executive compensation philosophy and core compensation program objectives. In setting the design for 2016, our Compensation Committee retained the mix of equity award
opportunities for our executives under our prior LTI Program that were designed to further reinforce "pay for performance" and align the
54
Table of Contents
interests
of our executives and their compensation with important Company financial measures and the long-term interests of our stockholders. The key features and objectives of each type of equity
vehicle included in the mix of equity awards comprising our NEOs' 2016 long-term equity incentive compensation are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
Equity Vehicle and
Percentage of Aggregate
LTI Program Target
Values
|
|
Key Features
|
|
Objectives
|
|
|
|
|
|
|
|
|
|
|
|
TSR performance-based DSUs (25%)*
|
|
TSR performance-based DSUs represent an opportunity to receive shares of our common stock based on our TSR measured against that of the other companies in the S&P 500 Healthcare Index (of which a significant portion of our peer group
companies are a part) over a three-year performance period.
|
|
Reinforce "pay for performance" by directly linking number of shares earned under the award to our TSR relative to that of industry-related companies.
|
|
|
|
For the 2016 Total Shareholder Return Performance Share Program (TSR PSP), the number of units that could be earned pursuant to the TSR performance-based DSUs would be within a range of 0% to 200% of the target units awarded as follows:
|
|
|
|
|
|
TSR Performance
Percentile Rank
|
|
TSR
Performance-
Based
DSUs as a Percent
of
Target
|
|
|
|
|
|
90th Percentile or above
|
|
200%
|
|
|
|
|
|
80th Percentile
|
|
150%
|
|
|
|
|
|
50th Percentile
|
|
100%
|
|
|
|
|
|
30th Percentile
|
|
40%
|
|
|
|
|
|
Below 30th Percentile
|
|
0%
|
|
|
|
|
|
If the threshold level of performance is achieved, the number of TSR performance-based DSUs would be calculated linearly in accordance with the chart above.
|
|
|
|
|
|
These awards typically vest upon satisfaction of both the performance criteria and the service criteria at the end of the three-year performance period.
|
|
|
55
Table of Contents
|
|
|
|
|
|
|
|
|
|
Equity Vehicle and
Percentage of Aggregate
LTI Program Target
Values
|
|
Key Features
|
|
Objectives
|
|
|
|
|
|
|
|
|
|
|
|
FCF performance-based DSUs (25%)*
|
|
FCF performance-based DSUs represent an opportunity to receive shares of our common stock based on our adjusted free cash flow over a one-year performance
period measured against our target performance for the same period; under the 2016 Free Cash Flow Performance Share Program (FCF PSP), our Compensation Committee set the target adjusted free cash flow at $1.500 billion to coincide with our Board
approved 2016 internal cash flow plan. For the 2016 FCF PSP, the number of units that could be earned pursuant to FCF performance-based DSUs would be within a range of 0% to 150% of the target units awarded as follows:
|
|
Align executive compensation opportunity with an important Company financial measure in our internal financial plan. Reinforce "pay for performance" by
directly linking the number of shares earned under the award to our adjusted free cash flow performance measured against our target performance.
|
|
|
|
FCF Performance
Percentile
Compared to
Plan
|
|
FCF
Performance-
Based
DSUs
as a Percent of
Target
|
|
|
|
|
|
125% or above
|
|
150%
|
|
|
|
|
|
110%
|
|
120%
|
|
|
|
|
|
100%
|
|
100%
|
|
|
|
|
|
90%
|
|
80%
|
|
|
|
|
|
50%
|
|
25%
|
|
|
|
|
|
Less than 50%
|
|
0%
|
|
|
|
|
|
If the threshold level of performance is achieved, the number of FCF performance-based DSUs would be calculated linearly in accordance with
the chart above. Adjusted free cash flow is reported operating cash flow minus capital expenditures and excludes cash flows associated with certain significant and unusual litigation, acquisition, divestiture, restructuring, debt extinguishment, and
tax-related items.
|
|
|
|
|
|
Vesting of the earned units, which is determined at the end of the one-year performance period, is subject to continued service through the
end of a three-year period (inclusive of the performance period).
|
|
|
|
Stock options (25%)*
|
|
Stock options represent the right to purchase shares of our common stock at an exercise price equal to the closing price of our common stock on the date of grant.
|
|
Reinforce "pay for performance" by linking the ultimate value of the award to the improved performance of our stock price.
|
|
|
|
These awards typically vest in four equal annual installments subject to continued service.
|
|
|
56
Table of Contents
|
|
|
|
|
|
|
|
|
|
Equity Vehicle and
Percentage of Aggregate
LTI Program Target
Values
|
|
Key Features
|
|
Objectives
|
|
|
|
|
|
|
|
|
|
|
|
Service-based DSUs (25%)*
|
|
Service-based DSUs represent the opportunity to receive shares of our common stock based on continued service.
|
|
Reinforce "pay for performance" by linking the ultimate value of the award to the performance of our stock price.
|
|
|
|
These awards typically vest in five equal annual installments subject to continued service.
|
|
Retain top talent and promote executive long-term share owner perspective in a share-efficient manner.
|
-
*
-
We
do not pay dividends on stock options, unvested Company performance-based DSUs or service-based DSUs.
For
further discussion of the performance share programs for our Company performance-based DSUs and the equity awards granted pursuant to our Long-Term Incentive Plans (LTIPs) and a description of how
we calculate adjusted free cash flow, please see the Executive Compensation sections titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards
Table
—
2016 Total Shareholder Return Performance Share Program,
" "
Narrative
Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
—
2016 Free Cash Flow Performance Share
Program
" and "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
—
2011 Long-Term Incentive
Plan
" and Annex A.
2016 Long-Term Incentive Awards for Our NEOs
In setting long-term incentive award opportunities for our executives, our Compensation Committee generally considers their market position relative to our
peer group companies' executives with comparable positions and scope of responsibilities, and their experience and scope of responsibilities.
In
determining the 2016 long-term equity incentive award amounts for our NEOs, our Compensation Committee also considered the recommendations of the Chief Executive Officer in light of the general
factors discussed above, including, as an indication of future performance potential, the executive's performance for the prior year determined under that year's PDC process.
In
February 2016, our Compensation Committee approved the grant of long-term equity incentive awards to our NEOs in the following amounts, which were based on the target dollar values of the
57
Table of Contents
long-term
equity incentive awards for our NEOs considered by the Compensation Committee (see discussion of such target dollar values below):
|
|
|
|
|
|
|
|
|
|
Name
|
|
Target FCF
Performance-Based
DSUs(1)(2)
|
|
Target TSR
Performance-Based
DSUs(1)(2)
|
|
Stock
Options(1)
|
|
Service-Based
DSUs(1)
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
115,874
|
|
115,874
|
|
337,268
|
|
115,874
|
|
Daniel J. Brennan
|
|
28,968
|
|
28,968
|
|
84,317
|
|
28,968
|
|
Kevin J. Ballinger
|
|
18,829
|
|
18,829
|
|
54,806
|
|
18,829
|
|
Joseph M. Fitzgerald
|
|
20,278
|
|
20,278
|
|
59,021
|
|
20,278
|
|
Timothy A. Pratt
|
|
17,381
|
|
17,381
|
|
50,590
|
|
17,381
|
-
(1)
-
2016
target FCF and TSR performance-based DSUs, stock options and service-based DSUs were granted as of February 22, 2016. Stock options
have an exercise price of $17.26 per share (the closing price of our common stock on the date of grant).
-
(2)
-
The
number of shares of our common stock issuable to our NEOs based on our performance under our FCF and TSR PSPs for the periods ended
December 31, 2016 is discussed below under the section titled "
Company Performance-Based DSUs — Results for Performance Periods Ended
December 31, 2016."
The
target dollar values of the long-term equity incentive awards for our NEOs considered by our Compensation Committee in February 2016 were as follows: (i) $8.0 million for
Mr. Mahoney; (ii) $2.0 million for Mr. Brennan; (iii) $1.3 million for Mr. Ballinger; (iv) $1.4 million for Mr. Fitzgerald; and
(v) $1.2 million for Mr. Pratt. The target dollar values were then allocated in accordance with our LTI Program to 25% FCF performance-based DSUs, 25% TSR performance-based DSUs,
25% stock options and 25% service-based DSUs. The number of FCF and TSR performance-based DSUs and service-based DSUs were calculated by dividing the target dollar value of those awards by the closing
price of our common stock on the date of grant, and the number of stock options was determined by dividing the target dollar value of that award by the stock option value determined in accordance with
FASB ASC Topic 718, as described in the footnotes to the Executive Compensation section titled "
Summary Compensation Table".
Company Performance-Based DSUs — Results for Performance Periods Ended December 31,
2016
In February 2017, our Compensation Committee determined the number of units earned pursuant to our performance-based DSUs under our 2014 TSR PSP and our 2016
FCF PSP.
Under
the 2014 TSR PSP, our TSR performance rank was fourth relative to that of the other companies in the S&P 500 Healthcare Industry Index over the three-year performance period ended
December 31, 2016. Accordingly, our Compensation Committee determined that pursuant to the terms of the program, 200% of the target number of TSR performance-based DSUs had been earned. As a
result, the following numbers of shares of our common stock were delivered to our NEOs in settlement of the 2014 TSR performance-based DSUs awarded to them: (i) 290,518 shares for
Mr. Mahoney; (ii) 57,338 shares for Mr. Brennan; (iii) 28,668 shares for Mr. Ballinger; (iv) 47,782 shares for Mr. Fitzgerald; and (v) 45,870
shares for Mr. Pratt.
Under
the 2016 FCF PSP, our adjusted free cash flow performance over the one-year performance period ended December 31, 2016 was 107.1% relative to target performance. Accordingly, our
Compensation Committee determined that pursuant to the terms of the program, 114.2% of the target number of FCF performance-based DSUs had been earned. As a result, and subject to the satisfaction of
the service-vesting criteria, the following number of shares of our common stock will be delivered to our NEOs no later than January 15, 2019 in settlement of the 2016 FCF performance-based
DSUs
58
Table of Contents
awarded
to them: (i) 132,328 shares for Mr. Mahoney; (ii) 33,081 shares for Mr. Brennan, (iii) 21,502 shares for Mr. Ballinger, (iv) 23,157 shares for
Mr. Fitzgerald and (v) 19,849 shares for Mr. Pratt.
Primary Elements of Indirect Executive Compensation
We also compensate our executives, including our NEOs, using indirect compensation, namely in the form of benefits and limited perquisites.
Generally, our benefits and perquisites are targeted to be competitive relative to our peer group companies. The primary elements of and objectives for our NEOs' 2016 indirect compensation are
summarized below.
General Employee Benefits
We provide employee benefits to eligible employees, including our NEOs, to promote personal health and well-being and to provide certain financial security
and protection upon retirement or in the event of death, disability or illness. As U.S.-based employees, our NEOs are eligible to receive employee benefits under our U.S. employee benefits program,
which consists of the following key elements that are generally the same as those provided to our other U.S. salaried employees: (i) health and welfare benefits based primarily on a preferred
provider model with executives sharing approximately 20% of the cost; (ii) Company-paid term life insurance policies that provide a benefit equal to base salary, with a minimum benefit of
$50,000 and a maximum benefit of up to $1 million, payable upon death; and (iii) a qualified 401(k) retirement plan with a Company match of 6% of eligible salary up to $265,000 in 2016
resulting in a maximum possible match of $15,900. In addition, our executive officers may participate in an annual executive level physical examination program that is designed to encourage the
proactive management of executive health. In approving the program, the Compensation Committee considered the overall cost of the program (estimated to be less than $10,000 per participant), that a
majority of our peer group companies offered some form of benefit related to executive level annual physical examinations, and the importance of good health to an executive's ability to focus on the
short and long-term needs of the Company. Company-paid term life insurance premium amounts (and related imputed income), Company matches of 401(k) Plan contributions for our NEOs, Company-paid
executive level annual physical examination costs, and certain other reimbursements in 2016 are reported in the footnotes to the Executive Compensation section titled "
Summary
Compensation Table
."
Deferred Compensation Programs
We maintain a Deferred Bonus Plan for certain of our management, including our NEOs, in order to provide them with the opportunity to defer up to 75% of their
annual award under our Annual Bonus Plan until the earlier of termination of employment or an elected distribution date. In 2016, Messrs. Ballinger and Fitzgerald elected to defer 75% of their
2016 Annual Bonus Plan Award, which was paid in 2017, under the Deferred Bonus Plan. For additional discussion of the Deferred Bonus Plan, please see the narrative to the Executive Compensation
section titled "
Nonqualified Deferred Compensation
."
Global Relocation Programs
We provide tiered relocation benefits under our global relocation program to eligible employees, including our NEOs, whom we request to move in connection
with their current position or a promotion and for eligible new hires we require to move in connection with accepting a position with us. Our objectives in providing global relocation benefits are to
attract and redeploy top talent. We provide "tax gross-ups" on applicable relocation benefits provided under our global relocation program as we believe that this benefit is integral to the Company's
ability to attract and retain employees
59
Table of Contents
whose
skill or knowledge enhance the Company's competitive position. The U.S. executive tier of the program covers reasonable expenses associated with the move and certain relocation services to
minimize the inconvenience and cost of moving, including as applicable, lump sum payments for temporary living, home search and miscellaneous expenses; new home search assistance; departure area home
sales assistance; reimbursement of duplicative housing costs; moving household goods; reimbursement of final trip expenses to the new area; spousal/partner career assistance; and cost of living
allowance for increases of at least eight percent in the cost of living from the previous residence location, paid as taxable income over four years in decreasing percentages. Under our global
relocation program, participants are generally required to sign a reimbursement agreement that requires them to pay back expenses incurred by the Company for their relocation in the event that they
voluntarily terminate their employment or are terminated for "cause" at a rate of 100% for termination within one year of the date on which payments were first made and 50% for termination following
the first year but within two years of the date on which payments were first made.
Personal Use of Aircraft
Pursuant to Mr. Mahoney's offer letter, he is permitted reasonable personal use of our corporate aircraft up to $100,000 per year in aggregate
incremental cost to the Company. Our other executives are permitted limited personal use of our corporate aircraft with prior approval. These executives are personally taxed on their personal use of
our corporate aircraft and we do not provide them with income tax gross-up payments. The aggregate incremental cost to the Company (and disallowed tax deductions of the Company) for our NEOs' personal
use of our corporate aircraft in 2016 is included in the footnotes to the Executive Compensation section titled "
Summary Compensation Table
."
|
Our Post-Employment and Change in Control Arrangements
|
Primary Elements of Post-Employment and Change in Control Arrangements
We provide post-employment and change in control payments and benefits to our executives under certain circumstances. We believe that offering
our executives these payments and benefits facilitates the operation of our business, allows them to better focus their time, attention and capabilities on our business, and assists the Company in
recruiting and retaining key executives. The primary elements of and objectives for our NEOs' 2016 post-employment and change in control agreements are summarized below.
Executive Retirement Plan
Our executives are eligible to participate in our Executive Retirement Plan. The objective of our Executive Retirement Plan is to provide a clear and
consistent approach to managing retirement-eligible executive departures with a standard, mutually understood separation and post-employment relationship. The Executive Retirement Plan provides
retiring executives with a lump sum benefit of 2.5 months of salary for each completed year of service, up to a maximum of 36 months' pay. The amount is payable in the first payroll
period after the last day of the six-month period following retirement. Receipt of payment is conditioned upon the retiring executive entering into an agreement with the Company that includes a
release of claims and customary non-disclosure, non-competition, non-solicitation and non-disparagement clauses in favor of the Company. To be eligible for benefits under the Executive Retirement
Plan, an executive's age plus his or her years of service with the Company must total at least 65 years (provided that the executive is at least 55 years old and has been with the
Company for at least five years). For further discussion of our Executive Retirement Plan, please see the narrative to the Executive Compensation section titled "
Retirement
Plan Benefits.
"
60
Table of Contents
Severance Plans
We maintain severance plans for eligible employees, including our NEOs, under which participants are entitled to receive certain severance payments,
subsidized COBRA health benefits and dental benefits for specified periods of time based on position level and classification and completed years of service to the Company and to receive outplacement
services in the event of certain involuntary terminations. The payment of severance benefits under the plans is subject to the Company's receipt of a release of claims. Executives, including certain
of our NEOs, who are eligible to receive payments under our Executive Retirement Plan or a Change in Control Agreement are not eligible to receive payments and benefits under our severance plans. For
further discussion of our severance plans, please see the Executive Compensation section titled "
Potential Payments Upon Termination or Change in
Control
—
Severance Plans.
"
Change in Control Agreements
We provide Change in Control Agreements to our executives, including our NEOs, and other key employees. The possibility of a change in control and the
uncertainty that it may raise among our executives as to their continued employment after or in connection with a change in control may result in their departure or distraction. Our objective in
providing Change in Control Agreements is to retain and encourage the continued attention and dedication of our executives during a potentially critical time, even if they fear that their position
will be eliminated after or in connection with the change in control. Our Change in Control Agreements require both a change in control and termination without cause or resignation for good reason
within two years after the change in control event, commonly referred to as a "double-trigger," for cash payments to be made under the agreement and vesting to be accelerated under the agreement for
equity awards where the surviving or acquiring entity substitutes or assumes outstanding equity awards. Our Change in Control Agreements include a release of claims as well as customary non-disclosure
and non-solicitation clauses in favor of the Company. Executives, including our NEOs, who are eligible to receive payments under our Change in Control Agreements are not eligible to receive payments
and benefits under our Executive Retirement Plan or our severance plans. For further discussion of our Change in Control Agreements, please see the Executive Compensation section titled
"
Potential Payments Upon Termination or Change in Control — Change in Control Agreements.
" Potential payments to our NEOs under our
Change in Control Agreements are included in the tables in the Executive Compensation section titled "
Potential Payments Upon Termination or Change in
Control
."
For
a discussion of our other plans and arrangements under which a change in control and/or termination of employment triggers payments or benefits, please see the Executive Compensation section
titled "
Potential Payments Upon Termination or Change in Control
." Potential payments to our NEOs as of December 31, 2016 under such plans or
arrangements are included in the tables in the Executive Compensation section titled "
Potential Payments Upon Termination or Change in Control
."
|
Recovery of Incentive Compensation Awards Policy and Provisions
|
In
February 2007, our Compensation Committee adopted a policy regarding the recovery or adjustment of short-term incentive awards paid to an executive after the policy was adopted in
the event relevant Company performance measures are restated in a manner that would have reduced the size of a previously granted award. In such an event, and to the extent permitted by applicable
law, the Company would seek to recover the amount of the short-term incentive award paid to such executive that was in excess of the amount that would have been awarded based on the restated financial
results, subject to and in accordance with the terms of the policy. Our Compensation
61
Table of Contents
Committee
monitors regulatory developments with respect to applicable executive compensation recovery policies required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and it expects
to consider such changes to the Company's current recovery policy as are necessary to comply with final rules (and related guidance, if any) to be issued by the SEC in accordance with such act.
In
May 2013, our Compensation Committee adopted a policy regarding the recovery of certain short-and long-term incentive compensation awards paid or granted to an executive after the policy was
adopted in the event of executive misconduct or gross dereliction of duty that resulted in a material violation of Company policy and caused significant harm to the Company. In such an event, and to
the extent permitted by applicable law, the Company may seek reimbursement of all or a portion of cash incentive compensation awards paid within a certain time period and/or recovery of all or a
portion of equity incentive awards granted to such executive over which the Company retains control, subject to and in accordance with the terms of the policy.
For
a discussion of other recovery and forfeiture provisions relating to incentive compensation awards and other benefits provided to our executives, please see the section titled
"
Global Relocation Program
" above, and the Executive Compensation sections titled "
Retirement Plan
Benefits
" and "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
."
|
Executive Stock Ownership Guidelines
|
Our
executives are required to have a significant personal investment in the Company through their ownership of shares of our common stock. Effective January 1, 2016, our
Board set new minimum stock ownership guidelines for executives, including our NEOs, as a number of shares of Company stock equal in value to at least the following
amounts:
-
•
-
Chief Executive Officer: six times annual base salary; and
-
•
-
All other Executives: three times annual base salary.
Executives
are required to comply with the guidelines at all times. However, if at any time an executive's ownership does not meet or exceed the guideline, he or she is expected to retain ownership of
at least fifty percent of his or her net share ownership with respect to each vesting of an equity award or stock option exercise until the guideline is met or exceeded. For purposes of satisfying the
guidelines, shares owned outright, shares held in company benefit plans and the intrinsic value of
vested "in-the-money" stock options are included in the aggregate number of shares held by an executive. Unvested equity award shares (including service-based DSUs and performance-based DSUs) and
unvested stock options are not included in the aggregate number of shares held by an executive. The Nominating and Governance Committee monitors compliance with these guidelines on an annual basis. As
of December 31, 2016, our Chief Executive Officer and other NEOs were in compliance with these guidelines.
|
Prohibition on Pledging and Hedging the Economic Value of our Common Stock
|
Our
executives, including our NEOs and our directors are prohibited from speculating in the Company's securities, engaging in transactions designed to "hedge" the value of our common
stock, and pledging their common stock as collateral for a loan. Executives and directors appointed after December 31, 2010 must unwind pre-existing hedging or pledging arrangements within nine
months of their election or appointment. Pre-existing hedging or pledging arrangements of such executives and
62
Table of Contents
directors
will be disclosed at the time of their election or appointment in the Company's related Form 8-K.
|
No Tax Gross-Ups (other than for Relocation Benefits)
|
In
2009, the Company eliminated tax gross-ups for its executives except for relocation benefits, which the Compensation Committee retained because the benefit generally applies to
all employees eligible to receive relocation benefits, including our executives, and the Compensation Committee believes it is integral to the Company's ability to attract and redeploy employees whose
skill or knowledge enhance the Company's competitive position. None of our NEOs received relocation benefits in 2016.
|
Our Equity Award Grant Policy and Practices
|
Under
our Equity Award Grant Policy, grants of equity awards to our executives are approved and effective as follows:
-
•
-
Annual equity awards (if any) for our employees, including our executives, are generally approved by our Compensation Committee at a regularly
scheduled meeting. Such awards are effective on the date of approval.
-
•
-
New hire, promotion, retention and other special or ad hoc awards for our executive officers are generally approved by our Compensation
Committee. New hire or promotion awards for executive officers are effective on the first trading day of the month following both the date of hire or promotion and the date of approval. Retention and
other special or ad hoc awards for our executive officers are effective on the first trading day of the month following approval.
-
•
-
Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant.
|
Tax and Accounting Considerations
|
Section 162(m)
of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to a company's chief executive
officer and the three other most highly compensated executive officers, other than the chief financial officer, employed by the company at the end of the year. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are met. Although we have plans that are intended to permit the award of deductible compensation under Section 162(m)
of the Internal Revenue Code, our Compensation Committee does not necessarily limit executive compensation to the amount deductible thereunder.
The
Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, which requires the Company to recognize compensation expense for share-based payments (including stock options
and other forms of equity compensation). FASB ASC Topic 718 is taken into account by the Compensation Committee in determining to use a portfolio approach to equity grants, awarding both stock options
and DSUs.
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Table of Contents
RISK ASSESSMENT OF OUR COMPENSATION PROGRAMS
With the assistance of the senior members of our Global Compensation and Benefits organization, certain senior executive officers and the
Compensation Committee's independent compensation consultant, FW Cook, in November 2016 the Compensation Committee reviewed a risk assessment of our compensation programs and policies to determine if
the provisions and operations of our programs create undesired or unintentional risk of a material nature.
Our
risk assessment included two work streams — one focused on reviewing areas of enterprise risk and the other focused on identifying compensation design risk. Our enterprise risk
analysis examined the types and magnitudes of risks our business areas present to the Company. Our compensation design risk analysis examined the potential risks in the design of our performance-based
incentive compensation arrangements. As part of this assessment, we analyzed the mix of fixed and variable compensation; the mix of short- and long-term compensation; the mix of long-term equity
incentives; performance metric mix; weighting, measurement, and payout timing; discretion and caps on short-term incentives; award size, vesting schedules and performance and other terms of long-term
equity incentives; and other incentive opportunities and their features. We also analyzed our recovery of incentive awards policy, executive stock ownership guidelines and hedging and pledging
prohibitions. Finally, we evaluated on a combined basis the results of the enterprise and compensation risk assessments, on a business area-by-business area basis.
As
a result of our analysis, the Compensation Committee believes that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company.
COMPENSATION COMMITTEE REPORT
The Executive Compensation and Human Resources Committee of the Board of Directors (the Compensation Committee) of Boston Scientific has
reviewed and discussed the Compensation Discussion & Analysis contained in this Proxy Statement with management and, based on
such review and discussions, the Compensation Committee has approved the inclusion of the Compensation Discussion & Analysis in this Proxy Statement and in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 for filing with the SEC.
This Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Boston Scientific filing
with the SEC, except to the extent that Boston Scientific specifically incorporates this Report by reference into another Boston Scientific filing.
THE
COMPENSATION COMMITTEE
Kristina
M. Johnson,
Chairman
Nelda J. Connors
Donna A. James
Edward J. Ludwig
Stephen P. MacMillan
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Table of Contents
EXECUTIVE COMPENSATION
|
Summary Compensation Table
|
The
table below summarizes the total compensation for each of our named executive officers for the fiscal years ended December 31, 2016, 2015 and 2014. For a narrative
description of material factors helpful to understand the information disclosed in the table below for 2016, please see the Compensation Discussion & Analysis and the narrative to this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)(1)
|
|
Bonus
($)(2)
|
|
Stock
Awards
($)(3)
|
|
Option
Awards
($)(4)
|
|
Non-Equity
Incentive Plan
Compensation
($)(5)
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6)
|
|
All Other
Compensation
($)(7)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
2016
|
|
$1,042,191
|
|
$0
|
|
$6,246,767
|
|
$1,998,819
|
|
$2,354,625
|
|
$281,730
|
|
$102,051
|
|
$12,026,183
|
|
Chairman of the Board,
|
|
2015
|
|
$967,740
|
|
$0
|
|
$6,587,016
|
|
$1,937,963
|
|
$1,825,000
|
|
$208,214
|
|
$68,195
|
|
$11,594,128
|
|
President and Chief Executive Officer
|
|
2014
|
|
$921,302
|
|
$0
|
|
$6,044,228
|
|
$1,899,718
|
|
$1,404,150
|
|
$198,620
|
|
$59,866
|
|
$10,527,884
|
|
Daniel J. Brennan
|
|
2016
|
|
$544,421
|
|
$0
|
|
$1,561,665
|
|
$499,705
|
|
$500,500
|
|
$191,075
|
|
$17,634
|
|
$3,315,000
|
|
Executive Vice President
|
|
2015
|
|
$492,736
|
|
$0
|
|
$1,487,391
|
|
$437,605
|
|
$523,250
|
|
$151,630
|
|
$17,293
|
|
$3,109,905
|
|
and Chief Financial Officer
|
|
2014
|
|
$450,000
|
|
$0
|
|
$1,192,917
|
|
$374,945
|
|
$416,588
|
|
$1,107,712
|
|
$16,478
|
|
$3,558,640
|
|
Kevin J. Ballinger
|
|
2016
|
|
$476,647
|
|
$0
|
|
$1,015,071
|
|
$324,808
|
|
$483,000
|
|
$198,808
|
|
$38,112
|
|
$2,536,446
|
|
Executive Vice President and
|
|
2015
|
|
$424,915
|
|
$0
|
|
$1,019,892
|
|
$300,072
|
|
$415,380
|
|
$72,312
|
|
$28,351
|
|
$2,260,922
|
|
President, Interventional Cardiology
|
|
2014
|
|
$392,781
|
|
$0
|
|
$596,438
|
|
$187,473
|
|
$414,750
|
|
$141,967
|
|
$203,900
|
|
$1,937,309
|
|
Joseph M. Fitzgerald
|
|
2016
|
|
$499,241
|
|
$0
|
|
$1,093,187
|
|
$349,788
|
|
$367,500
|
|
$97,608
|
|
$20,252
|
|
$2,427,576
|
|
Executive Vice President and
|
|
2015
|
|
$481,351
|
|
$0
|
|
$1,147,371
|
|
$337,578
|
|
$424,355
|
|
$104,434
|
|
$17,261
|
|
$2,512,350
|
|
President, Rhythm Management
|
|
2014
|
|
$454,082
|
|
$0
|
|
$994,105
|
|
$312,451
|
|
$425,040
|
|
$189,420
|
|
$16,881
|
|
$2,391,979
|
|
Timothy A. Pratt
|
|
2016
|
|
$640,017
|
|
$0
|
|
$937,010
|
|
$299,822
|
|
$665,600
|
|
$133,337
|
|
$24,523
|
|
$2,700,309
|
|
Executive Vice President,
|
|
2015
|
|
$638,563
|
|
$0
|
|
$1,019,892
|
|
$300,072
|
|
$665,600
|
|
$147,256
|
|
$23,879
|
|
$2,795,262
|
|
Chief Administrative Officer,
General Counsel and Secretary
|
|
2014
|
|
$627,337
|
|
$0
|
|
$954,325
|
|
$299,952
|
|
$579,600
|
|
$152,513
|
|
$19,183
|
|
$2,632,910
|
|
|
|
|
|
(1)
|
|
Base salaries for our executive officers are generally effective for one year starting in late February of each year. The amounts in this column for 2016 reflect, other than for Mr. Ballinger, an amount calculated by
prorating 2015 salaries from January 1, 2016 through February 22, 2016 and 2016 salaries for the remainder of the year. Since Mr. Ballinger's salary was twice increased in 2016, the amount in this column for Mr. Ballinger reflects
an amount calculated by prorating his 2015 salary from January 1, 2016 through February 22, 2016, his salary as increased on February 22, 2016 from that date through July 25, 2016, and his salary as increased on July 25, 2016
for the remainder of the year. These figures differ from those in the Compensation Discussion & Analysis, which lists amounts approved by the Compensation Committee in February 2016 for Messrs. Mahoney, Brennan, Fitzgerald and Pratt and
July 2016 for Mr. Ballinger.
|
(2)
|
|
Amounts in this column reflect cash bonuses, if any, paid to our NEOs other than pursuant to our 2016 Annual Bonus Plan. Cash bonuses paid to our NEOs pursuant to our 2016 Annual Bonus Plan are reflected in the
"Non-Equity Incentive Plan Compensation" column.
|
(3)
|
|
The amounts included in the "Stock Awards" column represent the aggregate grant date fair value of all service-based and Company performance-based DSUs granted in 2016, 2015 and 2014 under our 2011 Long-Term Incentive
Plan (2011 LTIP). These values have been determined in accordance with FASB ASC Topic 718.
|
|
|
The attainment of the performance-based DSUs awarded to our NEOs in 2016 is based on either (i) the Total Shareholder Return (TSR) of our common stock relative to the TSR of the common stock of the other
companies in the S&P 500 Healthcare Index over a three-year performance and service period, or (ii) our adjusted free cash flow over a one-year performance period measured against our internal financial plan for the same period, subject
to the satisfaction of the service criteria over a three-year period (inclusive of the performance period). For additional information with respect to these Company performance-based DSUs, including the vesting thereof, please see the sections titled
"
2016 Total Shareholder Return Performance Share Program"
and
"2016 Free Cash Flow Performance Share Program"
in the narrative to this table.
|
65
Table of Contents
|
|
|
|
|
|
We determined the grant date fair value of the 2016 TSR performance-based DSUs using a Monte Carlo simulation methodology, utilizing the following key assumptions:
|
|
|
|
|
|
Stock price on date of grant
|
|
$17.26
|
|
Risk-free rate
|
|
0.90%
|
|
Measurement period (in years)
|
|
2.85
|
|
|
|
|
|
|
The TSR performance metric for the 2016 TSR performance-based DSUs is a market condition as defined under FASB ASC Topic 718. Because these awards do not have performance conditions as defined under FASB ASC Topic 718,
such awards have no maximum grant date fair values that differ from the fair values presented in this Summary Compensation Table.
|
|
|
The grant date fair value of the 2016 FCF performance-based DSUs was determined based on management's evaluation of the Company's 2016 internal financial plan for adjusted free cash flow, assuming target achievement
of the adjusted free cash flow performance criteria and utilizing the closing market price of shares of our common stock on the date of grant. The fair values of the 2016 target FCF performance-based DSUs at the grant date assuming achievement of the
highest level of performance (as required to be disclosed by the SEC), which assumes actual adjusted free cash flow for 2016 at or above 125% of the Company's 2016 internal financial plan, are as follows: $2,999,978 for Mr. Mahoney's award,
$749,982 for Mr. Brennan's award, $487,474 for Mr. Ballinger's award, $524,997 for Mr. Fitzgerald's award, and $449,985 for Mr. Pratt's award.
|
|
|
We value service-based DSUs based on the closing market price of shares of our common stock on the date of grant.
|
|
|
For more information regarding the stock awards we granted in 2016, please see the Grants of Plan-Based Awards table. For a more detailed description of the assumptions used in determining grant date fair values of
DSUs granted in 2016, please see
Note M — Stock Ownership Plans
to our 2016 consolidated financial statements included in Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2016.
|
(4)
|
|
The amounts included in the "Option Awards" column represent the aggregate grant date fair value of all stock options granted during each of 2016, 2015 and 2014 under our 2011 LTIP. These values have been determined
in accordance with FASB ASC Topic 718. For a description of the assumptions used for purposes of determining grant date fair value of stock options granted in 2016, please see
Note M — Stock Ownership
Plans
to our 2016 consolidated financial statements included in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2016. For more information regarding the stock option awards we
granted in 2016, please see the Grants of Plan-Based Awards table.
|
(5)
|
|
Amounts in the "Non-Equity Incentive Plan Compensation" column represent payments made under our 2016 Annual Bonus Plan to our NEOs prior to March 15, 2017. Our NEOs' Annual Bonus Plan awards were made as cash
payments.
|
|
|
For further information regarding the 2016 Annual Bonus Plan awards, please see the Compensation Discussion & Analysis section titled "
Short-Term Incentives
" and
the narrative to this table.
|
(6)
|
|
The amounts shown in the "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column reflect the change in the actuarial present value of the accumulated benefit under our Executive Retirement
Plan for each retirement plan measurement date used for financial statement reporting purposes with respect to the Company's audited financial statements as compared to the prior retirement plan measurement date.
|
|
|
Mr. Brennan became eligible to participate in the Executive Retirement plan as of January 1, 2014. As such, the amount disclosed for him for 2014 in this column reflects the full present value of the
accumulated benefit under the plan.
|
|
|
Please see the narrative and footnotes to the Retirement Plan Benefits table for more information regarding the accrued benefits for each NEO under this plan. No amount is included with respect to nonqualified
deferred compensation earnings because there were no above-market or preferential earnings on nonqualified deferred compensation.
|
66
Table of Contents
|
|
|
|
(7)
|
|
The amounts shown for 2016 in the "All Other Compensation" column are comprised of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Match
(401(k) Plan)
(a)
|
|
Personal
Use of
Aircraft
(b)
|
|
Term
Life
Insurance
(c)
|
|
Other
(d)
|
|
Total All
Other
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
$15,900
|
|
$82,695
|
|
$2,970
|
|
$486
|
|
$102,051
|
|
Daniel J. Brennan
|
|
$15,900
|
|
$0
|
|
$1,557
|
|
$177
|
|
$17,634
|
|
Kevin J. Ballinger
|
|
$15,900
|
|
$0
|
|
$681
|
|
$21,531
|
|
$38,112
|
|
Joseph M. Fitzgerald
|
|
$15,900
|
|
$1,532
|
|
$1,418
|
|
$1,402
|
|
$20,252
|
|
Timothy A. Pratt
|
|
$14,669
|
|
$0
|
|
$9,238
|
|
$616
|
|
$24,523
|
|
|
|
|
|
(a)
|
|
The amounts shown in this column represent matching contributions made by the Company for each NEO under our 401(k) Retirement Savings Plan. All individual and matching contributions to the 401(k) Retirement Savings Plan
are fully vested upon contribution.
|
(b)
|
|
Pursuant to Mr. Mahoney's offer letter, he is permitted reasonable personal use of our corporate aircraft up to $100,000 per year in aggregate incremental cost to the Company, but is not entitled to reimbursement
from the Company for any taxes resulting from imputed income attributable to his personal use of the corporate aircraft. The amount reflected in the "Personal Use of Aircraft" column represents the aggregate incremental costs to us for
Mr. Mahoney's personal use of our corporate aircraft, as well as any incremental costs associated with persons accompanying Mr. Mahoney on business travel. We calculate the incremental cost to us by dividing the total annual variable
operating costs for the corporate aircraft by the number of in-flight hours during the year. The resulting dollar per hour amount is then multiplied by the number of hours flown for personal use by the executive during the year, including the "dead
head" costs of flying the aircraft to and from locations for personal use. Our corporate aircrafts are used predominately for business travel. Therefore, we do not include the fixed operating costs, such as pilot salary, general taxes and insurance,
in the incremental cost calculation. The incremental cost does not include amounts attributable to the NEO for increased income taxes we incurred in 2016 as a result of disallowed deductions related to personal use under Internal Revenue Service
rules. For 2016, the reflected amount excludes $1,045,727 and $23,955 of disallowed corporate income tax deductions attributable to Messrs. Mahoney and Fitzgerald's respective personal use of the corporate aircraft during the year.
Messrs. Mahoney and Fitzgerald were taxed on the imputed income attributable to their personal use of the corporate aircraft and did not receive tax assistance from the Company with respect to this amount.
|
(c)
|
|
Amounts in the "Term Life Insurance" column consist of premiums and the imputed income for Company-paid term life insurance attributable to our NEOs. For Messrs. Mahoney, Brennan, Ballinger, Fitzgerald, and Pratt,
the premium paid was $359, $196, $171, $180, and $231, respectively.
|
(d)
|
|
Amounts in the "Other" column consist of the costs of executive annual physical examinations, miscellaneous gifts and spousal travel, as well as $19,063 for Mr. Ballinger's spouse to accompany him to a corporate
event.
|
|
Grants of Plan Based Awards
|
The
table below presents information regarding awards under the Company's 2016 Annual Bonus Plan and 2011 Long-Term Incentive Plan, including those pursuant to the Company's 2016
Performance Share Programs, during the fiscal year ended December 31, 2016. For a description of material factors
67
Table of Contents
helpful
for an understanding of the information in the table below, please see the Compensation Discussion & Analysis and the narrative to this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)(3)
|
|
|
|
|
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)
|
|
Exercise
or Base
Price
of
Option
Awards
($/Sh)
|
|
|
|
|
Estimated Future Payouts
under Non-Equity Incentive Plan
Awards(1)
|
|
Estimated Future Payouts
under Equity Incentive Plan
Awards(2)
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
|
|
$0
|
|
$1,575,000
|
|
$3,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016(5)
|
|
|
|
|
|
|
|
46,349
|
|
115,874
|
|
231,748
|
|
|
|
|
|
|
|
$2,246,797
|
|
|
|
2/22/2016(6)
|
|
|
|
|
|
|
|
28,968
|
|
115,874
|
|
173,811
|
|
|
|
|
|
|
|
$1,999,985
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,874
|
|
|
|
|
|
$1,999,985
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
337,268
|
|
$17.26
|
|
$1,998,819
|
|
Daniel J. Brennan
|
|
|
|
$0
|
|
$385,031
|
|
$1,155,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016(5)
|
|
|
|
|
|
|
|
11,587
|
|
28,968
|
|
57,936
|
|
|
|
|
|
|
|
$561,690
|
|
|
|
2/22/2016(6)
|
|
|
|
|
|
|
|
7,242
|
|
28,968
|
|
43,452
|
|
|
|
|
|
|
|
$499,988
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,968
|
|
|
|
|
|
$499,988
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,317
|
|
$17.26
|
|
$499,705
|
|
Kevin J. Ballinger
|
|
|
|
$0
|
|
$300,000
|
|
$900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016(5)
|
|
|
|
|
|
|
|
7,531
|
|
18,829
|
|
37,658
|
|
|
|
|
|
|
|
$365,094
|
|
|
|
2/22/2016(6)
|
|
|
|
|
|
|
|
4,707
|
|
18,829
|
|
28,243
|
|
|
|
|
|
|
|
$324,989
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,829
|
|
|
|
|
|
$324,989
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,806
|
|
$17.26
|
|
$324,808
|
|
Joseph M. Fitzgerald
|
|
|
|
$0
|
|
$350,008
|
|
$1,050,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016(5)
|
|
|
|
|
|
|
|
8,111
|
|
20,278
|
|
40,556
|
|
|
|
|
|
|
|
$393,190
|
|
|
|
2/22/2016(6)
|
|
|
|
|
|
|
|
5,069
|
|
20,278
|
|
30,417
|
|
|
|
|
|
|
|
$349,998
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,278
|
|
|
|
|
|
$349,998
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,021
|
|
$17.26
|
|
$349,788
|
|
Timothy A. Pratt
|
|
|
|
$0
|
|
$512,014
|
|
$1,536,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/22/2016(5)
|
|
|
|
|
|
|
|
6,952
|
|
17,381
|
|
34,762
|
|
|
|
|
|
|
|
$337,018
|
|
|
|
2/22/2016(6)
|
|
|
|
|
|
|
|
4,345
|
|
17,381
|
|
26,071
|
|
|
|
|
|
|
|
$299,996
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,381
|
|
|
|
|
|
$299,996
|
|
|
|
2/22/2016(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,590
|
|
$17.26
|
|
$299,822
|
|
|
|
|
|
(1)
|
|
The amounts in these columns reflect target and maximum payouts under the 2016 Annual Bonus Plan. There is no threshold-level payout under the 2016 Annual Bonus Plan. The maximum possible payout under the 2016 Annual
Bonus Plan is 300% of the target payout, representing the product of (i) a maximum of 150% of the target payout based on Company performance metrics and (ii) a maximum of 200% of the target payout based on individual performance objectives.
Under the 2016 Annual Bonus Plan, bonuses to executives covered by Internal Revenue Code Section 162(m) are capped at $3.25 million. The actual amount earned by each NEO under the 2016 Annual Bonus Plan is reported under the "Non-Equity
Incentive Plan Compensation" column in the Summary Compensation Table. For additional information about our 2016 Annual Bonus Plan and a discussion of how these amounts are determined, please see the Compensation Discussion & Analysis
section titled "
Short-Term Incentives
" and the section titled "
2016 Annual Bonus Plan
" in the narrative to this table.
|
(2)
|
|
The amounts in these columns reflect threshold, target and maximum share issuance under our 2016 TSR PSP and 2016 FCF PSP. The target performance-based DSUs awarded under these programs were granted to our NEOs in
February 2016 as part of our annual review process and were awarded under our 2011 LTIP. For additional details regarding the awards to our NEOs pursuant to our 2016 TSR PSP and 2016 FCF PSP, please see footnotes 5 and 6 to this Grants of Plan-Based
Awards table, respectively.
|
(3)
|
|
The amounts in these columns reflect the number of service-based DSUs and stock options granted to our NEOs under our 2011 LTIP during 2016.
|
(4)
|
|
The amounts in this column have been determined in accordance with FASB ASC Topic 718. See footnotes 3 and 4 to the Summary Compensation Table for a description of the assumptions used in determining the grant date
fair value of these awards.
|
68
Table of Contents
|
|
|
|
(5)
|
|
These awards were granted pursuant to our 2016 TSR PSP. The threshold award level represents the minimum share issuance for each award that a participant may receive based on performance, which is 40% of the target
TSR performance-based DSUs awarded under the program. The maximum share issuance for each award is 200% of the target TSR performance-based DSUs awarded under the 2016 TSR PSP. For additional information about our 2016 TSR PSP and a discussion of how
these amounts are determined, please see the section titled "
2016 Total Shareholder Return Performance Share Program"
in the narrative to this table.
|
(6)
|
|
These awards were granted pursuant to our 2016 FCF PSP. The threshold award level represents the minimum share issuance for each award that a participant may receive based on performance, which is 25% of the target
FCF performance-based DSUs awarded under the program. The maximum share issuance for each award is 150% of the target FCF performance-based DSUs awarded under the 2016 FCF PSP. For additional information about our 2016 FCF PSP and a discussion of how
these amounts are determined, please see the section titled
"2016 Free Cash Flow Performance Share Program"
in the narrative to this table.
|
(7)
|
|
These awards were granted as part of our annual review process and awarded under our 2011 LTIP.
|
|
Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards Table
|
The
following provides information about the terms of our 2016 Annual Bonus Plan, 2016 Performance Share Programs and our Long-Term Incentive Plan, pursuant to which our NEOs were
awarded short- and long-term incentive compensation, as applicable and detailed in the tables above. For additional information regarding the application of these plans and programs to our NEOs in
2016, please see the Compensation Discussion & Analysis.
2016 Annual Bonus Plan
Our 2016 Annual Bonus Plan is administered by our Compensation Committee and was established under our 2011 LTIP. The plan year for our 2016
Annual Bonus Plan ran from January 1, 2016 to December 31, 2016. Generally all U.S. salaried employees not eligible for commissions under sales compensation plans and certain
international and expatriate/inpatriate employees selected for participation are eligible to participate in our 2016 Annual Bonus Plan, provided they have at least two full months of service during
the plan year. Participants generally must be employed with us on the date payments are made in order to receive awards under the plan. However, in the event of death or retirement or certain
involuntary terminations without cause, in each case, as described in the 2016 Annual Bonus Plan, participants may receive their performance incentive awards for the year on a prorated basis based on
the percentage of the year the participant was employed by us and eligible to participate. Participants who have at least two months of eligibility but less than a full year similarly may receive
awards under the 2016 Annual Bonus Plan on a prorated basis.
Target Incentive Award Opportunity
Each participant is provided with a target incentive award opportunity under the 2016 Annual Bonus Plan expressed as a percentage of his or her base salary.
For a discussion of the 2016 target incentive award opportunities for our NEOs, please see the Compensation Discussion & Analysis sections titled "
Individual Target
Incentive Award Opportunity
" and
"2016 Annual Bonus Plan Awards Paid to Our NEOs."
Company Performance Funds Total Bonus Pool
Company Performance Metrics and Weighting
. Under the 2016 Annual Bonus Plan, after year-end a single Company-wide annual bonus pool
(Total Bonus Pool) is funded based on the Company's performance measured against important Company-level financial performance metric targets. For
2016, our Compensation Committee selected adjusted EPS and standard foreign exchange (SFX) net sales as our Company-level performance metrics. Each metric has a 50% weighting.
69
Table of Contents
Company Metrics Defined
. For purposes of our 2016 Annual Bonus Plan: (i) adjusted EPS equals adjusted net income (loss) divided
by weighted average diluted shares outstanding for the performance year (adjusted net income equals GAAP net income (loss) excluding intangible asset impairment charges, acquisition-related net
charges, restructuring and restructuring-related net charges, litigation-related net charges, pension termination charges, debt extinguishment charges, discrete tax items, and amortization expense,
which are considered non-operational); and (ii) SFX net sales is calculated at an assumed standard constant currency basis that excludes the impact of changes in foreign currency rates, which
are highly variable and difficult to predict.
For
a discussion of the Company level targets under the 2016 Annual Bonus Plan, funding of the Total Bonus Pool and the individual performance component of the 2016 Annual Bonus Plan, please see the
Compensation Discussion & Analysis section titled "
Short-Term Incentives
."
Recovery of Annual Bonus Plan Award
Our 2016 Annual Bonus Plan provides that, to the extent permitted by applicable law, our Board will seek reimbursement of incentive compensation paid to any
executive officer under the plan in the event of a restatement of our financial results that reduced a previously granted award's size or payment. Under such circumstances, and to the extent permitted
by applicable law, we would seek to recover the amount of the 2016 Annual Bonus Plan award paid to such executive that was in excess of the amount that would have been paid based on the restated
financial results. Additionally, our 2016 Annual Bonus Plan provides that, to the extent permitted by applicable law, our Board may seek reimbursement of incentive compensation paid to an executive
under the plan in the event of executive misconduct or gross dereliction of duty that resulted in a material violation of Company policy and caused significant harm to the Company. In such an event,
and to the extent permitted by applicable law, the Board may seek reimbursement of all or a portion of cash incentive compensation awards paid within a certain time period under the plan.
2016 Total Shareholder Return Performance Share Program
Our 2016 TSR PSP is administered, and the TSR performance-based DSUs awarded pursuant to our 2016 TSR PSP are granted, under our 2011 LTIP.
The TSR performance-based DSUs vest upon the satisfaction of both the Company performance criteria and service criteria under the 2016 TSR PSP, subject to acceleration in the event of certain
qualifying terminations discussed below. Our executives, including our NEOs, are eligible to participate in the 2016 TSR PSP, which is administered by our Compensation Committee. For a discussion of
the TSR performance-based DSUs awarded to our NEOs in 2016, please see the Compensation Discussion & Analysis section titled "
2016 Long-Term Incentive Awards for our
NEOs."
Company Performance Criteria
For a discussion of the Company performance criteria under the 2016 TSR PSP please see the Compensation Discussion & Analysis section titled
"
Long-Term Incentives.
"
Calculation of TSR and Percentile Performance
. The TSR for the Company and each other company in the S&P 500 Healthcare Index
for the three-year performance period is determined based on the following formula:
(Change
in Stock Price + Dividends Paid) / Beginning Stock Price
70
Table of Contents
The
change in stock price is determined by subtracting the beginning stock price (the daily average closing price of one share of common stock for the two calendar months prior to the beginning of the
performance period) from the ending stock price (the daily average closing price of one share of common stock for the last two calendar months of the performance period). The dividends paid are the
total of all cash dividends paid on one share of common stock during the performance period.
Following
the calculation of the TSR for the three-year performance period for our Company and each of the other companies in the S&P 500 Healthcare Index, the companies will be ranked in order
of maximum to minimum TSRs for the full three-year performance period. Our percentile performance will be determined by (i) dividing (a) our ranking versus that of the other companies in
the S&P 500 Healthcare Index minus one, by (b) the total number of companies in the S&P 500 Healthcare Index minus one, and (ii) subtracting the result from one.
Service Criteria
Generally under the 2016 TSR PSP, except with respect to termination of employment due to retirement, death or disability, or in connection with a change in
control, in each case, as described in the 2016 TSR PSP and/or the 2011 LTIP, a participant must be employed with us on December 31, 2018 to be eligible to receive shares of our common stock in
respect of his or her TSR performance-based DSUs as to which the performance criteria under the program have been satisfied.
For
information regarding potential payments upon certain terminations of employment or in connection with a change in control, please see "
Potential Payments Upon Termination
or Change in Control.
"
2016 Free Cash Flow Performance Share Program
Our 2016 FCF PSP is administered, and the FCF performance-based DSUs awarded pursuant to our 2016 FCF PSP are granted, under our 2011 LTIP.
The 2016 grants of FCF performance-based DSUs vest upon the satisfaction of both the one-year Company performance criteria and the three-year service criteria (inclusive of the performance period)
under the 2016 FCF PSP, subject to acceleration in the event of certain qualifying terminations discussed below. Our executives, including our NEOs, were eligible to participate under the 2016 FCF
PSP, which is administered by our Compensation Committee. For a discussion of the 2016 FCF performance-based DSUs awarded to our NEOs and the Company's achievement of the Company performance criteria
under the program, please see the Compensation Discussion & Analysis section titled "
2016 Long-Term Incentive Awards for our NEOs."
Company Performance Criteria
For a discussion of the Company performance criteria under the 2016 FCF PSP, please see the Compensation Discussion & Analysis section titled
"
Long-Term Incentives.
"
Service Criteria
Generally under the 2016 FCF PSP, except with respect to termination of employment due to retirement, death or disability, or in connection with a change in
control, in each case, as described in the 2016 FCF PSP and/or the 2011 LTIP, a participant must be employed with us on December 31, 2018 to be eligible to receive shares of our common stock in
respect of his or her 2016 FCF performance-based DSUs as to which the performance criteria under the program have been satisfied.
71
Table of Contents
For
information regarding potential payments upon certain terminations of employment or in connection with a change in control, please see "
Potential Payments Upon Termination
or Change in Control.
"
2011 Long-Term Incentive Plan
The purpose of the broad-based equity incentive award opportunities available for grant under our 2011 LTIP is to attract, retain, engage and
focus key employees and other eligible participants on achieving long-term stockholder value by rewarding them for the increased performance of our common stock underlying such awards. Our 2011 LTIP
is administered by our Compensation Committee and provides for the grant of restricted or unrestricted common stock, deferred stock units, options to acquire our common stock, stock appreciation
rights (SARs), performance awards and other stock and non-stock awards (collectively, Awards). Our 2011 LTIP prohibits repricing or replacement of options or SARs and the issuance of in-the-money
options or SARs, and includes limitations on the amounts of grants and payments to any individual within a given fiscal year as well as certain other customary limitations. Employees, directors and
other individuals who provide services to us and our affiliates who, in the opinion of the Compensation Committee, are in a position to make a significant contribution to our success or that of our
affiliates are eligible for Awards under our 2011 LTIP. Our 2011 LTIP became effective on June 1, 2011, following its approval at our 2011 Annual Meeting of Stockholders, and will terminate on
March 1, 2021 (unless terminated sooner by our Board), and no further Awards may be granted following that date.
Certain Separations from Service
Generally under the 2011 LTIP, except with respect to termination of employment due to retirement, death or disability, or in connection with a change in
control, in each case, as described therein or as otherwise provided for in the applicable award agreement, all equity awards terminate to the extent not vested immediately prior to the cessation of
employment, and to the extent vested but not exercised at such time, remain exercisable for the lesser of one year or until the expiration of the stated term of the award. Further, in the event of a
termination for "cause" (defined as conviction of, or a failure to contest prosecution for, a felony, or misconduct or dishonesty that is harmful to our business or reputation), or as a result of
reasons that cast such discredit on the
individual as to justify immediate termination of the award, in each case, as determined in the Compensation Committee's sole discretion, all outstanding equity awards (including unexercised stock
options, whether vested or unvested) terminate immediately upon notice of such termination.
For
a discussion of our plans and arrangements under which a change in control and/or termination of employment triggers payments or benefits, including our 2011 LTIP, please see the narrative to the
tables appearing in "
Potential Payments Upon Termination or Change in Control."
Potential payments to our NEOs in 2016 under such plans or arrangements
are included in the tables appearing in "
Potential Payments Upon Termination or Change in Control."
2016 Equity Awards
With respect to our executives, including our NEOs as applicable, our Compensation Committee set the mix of equity award opportunities under our 2016
Long-Term Incentive Program at 25% target TSR performance-based DSUs, 25% target FCF performance-based DSUs, 25% stock options and 25% service-based DSUs. For a discussion of the 2016 equity awards
made to our NEOs, please see the Compensation Discussion & Analysis section titled "
Long-Term Incentives.
"
72
Table of Contents
|
Outstanding Equity Awards at Fiscal Year End
|
The
following table provides information with respect to outstanding unexercised non-qualified stock options and unvested DSUs for each NEO as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)(3)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
02/27/2012
|
|
674,941
|
|
0
|
|
$6.28
|
|
02/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2013
|
|
495,402
|
|
165,134
|
|
$7.39
|
|
02/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2014
|
|
173,041
|
|
173,042
|
|
$13.08
|
|
02/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
02/23/2015
|
|
83,512
|
|
250,539
|
|
$16.31
|
|
02/23/2025
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2016
|
|
0
|
|
337,268
|
|
$17.26
|
|
02/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
57,325
|
|
$1,239,940
|
|
|
|
|
|
|
|
02/28/2013
|
|
|
|
|
|
|
|
|
|
101,489
|
|
$2,195,207
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
87,156
|
|
$1,885,184
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
290,518(4)
|
|
$6,283,904
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
147,873(5)
|
|
$3,198,493
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
95,034
|
|
$2,055,585
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
129,246(6)
|
|
$2,795,591
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
115,874
|
|
$2,506,355
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
132,328(7)
|
|
$2,862,255
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,584(8)
|
|
$5,138,942
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
231,748(9)
|
|
$5,012,709
|
|
Daniel J. Brennan
|
|
02/16/2010
|
|
81,847
|
|
0
|
|
$7.41
|
|
02/16/2020
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2011
|
|
49,690
|
|
0
|
|
$7.16
|
|
02/28/2021
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
24,373
|
|
0
|
|
$6.28
|
|
02/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2013
|
|
20,823
|
|
9,465
|
|
$7.39
|
|
02/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2014
|
|
34,152
|
|
34,154
|
|
$13.08
|
|
02/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
02/23/2015
|
|
18,857
|
|
56,574
|
|
$16.31
|
|
02/23/2025
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2016
|
|
0
|
|
84,317
|
|
$17.26
|
|
02/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
2,588
|
|
$55,978
|
|
|
|
|
|
|
|
02/28/2013
|
|
|
|
|
|
|
|
|
|
5,413
|
|
$117,083
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
17,202
|
|
$372,079
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
57,338(4)
|
|
$1,240,221
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
29,185(5)
|
|
$631,272
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
21,460
|
|
$464,180
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
29,185(6)
|
|
$631,272
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
28,968
|
|
$626,578
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
33,081(7)
|
|
$715,542
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,648(8)
|
|
$1,160,406
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,936(9)
|
|
$1,253,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)(3)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Ballinger
|
|
02/28/2011
|
|
62,112
|
|
0
|
|
$7.16
|
|
02/28/2021
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
9,375
|
|
0
|
|
$6.28
|
|
02/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2013
|
|
56,145
|
|
18,715
|
|
$7.39
|
|
02/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2014
|
|
17,076
|
|
17,077
|
|
$13.08
|
|
02/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
02/23/2015
|
|
12,931
|
|
38,793
|
|
$16.31
|
|
02/23/2025
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2016
|
|
0
|
|
54,806
|
|
$17.26
|
|
02/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
3,185
|
|
$68,892
|
|
|
|
|
|
|
|
02/28/2013
|
|
|
|
|
|
|
|
|
|
11,502
|
|
$248,788
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
8,601
|
|
$186,040
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
28,668(4)
|
|
$620,089
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
14,592(5)
|
|
$315,625
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
14,715
|
|
$318,285
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
20,012(6)
|
|
$432,860
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
18,829
|
|
$407,271
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
21,502(7)
|
|
$465,088
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,786(8)
|
|
$795,681
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,658(9)
|
|
$814,543
|
|
Joseph M. Fitzgerald
|
|
02/12/2008
|
|
85,227
|
|
0
|
|
$12.52
|
|
02/12/2018
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2009
|
|
44,236
|
|
0
|
|
$8.30
|
|
02/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
02/16/2010
|
|
107,692
|
|
0
|
|
$7.41
|
|
02/16/2020
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2011
|
|
77,640
|
|
0
|
|
$7.16
|
|
02/28/2021
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
70,306
|
|
0
|
|
$6.28
|
|
02/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2013
|
|
59,448
|
|
19,816
|
|
$7.39
|
|
02/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2014
|
|
28,460
|
|
28,461
|
|
$13.08
|
|
02/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
02/23/2015
|
|
14,547
|
|
43,642
|
|
$16.31
|
|
02/23/2025
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2016
|
|
0
|
|
59,021
|
|
$17.26
|
|
02/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
5,972
|
|
$129,174
|
|
|
|
|
|
|
|
02/28/2013
|
|
|
|
|
|
|
|
|
|
12,179
|
|
$263,432
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
14,335
|
|
$310,066
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
47,782(4)
|
|
$1,033,525
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
24,321(5)
|
|
$526,063
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
16,554
|
|
$358,063
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
22,513(6)
|
|
$486,956
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
20,278
|
|
$438,613
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
23,157(7)
|
|
$500,886
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,384(8)
|
|
$895,136
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,556(9)
|
|
$877,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested
($)(3)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy A. Pratt
|
|
02/24/2009
|
|
100,536
|
|
0
|
|
$8.30
|
|
02/24/2019
|
|
|
|
|
|
|
|
|
|
|
|
02/16/2010
|
|
192,308
|
|
0
|
|
$7.41
|
|
02/16/2020
|
|
|
|
|
|
|
|
|
|
|
|
02/26/2010
|
|
4,348
|
|
0
|
|
$7.74
|
|
02/26/2020
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2011
|
|
232,919
|
|
0
|
|
$7.16
|
|
02/28/2021
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
112,490
|
|
0
|
|
$6.28
|
|
02/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
02/28/2013
|
|
82,566
|
|
27,523
|
|
$7.39
|
|
02/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
02/24/2014
|
|
27,322
|
|
27,322
|
|
$13.08
|
|
02/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
02/23/2015
|
|
12,931
|
|
38,793
|
|
$16.31
|
|
02/23/2025
|
|
|
|
|
|
|
|
|
|
|
|
02/22/2016
|
|
0
|
|
50,590
|
|
$17.26
|
|
02/22/2026
|
|
|
|
|
|
|
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
9,555
|
|
$206,675
|
|
|
|
|
|
|
|
02/28/2013
|
|
|
|
|
|
|
|
|
|
16,915
|
|
$365,871
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
13,761
|
|
$297,650
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
45,870(4)
|
|
$992,168
|
|
|
|
|
|
|
|
02/24/2014
|
|
|
|
|
|
|
|
|
|
23,347(5)
|
|
$504,996
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
14,715
|
|
$318,285
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
20,012(6)
|
|
$432,860
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
17,381
|
|
$375,951
|
|
|
|
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
19,849(7)
|
|
$429,334
|
|
|
|
|
|
|
|
02/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,786(8)
|
|
$795,681
|
|
|
|
02/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,762(9)
|
|
$751,902
|
|
|
|
|
|
(1)
|
|
All stock options are non-qualified stock options and vest in four equal annual installments beginning on the first anniversary of the date of grant, subject to continued service on each applicable vesting
date.
|
(2)
|
|
Unless otherwise noted, all service-based DSUs vest in five equal annual installments beginning on the first anniversary of the date of grant, subject to continued service on each applicable vesting date.
|
(3)
|
|
Unless otherwise noted, the amounts reflected in this column are based on the closing price of our common stock on December 30, 2016, which was $21.63.
|
(4)
|
|
In February 2014, each of our NEOs was awarded TSR performance-based DSUs under our 2014 TSR PSP. Our total shareholder return performance was ranked fourth relative to that of the other companies in the
S&P 500 Healthcare Index over the performance cycle comprising the three-year period that ended December 31, 2016. Accordingly, in February 2017 the Compensation Committee determined that pursuant to the terms of the 2014 TSR PSP, 200%
of the target number of TSR performance-based DSUs had been earned based on the performance criteria under the program. Amounts for these awards represent the number of shares of our common stock that were delivered or otherwise made available to our
NEOs on February 28, 2017 in settlement of the units awarded to them in 2014.
|
(5)
|
|
In February 2014, each of our NEOs was awarded FCF performance-based DSUs under our 2014 FCF PSP. Our adjusted free cash flow performance over the one-year performance period that ended December 31, 2014 was
100.9% relative to target performance for the same period. Accordingly, in February 2015, the Compensation Committee determined that pursuant to the terms of the 2014 FCF PSP, 101.8% of the target number of FCF performance-based DSUs had satisfied
the performance criteria under the program. The common stock associated with these awards was delivered in settlement of these awards in January 2017.
|
75
Table of Contents
|
|
|
|
|
(6)
|
|
In February 2015, each of our NEOs was awarded FCF performance-based DSUs under our 2015 FCF PSP. Our adjusted free cash flow performance over the one-year performance period that ended December 31, 2015 was 104.4%
relative to target performance for the same period. Accordingly, in February 2016, the Compensation Committee determined that pursuant to the terms of the 2015 FCF PSP, 108.8% of the target number of FCF performance-based DSUs had satisfied the
performance criteria under the program. Amounts for these awards represent the number of shares of our common stock that will be delivered or otherwise made available to our NEOs no later than January 15, 2018 in settlement of the units awarded
to them in 2015 so long as the service criteria is also satisfied. As of December 31, 2016, such units were unearned and remained subject to forfeiture under the terms of the 2015 FCF PSP.
|
(7)
|
|
In February 2016, each of our NEOs was awarded FCF performance-based DSUs under our 2016 FCF PSP. Our adjusted free cash flow performance over the one-year performance period that ended December 31, 2016 was
107.1% relative to target performance for the same period. Accordingly, in February 2017, the Compensation Committee determined that pursuant to the terms of the 2016 FCF PSP, 114.2% of the target number of FCF performance-based DSUs had satisfied
the performance criteria under the program. Amounts for these awards represent the number of shares of our common stock that will be delivered or otherwise made available to our NEOs no later than January 15, 2019 in settlement of the units
awarded to them in 2016 so long as the service criteria is also satisfied. As of December 31, 2016, such units were unearned and remained subject to forfeiture under the terms of the 2016 FCF PSP.
|
(8)
|
|
In February 2015, each of our NEOs was awarded TSR performance-based DSUs under our 2015 TSR PSP. In accordance with the SEC rules, the number of performance-based DSUs shown represents the number of units that may be
earned as of December 31, 2016 based on maximum performance. The SEC rules require that the maximum number of units be disclosed because the number of units that would have been earned based on actual results under the performance conditions for
the two year period from January 1, 2015 through December 31, 2016 (instead of through the end of the performance period on December 31, 2017) was at the maximum level of performance under the program.
|
(9)
|
|
In February 2016, each of our NEOs was awarded TSR performance-based DSUs under our 2016 TSR PSP. In accordance with the SEC rules, the number of performance-based DSUs shown represents the number of units that may be
earned as of December 31, 2016 based on maximum performance. The SEC rules require that the maximum number of units be disclosed because the number of units that would have been earned based on actual results under the performance conditions for
the one year period from January 1, 2016 through December 31, 2016 (instead of through the end of the performance period on December 31, 2018) was between target and the maximum level of performance under the program.
|
|
Options Exercised and Stock Vested
|
The
following table sets forth information regarding stock options that were exercised and DSUs that vested for our NEOs during the fiscal year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of Shares
Acquired on
Exercise (#)
|
|
Value Realized on
Exercise ($)(1)
|
|
Number of Shares
Acquired on
Vesting (#)
|
|
Value Realized on
Vesting ($)(2)
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
0
|
|
$0
|
|
1,267,264
|
|
$23,693,145
|
|
Daniel J. Brennan
|
|
86,762
|
|
$824,606
|
|
59,966
|
|
$1,051,093
|
|
Kevin J. Ballinger
|
|
189,929
|
|
$2,785,119
|
|
107,735
|
|
$1,893,312
|
|
Joseph M. Fitzgerald
|
|
0
|
|
$0
|
|
116,233
|
|
$2,042,085
|
|
Timothy A. Pratt
|
|
154,761
|
|
$1,356,446
|
|
164,202
|
|
$2,883,546
|
|
|
|
|
|
(1)
|
|
The amounts shown in this column represent the number of shares acquired on exercise multiplied by the difference between the option exercise price and the closing price of our common stock on the date of
exercise.
|
(2)
|
|
The amounts reflected in this column represent the number of shares vested or earned multiplied by the closing price of our common stock on the vesting date.
|
76
Table of Contents
All
of our executive officers, including our NEOs, are eligible to participate in our Executive Retirement Plan, as amended effective November 1, 2014. The Executive
Retirement Plan is intended to provide a clear and consistent approach to managing retirement-eligible executive departures with a standard, mutually understood separation and post-employment
relationship. The plan provides retiring executives with a lump sum benefit of 2.5 months of salary for each year of service, up to a maximum of 36 months' pay. The lump sum payments are
made in the first payroll period after the last day of the six-month period following retirement. Receipt of payment is conditioned upon the retiring employee entering into a separation agreement with
us that includes a release of claims and customary non-disclosure, non-competition, non-solicitation and non-disparagement clauses in favor of the Company. The plan provides that in the event the
executive breaches the non-competition or non-solicitation provision of his or her separation agreement, the executive must, in addition to any other court-ordered relief, repay to the Company all
amounts paid under the plan.
To
receive benefits under the plan, upon his or her retirement an executive's age plus his or her years of service with us must total at least 65 years (provided that the executive is at least
55 years old and has been employed by us for at least five years). For purposes of the plan, "retirement" means any separation from service (as defined in the plan) other than a termination for
"cause" (defined as conviction of, or failure to contest prosecution for, a felony, or misconduct or dishonesty that is harmful to our business or reputation). In addition, if an executive dies and is
otherwise eligible for benefits under the plan on the date of his or her death, benefits under the plan will be paid within 60 days of the executive's death.
The
Executive Retirement Plan includes a special participant eligibility classification for employees that are "Grandfathered Individuals." Under the Executive Retirement Plan, an employee is a
Grandfathered Individual if (i) he or she has completed at least 10 continuous years of service with the Company prior to retiring, (ii) immediately prior to retiring he or she is
serving in a "Special Assignment," which is a regular position of employment with the Company that he or she assumed, at the written request of the Chief Executive Officer or his or her designee,
immediately after serving for a period of at least five consecutive years as a member of the Company's executive committee and/or in a division president position not on the executive committee, and
(iii) the Compensation Committee approved the inclusion of the employee in an eligibility classification as a Grandfathered Individual in connection with his or her acceptance of the Special
Assignment.
If
a Grandfathered Individual satisfies the requirements to receive benefits under the Plan, he or she will receive a lump sum benefit payable in the first payroll period after the last day of the
six-month period following his or her retirement. In the case of a Grandfathered Individual that served as a member of the Company's executive committee during the entire five-year period immediately
prior to assuming the Special Assignment, the lump sum benefit will be equal to 2.5 months of salary for each year of service, up to a maximum of 36 months' pay. For a Grandfathered
Individual that did not serve as a member of the Company's executive committee during the entire five-year period immediately prior to assuming the Special Assignment, the lump sum benefit will be
equal to 1.5 months of salary
for each year of service, up to a maximum of 24 months' pay. The base salary used for purposes of calculating the lump sum benefit will be the greater of the Grandfathered Individual's base
salary immediately prior to retirement or his or her base salary immediately prior to assuming the Special Assignment.
For
retirement-eligible NEOs (Mr. Pratt), the present value of accrued benefits is calculated as the value of their lump sum benefit under the plan based on the NEO's base salary, age and
number of
77
Table of Contents
years
of credited service as of December 31, 2016. For NEOs who were not eligible for retirement (Messrs. Mahoney, Brennan, Ballinger and Fitzgerald) as of December 31, 2016, the
present value of accrued benefits is calculated based on the respective NEO's base salary, age and number of years of credited service as of December 31, 2016, discounted to December 31,
2016 from the earliest retirement eligibility date, using a discount rate of 3.5% per year. This valuation methodology is consistent with the methodology we use for financial statement accounting
purposes except that executives are assumed to remain employed by us until their earliest retirement age under the plan (or their age on December 31, if eligible for retirement at that date).
For financial statement accounting purposes, the valuation considers the probability that the executives will achieve retirement age. For a more detailed description of the assumptions used in valuing
accrued benefits under the plan, please see
Note A — Significant Accounting Policies
to our 2016 consolidated financial
statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.
The
table below shows the present value of accumulated benefits payable to each of our NEOs, including the numbers of years of service credited to each NEO, under our Executive Retirement Plan as of
December 31, 2016.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)(1)
|
|
Present Value of
Accumulated Benefit
($)(2)
|
|
Payments
During Last
Fiscal Year ($)
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney
|
|
BSC Executive Retirement Plan
|
|
5.20
|
|
$991,948
|
|
$0
|
|
Daniel J. Brennan
|
|
BSC Executive Retirement Plan
|
|
20.06
|
|
$1,450,417
|
|
$0
|
|
Kevin J. Ballinger
|
|
BSC Executive Retirement Plan
|
|
21.07
|
|
$1,032,734
|
|
$0
|
|
Joseph M. Fitzgerald
|
|
BSC Executive Retirement Plan
|
|
26.21
|
|
$1,430,981
|
|
$0
|
|
Timothy A. Pratt
|
|
BSC Executive Retirement Plan
|
|
8.67
|
|
$1,156,031
|
|
$0
|
|
|
|
|
|
(1)
|
|
The numbers of years of credited service reflect the NEO's actual years of service as of December 31, 2016. We do not credit additional years of service under the plan. Rather, the plan provides that the number of
years of credited service is calculated through the NEO's last day worked. Partially completed years of service are prorated based on calendar days and calculated to the second decimal point.
|
(2)
|
|
Amounts are computed as of December 31, 2016, the same retirement plan measurement date used for financial statement reporting purposes for our audited financial statement for the year ended December 31,
2016.
|
|
Nonqualified Deferred Compensation
|
In
May 2010, our Board approved the Boston Scientific Corporation Deferred Bonus Plan (the Deferred Bonus Plan). The Deferred Bonus Plan provides certain of our management, including
our NEOs, an opportunity to defer a portion of their annual award under our Annual Bonus Plan. The Deferred Bonus Plan provides participants the opportunity to defer up to 75% of their annual award
under our Annual Bonus Plan until the earlier of (i) termination of employment or (ii) an elected distribution date, such election to be made by June 30th of each year.
Investment choices under the plan are generally the same as those under our 401(k) Retirement Savings Plan, except that, among other things, participants may not elect to invest in the BSC Stock Fund.
Distributions under the plan are in either lump sum payments or annual installments over a period of two to five years, as specified by the participant. Under the Deferred Bonus Plan,
Mr. Mahoney elected to defer 35% of his 2014 Annual Bonus Plan Award, Mr. Fitzgerald elected to defer 50% of his 2014 and 2015 Annual Bonus Plan Awards and 75% of his 2016 Annual Bonus
Plan Award, and Mr. Ballinger elected to defer 75% of his 2016 Annual Bonus Plan Award.
In
September 2004, we committed to fund a special one-time contribution to our 401(k) Retirement Savings Plan for the benefit of our employees. In June 2005, we adopted an Excess Benefit Plan, a
non-qualified deferred compensation plan designed to provide specific supplemental benefits to those
78
Table of Contents
employees
who would have exceeded the 2004 Internal Revenue Code contribution limits if the special contribution had been made to their 401(k) plan accounts. Accordingly, the historic Excess Benefit
Plan was established to accept the "overflow" contributions resulting from the special one-time contribution on behalf of participating employees, including certain of our NEOs. Investment choices
under the historic Excess Benefit Plan are generally the same as those under our 401(k) Retirement Savings Plan, except that, among other things, executive officers may not elect to invest in the BSC
Stock Fund. The investment elections are made by each participant and may be changed daily. Generally, a lump sum cash payment of their respective account balances under the plan is made to
participants determined to be "specified employees," including certain of our NEOs, commencing no earlier than six months and one day following their "separation from service."
The
table below shows the aggregate earnings and balances for each of our NEOs under our historic Excess Benefit Plan and Deferred Bonus Plan as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Executive
Contributions
in Last Fiscal
Year
($)
|
|
Registrant
Contributions
in Last Fiscal
Year
($)
|
|
Aggregate
Earnings
in Last
Fiscal
Year
($)(1)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance at
Last Fiscal
Year End
($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Mahoney(2)
|
|
Excess Benefit Plan
Deferred Bonus Plan
|
|
$0
$0
|
|
$0
$11,549(3)
|
|
$0
$49,689
|
|
$0
$0
|
|
$0
$524,631
|
|
Daniel J. Brennan
|
|
Excess Benefit Plan
Deferred Bonus Plan
|
|
$0
$0
|
|
$0
$0
|
|
$3,808
$0
|
|
$0
$0
|
|
$41,656
$0
|
|
Kevin J. Ballinger
|
|
Excess Benefit Plan
Deferred Bonus Plan
|
|
$0
$0
|
|
$0
$7,310(3)
|
|
$(1,914)
$(6,917)
|
|
$0
$0
|
|
$26,948
$301,716
|
|
Joseph M. Fitzgerald
|
|
Excess Benefit Plan
Deferred Bonus Plan
|
|
$0
$212,178
|
|
$0
$13,726(3)
|
|
$7,930
$171,563
|
|
$0
$0
|
|
$54,852
$1,231,118
|
|
Timothy A. Pratt(2)
|
|
Excess Benefit Plan
Deferred Bonus Plan
|
|
$0
$0
|
|
$0
$0
|
|
$0
$0
|
|
$0
$0
|
|
$0
$0
|
|
|
|
|
|
(1)
|
|
No portion of the amounts in this column is included in the "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column for 2016, 2015 or 2014 in the Executive Compensation section titled
"
Summary Compensation Table,"
as the earnings were neither above-market nor preferential.
|
(2)
|
|
Mr. Mahoney and Mr. Pratt were not employed by us when the one-time 401(k) contribution was made to our historic Excess Benefit Plan.
|
(3)
|
|
Represents adjustments.
|
The
investment choices under the historic Excess Benefit Plan and the Deferred Bonus Plan and their annual rates of return for the year ended December 31, 2016 are contained in the following
table.
|
|
|
|
Name of Investment Option
|
|
2016 Rate of Return
|
|
|
|
|
|
American Funds EuroPacific Growth Fund
|
|
1.01%
|
|
Metropolitan West Total Return Bond Fund
|
|
2.46%
|
|
PRIMECAP Odyssey Growth Fund
|
|
8.42%
|
|
T. Rowe Price Institutional Small Cap Stock Fund
|
|
19.00%
|
|
Vanguard Extended Market Index Fund Institutional Plus Shares
|
|
16.17%
|
|
Vanguard Federal Money Market Fund
|
|
0.30%
|
|
Vanguard Growth Index Fund Institutional Shares
|
|
6.13%
|
|
Vanguard Institutional Index Fund Institutional Plus Shares
|
|
11.95%
|
|
Vanguard Total Bond Market Index Fund Institutional Shares
|
|
2.61%
|
|
Vanguard Total International Stock Index Fund Institutional Shares
|
|
4.70%
|
|
Vanguard Wellington Fund Admiral Shares
|
|
11.09%
|
|
Vanguard Windsor II Fund Admiral Shares
|
|
13.49%
|
79
Table of Contents
|
Potential Payments Upon Termination or Change In Control
|
Executive Retirement Plan
All of our executives, including our NEOs, are eligible to participate in our Executive Retirement Plan. The Executive Retirement Plan is
intended to provide a clear and consistent approach to managing executive departures with a standard mutually-understood separation and post-employment relationship. The benefits payable to our
executives upon "retirement" under the Executive Retirement Plan, as well as the present value of amounts accrued thereunder as of December 31, 2016, are reflected in the table and the related
footnotes and narrative to the section titled "
Retirement Plan Benefits."
In addition, changes in the present value of the benefits under the Executive
Retirement Plan from December 31, 2015 to December 31, 2016 are reflected in the "Change in Pension Value and Nonqualified Deferred Compensation Earnings" column of the Summary
Compensation Table. For further discussion of our Executive Retirement Plan, please see the narrative to the table appearing in the section titled "
Retirement Plan
Benefits
."
Change in Control Agreements
We provide Change in Control Agreements to our executives, including our NEOs, and other key employees. Our Change in Control Agreements for
our executives are limited to a three-year term and provide that if both a change in control occurs during the term of the agreement and the executive's employment is terminated either by us without
"Cause" or by the executive for "Good Reason" (each as described below) during the two-year period following the change in control, then the executive would be entitled to receive a lump sum payment
of three times the sum of (i) the executive's base salary and (ii) target incentive bonus (or prior year's bonus, if higher). Additionally, an executive would be entitled to receive a
prorated target incentive bonus for the year in which his or her termination occurred, continuation of health, life insurance and other welfare benefits for up to three years, and reimbursement for up
to $100,000 in legal fees and expenses incurred by an executive in disputing termination or enforcing rights under his or her Change in Control Agreement. Our Change in Control Agreements further
provide that all equity granted to executives require both a change in control and a termination without Cause or resignation by the executive for Good Reason within two years after the change in
control in order to accelerate vesting; provided, however, that if the surviving or acquiring entity in a change in control transaction does not provide for the substitution or assumption of
outstanding equity awards, such outstanding awards will immediately become fully vested.
The
Change in Control Agreements do not include an excise tax "gross-up" but rather require a reduction in the amount of the severance payments if the reduction would result in a greater after-tax
amount. In exchange for the benefits afforded under our Change in Control Agreements, our executives agree to certain non-disclosure restrictions, a two-year non-solicitation obligation and to execute
a release in favor of the Company. Executives, including our NEOs, who are eligible to receive payments
under our Change in Control Agreements are not also eligible to receive payments and benefits under our Executive Retirement Plan or Severance Plan For Exempt Employees (the Severance Plan).
For
purposes of our Change in Control Agreements, "Cause" generally means willfully engaging in criminal or fraudulent acts or gross misconduct that is demonstrably and materially injurious to us.
"Good Reason" generally means, among other things, assignment of duties inconsistent with the executive's status as an executive or an adverse alteration of the executive's duties; a reduction in
annual base salary or bonus or failure to increase salary at a rate commensurate with that of other key executives; an adverse change in long-term incentive opportunities; failure by the Company to
80
Table of Contents
continue
to provide comparable benefits or continue in effect, or continue the executive's participation in, any compensation plan in which the executive participates; the relocation of the
executive's principal place of work more than 50 miles; or failure by the Company to obtain a satisfactory agreement from any successor entity to agree to perform the Change in Control Agreement.
Long-Term Incentive Plan
Our employees, including our NEOs, are eligible to receive equity awards under our 2011 LTIP. Equity awards granted to our executives under
our 2011 LTIP require both a change in control and a subsequent termination without Cause or for Good Reason pursuant to the terms of our Change in Control Agreements for accelerated vesting where the
surviving or acquiring entity assumes outstanding awards.
Further,
beginning in July 2010, the terms of all annual equity awards granted to our employees, including our NEOs, provide that in the event that the employee's employment terminates due to
disability or retirement (each as defined in the 2011 LTIP) prior to the first anniversary of the equity award grant date, the unvested equity award will immediately lapse and be forfeited, and in the
event of a termination due to death prior to the first anniversary of the equity award grant date, a prorated portion of such awards will vest based on the percent of the year completed prior to
death. In the event of a termination due to disability, retirement or death after the first anniversary of the equity award grant date, all unvested equity awards will vest in full.
Our
2011 LTIP is more fully described under the section titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table —
2011 Long-Term Incentive Plan.
"
TSR Performance Share Programs
Our TSR PSPs cover our executives, including our NEOs, and are administered by the Compensation Committee. Under our TSR PSPs, if a
participant's employment terminates due to retirement, death or disability after December 31 in the year of grant, but prior to the end of the three-year performance period, shares of our
common stock will be issued in respect of the TSR performance-based DSUs as to which the performance criteria under the program have been satisfied at the end of the three-year performance period, on
a prorated basis. However, such awards will be forfeited in their entirety in the event retirement, death, or disability occurs prior to December 31 in the year of grant.
Pursuant
to the terms of our Change in Control Agreements, the TSR performance-based DSUs awarded to our executives require both a change in control and a subsequent termination without Cause or for
Good Reason for accelerated vesting where the surviving or acquiring entity assumes outstanding awards. Under our TSR PSPs and our Change in Control Agreements, if a change in control and a subsequent
termination without Cause or for Good Reason occurs after December 31 in the year of grant, but prior to the end of the three-year performance period, shares of our common stock will be issued
in respect of the TSR performance-based DSUs as to which the performance criteria under the program have been satisfied on the last day of the month preceding the date on which the change in control
is consummated, on a prorated basis. However, such awards will be forfeited in their entirety in the event a change of control occurs prior to December 31 in the year of grant.
Our
2016 TSR PSP is more fully described under the section titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table —
2016 Total Shareholder Return Performance Share Program.
"
81
Table of Contents
FCF Performance Share Programs
Our FCF PSPs cover our executives, including our NEOs, and are administered by our Compensation Committee. Under our FCF PSPs, if a
participant's employment terminates due to retirement, death or disability after the end of the one-year performance period but prior to the end of the three-year service period, shares of our common
stock will be issued in respect of the FCF performance-based DSUs as to which the performance criteria under the program have been satisfied on a prorated basis. Pursuant to the terms of our Change in
Control Agreements, the FCF performance-based DSUs awarded to our executives require both a change in control and a subsequent termination without Cause or for Good Reason for accelerated vesting
where the surviving or acquiring entity assumes outstanding awards. However, such awards will be forfeited in their entirety in the event of a change of control that occurs prior to the end of the
one-year performance period.
Our
2016 FCF PSP is more fully described under the section titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table —
2016 Free Cash Flow Performance Share Program.
"
2016 Annual Bonus Plan
Our 2016 Annual Bonus Plan is generally available to all U.S. salaried personnel not eligible for commissions under sales compensation plans,
including our NEOs, and certain international and expatriate/inpatriate employees working in positions designated by the Company as eligible to participate in the plan. To be eligible to receive their
incentive award, participants generally must be employed by us on the date payments are made under the 2016 Annual Bonus Plan. However, in the event of death, retirement or certain involuntary
terminations without cause, in each case, as described in the 2016 Annual Bonus Plan, participants may receive their performance incentive awards for the year on a prorated basis based on the
percentage of the year the participant was employed by us and eligible to participate (subject to certain minimum months of service requirements). Grants of performance incentive awards to our NEOs
under our 2016 Annual Bonus Plan are reflected in the Summary Compensation Table in the "Non-Equity Incentive Plan Compensation" column, and our 2016 Annual Bonus Plan is more fully described under
the section titled "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table — 2016 Annual Bonus
Plan
", as well as the Compensation Discussion & Analysis section titled "
Short-Term Incentives."
Severance Plans
We maintain severance plans for eligible employees, including our NEOs, under which participants are entitled to receive certain payments and
benefits for specified periods of time following a qualifying termination. Such benefits are only available in the event of certain involuntary terminations either (i) due to an anticipated
facility relocation or closing or a reduction of staffing levels where the employee has not refused a similar position with us, or (ii) resulting from a sale, merger or reorganization of our
Company where the employee is not provided an opportunity to be employed in a similar position with the acquiring or resulting entity. Executives, including our NEOs, who are eligible to receive
payments under our Executive Retirement Plan, are not also eligible to receive payments and benefits under our severance plans. In addition, executives who receive severance payments under a Change in
Control Agreement are not eligible to receive payments and benefits under our severance plans.
The
Severance Plan provides that director level and above exempt employees, including certain of our NEOs, are eligible for (i) two weeks of payments for each completed year of service to the
Company, based on the weekly rate of the employee's salary in effect on the date of his termination, with a
82
Table of Contents
minimum
benefit of 26 weeks and a maximum benefit of 52 weeks, (ii) one month of subsidized health and dental coverage for each completed year of service to the Company with a
minimum benefit of six months and a maximum benefit of twelve months, and (iii) outplacement services, in each case, in the event of certain involuntary terminations described above.
Additionally,
the Severance Plan provides that in the event of certain involuntary terminations, employees eligible to participate in our Annual Bonus Plan may be entitled to a prorated bonus if such
involuntary termination occurs on or after October 1 of a calendar year. The prorated bonus is calculated by multiplying the amount of the bonus an employee would have received for the calendar
year, had he or she remained employed by the Company until the bonus payment date (or, if less, the target bonus) times a fraction, the denominator of which is the number of days in the calendar year,
and the numerator of which is the number of days in which he or she was a bonus-eligible employee during the calendar year.
Under
the Severance Plan, the payment of severance benefits is subject to the Company's receipt of a release of claims. In addition, the maximum severance payment available under the plan is limited
to
twice the Internal Revenue Code dollar limitation in effect for qualified plans for the calendar year immediately preceding the calendar year in which the termination occurs.
The
following tables show potential payments to Messrs. Mahoney, Brennan, Ballinger, Fitzgerald and Pratt under existing agreements, plans or other arrangements, for various scenarios involving
a change in control or termination of employment, in each case assuming the termination was effective before the end of the day on December 31, 2016 and, where applicable, using the closing
market price of our common stock of $21.63 per share on December 30, 2016. In each case, amounts in these tables do not include amounts payable, if any, to our NEOs who were not retirement
eligible on December 31, 2016 pursuant to our Executive Retirement Plan, which are described in the table and accompanying narrative and footnotes in the section titled
"
Retirement Plan Benefits.
"
83
Table of Contents
Michael F. Mahoney
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
Upon
Termination:
|
|
Termination
for
Cause(1)
|
|
Voluntary
Termination(2)
|
|
Involuntary
Termination
Without
Cause(3)
|
|
Change in
Control(4)
|
|
Termination
Following
Change in
Control(4)
|
|
Disability
|
|
Death
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$0
|
|
$0
|
|
$525,000
|
|
$0
|
|
$3,150,000
|
|
$0
|
|
$0
|
|
$0
|
|
Bonus
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$5,475,000
|
|
$0
|
|
$0
|
|
$0
|
|
Pro rata Target Bonus(5)
|
|
$0
|
|
$0
|
|
$1,575,000
|
|
$0
|
|
$1,575,000
|
|
$0
|
|
$1,575,000
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Severance
|
|
$0
|
|
$0
|
|
$2,100,000
|
|
$0
|
|
$10,200,000
|
|
$0
|
|
$1,575,000
|
|
$0
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits(6)
|
|
$0
|
|
$0
|
|
$8,342
|
|
$0
|
|
$58,126
|
|
$0
|
|
$0
|
|
$0
|
|
Post-Termination Life Insurance
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,076
|
|
$0
|
|
$0
|
|
$0
|
|
Executive Retirement Plan(7)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Other Benefits(8)
|
|
$0
|
|
$0
|
|
$2,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$0
|
|
$0
|
|
$10,342
|
|
$0
|
|
$59,202
|
|
$0
|
|
$0
|
|
$0
|
|
280G or Other Tax Adjustment
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Long Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Stock Options(9)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$6,637,746
|
|
$5,163,885
|
|
$6,514,924
|
|
$0
|
|
Value of Accelerated Deferred Stock Units(10)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$26,987,700
|
|
$24,481,345
|
|
$26,778,837
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Accelerated Equity Grants
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$33,625,446
|
|
$29,645,230
|
|
$33,293,761
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value: All Benefits
|
|
$0
|
|
$0
|
|
$2,110,342
|
|
$0
|
|
$43,884,648
|
|
$29,645,230
|
|
$34,868,761
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
Table of Contents
Daniel J. Brennan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
Upon
Termination:
|
|
Termination
for
Cause(1)
|
|
Voluntary
Termination(2)
|
|
Involuntary
Termination
Without
Cause(3)
|
|
Change in
Control(4)
|
|
Termination
Following
Change in
Control(4)
|
|
Disability
|
|
Death
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$0
|
|
$0
|
|
$423,111
|
|
$0
|
|
$1,650,132
|
|
$0
|
|
$0
|
|
$0
|
|
Bonus
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,569,750
|
|
$0
|
|
$0
|
|
$0
|
|
Pro rata Target Bonus(5)
|
|
$0
|
|
$0
|
|
$385,031
|
|
$0
|
|
$385,031
|
|
$0
|
|
$385,031
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Severance
|
|
$0
|
|
$0
|
|
$808,142
|
|
$0
|
|
$3,604,913
|
|
$0
|
|
$385,031
|
|
$0
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits(6)
|
|
$0
|
|
$0
|
|
$16,683
|
|
$0
|
|
$57,962
|
|
$0
|
|
$0
|
|
$0
|
|
Post-Termination Life Insurance
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$587
|
|
$0
|
|
$0
|
|
$0
|
|
Executive Retirement Plan(7)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Other Benefit(8)
|
|
$0
|
|
$0
|
|
$2,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$0
|
|
$0
|
|
$18,683
|
|
$0
|
|
$58,549
|
|
$0
|
|
$0
|
|
$0
|
|
280G or Other Tax Adjustment
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Long Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Stock Options(9)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,096,237
|
|
$727,772
|
|
$1,065,532
|
|
$0
|
|
Value of Accelerated Deferred Stock Units(10)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$5,285,160
|
|
$4,658,582
|
|
$5,232,945
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Accelerated Equity Grants
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$6,381,397
|
|
$5,386,354
|
|
$6,298,477
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value: All Benefits
|
|
$0
|
|
$0
|
|
$826,825
|
|
$0
|
|
$10,044,859
|
|
$5,386,354
|
|
$6,683,508
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
Table of Contents
Kevin J. Ballinger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
Upon
Termination:
|
|
Termination
for
Cause(1)
|
|
Voluntary
Termination(2)
|
|
Involuntary
Termination
Without
Cause(3)
|
|
Change in
Control(4)
|
|
Termination
Following
Change in
Control(4)
|
|
Disability
|
|
Death
|
|
Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$0
|
|
$0
|
|
$403,846
|
|
$0
|
|
$1,500,000
|
|
$0
|
|
$0
|
|
$0
|
|
Bonus
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,246,140
|
|
$0
|
|
$0
|
|
$0
|
|
Pro rata Target Bonus(5)
|
|
$0
|
|
$0
|
|
$300,000
|
|
$0
|
|
$300,000
|
|
$0
|
|
$300,000
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Severance
|
|
$0
|
|
$0
|
|
$703,846
|
|
$0
|
|
$3,046,140
|
|
$0
|
|
$300,000
|
|
$0
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits(6)
|
|
$0
|
|
$0
|
|
$13,308
|
|
$0
|
|
$46,765
|
|
$0
|
|
$0
|
|
$0
|
|
Post-Termination Life Insurance
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$513
|
|
$0
|
|
$0
|
|
$0
|
|
Executive Retirement Plan(7)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Other Benefits(8)
|
|
$0
|
|
$0
|
|
$2,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$0
|
|
$0
|
|
$15,308
|
|
$0
|
|
$47,278
|
|
$0
|
|
$0
|
|
$0
|
|
280G or Other Tax Adjustment
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$(1,032,272)
|
|
$0
|
|
$0
|
|
$0
|
|
Long Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Stock Options(9)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$858,391
|
|
$618,889
|
|
$838,432
|
|
$0
|
|
Value of Accelerated Deferred Stock Units(10)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$3,363,167
|
|
$2,955,896
|
|
$3,329,228
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Accelerated Equity Grants
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$4,221,558
|
|
$3,574,785
|
|
$4,167,660
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value: All Benefits
|
|
$0
|
|
$0
|
|
$719,154
|
|
$0
|
|
$6,282,704
|
|
$3,574,785
|
|
$4,467,660
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
Table of Contents
Joseph M. Fitzgerald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
Upon
Termination:
|
|
Termination
for
Cause(1)
|
|
Voluntary
Termination(2)
|
|
Involuntary
Termination
Without
Cause(3)
|
|
Change in
Control(4)
|
|
Termination
Following
Change in
Control(4)
|
|
Disability
|
|
Death
|
|
Retirement
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$0
|
|
$0
|
|
$500,012
|
|
$0
|
|
$1,500,036
|
|
$0
|
|
$0
|
|
$0
|
|
Bonus
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,273,065
|
|
$0
|
|
$0
|
|
$0
|
|
Pro rata Target Bonus(5)
|
|
$0
|
|
$0
|
|
$350,008
|
|
$0
|
|
$350,008
|
|
$0
|
|
$350,008
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Severance
|
|
$0
|
|
$0
|
|
$850,020
|
|
$0
|
|
$3,123,109
|
|
$0
|
|
$350,008
|
|
$0
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits(6)
|
|
$0
|
|
$0
|
|
$13,336
|
|
$0
|
|
$46,868
|
|
$0
|
|
$0
|
|
$0
|
|
Post-Termination Life
Insurance
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$539
|
|
$0
|
|
$0
|
|
$0
|
|
Executive Retirement
Plan(7)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Other Benefits(8)
|
|
$0
|
|
$0
|
|
$2,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$0
|
|
$0
|
|
$15,336
|
|
$0
|
|
$47,407
|
|
$0
|
|
$0
|
|
$0
|
|
280G or Other Tax
Adjustment
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$(1,204,549)
|
|
$0
|
|
$0
|
|
$0
|
|
Long Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Stock
Options(9)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,015,619
|
|
$757,697
|
|
$994,125
|
|
$0
|
|
Value of Accelerated
Deferred Stock Units(10)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$4,388,665
|
|
$3,950,051
|
|
$4,352,113
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Accelerated
Equity Grants
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$5,404,284
|
|
$4,707,748
|
|
$5,346,238
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value: All Benefits
|
|
$0
|
|
$0
|
|
$865,356
|
|
$0
|
|
$7,370,251
|
|
$4,707,748
|
|
$5,696,246
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
Table of Contents
Timothy A. Pratt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due
Upon
Termination:
|
|
Termination
for
Cause(1)
|
|
Voluntary
Termination(2)
|
|
Involuntary
Termination
Without
Cause(3)
|
|
Change in
Control(4)
|
|
Termination
Following
Change in
Control(4)
|
|
Disability
|
|
Death
|
|
Retirement
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,920,051
|
|
$0
|
|
$0
|
|
$0
|
|
Bonus
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$1,996,800
|
|
$0
|
|
$0
|
|
$0
|
|
Pro rata Target Bonus(5)
|
|
$0
|
|
$512,014
|
|
$512,014
|
|
$0
|
|
$512,014
|
|
$512,014
|
|
$512,014
|
|
$512,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Severance
|
|
$0
|
|
$512,014
|
|
$512,014
|
|
$0
|
|
$4,428,865
|
|
$512,014
|
|
$512,014
|
|
$512,014
|
|
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health and Welfare
Benefits(6)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$42,809
|
|
$0
|
|
$0
|
|
$0
|
|
Post-Termination Life
Insurance
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$693
|
|
$0
|
|
$0
|
|
$0
|
|
Executive Retirement
Plan(7)
|
|
$0
|
|
$1,156,031
|
|
$1,156,031
|
|
$0
|
|
$0
|
|
$1,156,031
|
|
$1,156,031
|
|
$1,156,031
|
|
Other Benefits(8)
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Benefits
|
|
$0
|
|
$1,156,031
|
|
$1,156,031
|
|
$0
|
|
$43,502
|
|
$1,156,031
|
|
$1,156,031
|
|
$1,156,031
|
|
280G or Other Tax
Adjustment
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
Long Term Incentives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated Stock
Options(9)
|
|
$0
|
|
$831,909
|
|
$831,909
|
|
$0
|
|
$1,052,988
|
|
$831,909
|
|
$1,034,564
|
|
$831,909
|
|
Value of Accelerated
Deferred Stock Units(10)
|
|
$0
|
|
$3,854,683
|
|
$3,854,683
|
|
$0
|
|
$4,230,634
|
|
$3,854,683
|
|
$4,199,304
|
|
$3,854,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value of Accelerated
Equity Grants
|
|
$0
|
|
$4,686,592
|
|
$4,686,592
|
|
$0
|
|
$5,283,622
|
|
$4,686,592
|
|
$5,233,868
|
|
$4,686,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Value: All Benefits
|
|
$0
|
|
$6,354,637
|
|
$6,354,637
|
|
$0
|
|
$9,755,989
|
|
$6,354,637
|
|
$6,901,913
|
|
$6,354,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Employees, including NEOs, are not entitled to any benefits upon termination for cause. All unvested equity awards, as well as all vested but unexercised stock options, are forfeited as of the date of termination for
cause. For a definition of cause, please see the section titled "
Change in Control Agreements
" in the narrative to these tables.
|
(2)
|
|
Other than for Mr. Pratt who was retirement eligible, no benefits were payable upon voluntary termination by our NEOs as of December 31, 2016.
|
(3)
|
|
Amounts in this column represent benefits payable upon involuntary termination by the Company on December 31, 2016 (other than termination for cause or in connection with a change in control). Amounts for
Messrs. Mahoney, Brennan, Ballinger and Fitzgerald represent benefits payable pursuant to our 2016 Annual Bonus Plan and the Severance Plan only in the event of certain involuntary terminations under the plans where each is not otherwise offered
similar employment within the Company. Amounts for Mr. Pratt represent benefits payable pursuant to our 2016 Annual Bonus Plan and Executive Retirement Plan. Because Mr. Pratt is eligible to receive benefits under the Executive Retirement
Plan, he is not eligible for any payments of benefits under the Severance Plan.
|
(4)
|
|
All equity awards granted to our executives require both a change in control and subsequent termination (without cause or by the executive for good reason) in order to accelerate vesting; provided, however, that if
the surviving or acquiring entity in a change in control transaction does not provide for the substitution or assumption of outstanding equity awards, such outstanding awards will immediately become fully vested. Amounts in the "Change in Control"
column assume that the executive is not terminated subsequent to a change in control and that the surviving or acquiring entity in a change in control transaction provides for the substitution or assumption of outstanding equity awards.
|
88
Table of Contents
|
|
|
|
|
|
Amounts in the "Termination Following Change in Control" column represent benefits payable under our Change in Control Agreements following termination without cause or resignation by the executive for good reason on
December 31, 2016 in connection with, and within two years of, a change in control of the Company. For a further description of our Change in Control Agreements, please see the section titled "
Change in Control
Agreements
" in the narrative to these tables.
|
(5)
|
|
Amounts in the "Pro rata Target Bonus" row represent the assumed on-plan bonus under our 2016 Annual Bonus Plan, which is equal to the incentive target amount under the plan, for each of our NEOs.
|
|
|
Under the 2016 Annual Bonus Plan, participants generally must be employed by us on the date payments are made in order to be eligible for their incentive award. However, in the event of death, retirement or certain
involuntary terminations without cause, participants generally may receive their performance incentive awards for the year on a prorated basis based on the percentage of the year the participant was employed by us and eligible to participate (subject
to certain minimum months of service requirements). For a further description of our 2016 Annual Bonus Plan, please see the "
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table —
2016 Annual Bonus Plan
", as well as the Compensation Discussion & Analysis section titled "
Short-Term Incentives.
"
|
(6)
|
|
In determining the value of health and welfare benefits, we use the assumptions used for financial reporting purposes under GAAP.
|
(7)
|
|
Amounts in the "Executive Retirement Plan" row represent amounts earned under our Executive Retirement Plan, provided the NEO is eligible for benefits under the plan. In order to be eligible for benefits under the
plan, the sum of an executive officer's age and years of service must equal 65, provided that the executive is at least 55 years old and has completed at least five years of service with us. Mr. Pratt is the only NEO that is eligible for
benefits under the plan.
|
(8)
|
|
Amounts in the "Other Benefits" row represent payment of outplacement services under the Severance Plan.
|
(9)
|
|
Amounts in the "Value of Accelerated Stock Options" row represent the number of shares underlying in-the-money unvested stock options held by each NEO, multiplied by the difference between that option's exercise price
and $21.63 (the closing price of our common stock on December 30, 2016). As of December 31, 2016, all of the unvested stock options held by our NEOs were in-the-money.
|
(10)
|
|
Amounts in the "Value of Accelerated Deferred Stock Units" row represent the value of the number of each NEO's performance and service-based DSUs, the vesting of which would have accelerated as of December 31,
2016, calculated by multiplying the number of accelerated DSUs by $21.63 (the closing price of our common stock on December 30, 2016).
|
|
|
In February 2014, each of our NEOs was awarded TSR performance-based DSUs under our 2014 TSR PSP, the attainment of which was based on the TSR of our common stock relative to the TSR of the common stock of the other
companies in the S&P 500 Healthcare Index over a three-year performance period. As of December 31, 2016, the performance and concurrent service period had been completed, and each NEO became entitled to 200% of the target number of TSR
performance-based DSUs he was granted under the program in February 2014. The values of the awards to our NEOs under our 2014 TSR PSP are included in the tables above.
|
|
|
In February 2015 and 2016, each of our NEOs was awarded TSR performance-based DSUs under our 2015 and 2016 TSR PSPs, respectively, the attainment of which was based on the TSR of our common stock relative to the TSR
of the common stock of the other companies in the S&P 500 Healthcare Index over a three-year performance and service period (the "Performance Period"). Under the 2015 and 2016 TSR PSPs, if (a) a participant is terminated without cause
or for good reason following a change in control after December 31 in the year of the grant but prior to the end of the Performance Period or (b) a participant's employment terminates due to retirement, death or disability, in each case,
after December 31 in the year of the grant but prior to the end of the Performance Period, shares of our common stock will be issued in respect of the TSR performance-based DSUs as to which the performance criteria under the program had been
satisfied, as of (x) for (a) above, the last day of the month preceding the date on which the Change in Control is consummated and (y) for (b) above, the end of the Performance Period, in each case prorated based on the number of
months worked during the Performance Period, rounded to the nearest whole month.
|
89
Table of Contents
|
|
|
|
|
|
If an NEO's employment was terminated without cause or for good reason following a change in control on December 31, 2016, (a) the awards under our 2015 TSR PSP would accelerate, on a prorated basis, at 200%
of target because the Company's TSR performance during the period beginning January 1, 2015 and ended December 31, 2016 ranked first compared to its 47 peers for that period and (b) the awards under our 2016 TSR PSP would accelerate,
on a prorated basis, at 165% of target because the Company's TSR performance during the period beginning January 1, 2016 and ended December 31, 2016 ranked tenth compared to its 53 peers for that period. Because we have not yet reached the
end of the Performance Period for the awards under the 2015 and 2016 TSR PSPs, we are unable to ascertain with certainty the value of the TSR performance-based DSUs the NEOs would be entitled to in the event of retirement, death or disability on
December 31, 2016. Assuming that the Company's performance at the end of the Performance Period is the same as for the one- and two-year periods ended December 31, 2016, (a) the awards under our 2015 TSR PSP would accelerate, on a
prorated basis at 200% of target and (b) the awards under our 2016 TSR PSP would accelerate, on a prorated basis, at 165% of target.
|
|
|
For a discussion of the actual performance under our 2014, 2015 and 2016 TSR PSPs, please see the footnotes to the table appearing in "
Outstanding Equity Awards At Fiscal Year
End
."
|
|
|
In February 2014, February 2015 and February 2016, each of our NEOs was awarded FCF performance-based DSUs under our 2014 FCF PSP, 2015 FCF PSP and 2016 FCF PSP, respectively. Our adjusted free cash flow performance
over the one-year performance period that ended December 31, 2014 was 100.9% relative to our 2014 internal financial plan; accordingly, in February 2015, the Compensation Committee determined that pursuant to the terms of the 2014 FCF PSP,
101.8% of the target number of FCF performance-based DSUs had been earned under the program. Our adjusted free cash flow performance over the one-year performance period that ended December 31, 2015 was 104.4% relative to our 2015 internal
financial plan; accordingly, in February 2016, the Compensation Committee determined that pursuant to the terms of the 2015 FCF PSP, 108.8% of the target number of FCF performance-based DSUs had been earned under the program. Our adjusted free cash
flow performance over the one-year performance period that ended December 31, 2016 was 107.1% relative to our 2016 internal financial plan; accordingly, in February 2017, the Compensation Committee determined that pursuant to the terms of the
2016 FCF PSP, 114.2% of the target number of FCF performance-based DSUs had been earned under the program. All of such units were subject to the satisfaction of the service criteria over a three-year period (inclusive of the performance period). If a
participant's employment terminates due to retirement, death or disability after the end of the performance period but prior to the end of the three-year service period, shares of our common stock will be issued in respect of the FCF
performance-based DSUs as to which the performance criteria under the program have been satisfied on a prorated basis based on the number of months worked during the three-year service period, rounded to the nearest whole month. Additionally,
pursuant to the terms of our Change in Control Agreements, the vesting of FCF performance-based DSUs awarded to our executives will be accelerated on a pro rata basis based on the number of months worked during the three-year service period, rounded
to the nearest whole month in the event of both a change in control and a subsequent termination without cause or for good reason.
|
90
Table of Contents
PROPOSAL 2: ADVISORY VOTE TO APPROVE
NAMED EXECUTIVE OFFICER COMPENSATION
Section 14A of the Exchange Act requires that we provide our stockholders with the opportunity to vote to approve, on a non-binding,
advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. Our Board has determined to
provide our stockholders this opportunity on an annual basis and we expect the next vote to be held at our 2018 annual meeting of stockholders.
As
described in the Compensation Discussion & Analysis, our executive compensation philosophy is to provide appropriate competitive compensation opportunities to our executives with actual pay
outcomes heavily influenced by the achievement of Company performance targets and individual
performance objectives (in other words, "pay for performance") in support of our business strategy and creation of long-term stockholder value.
Executive Compensation Program Best Practices
Our Compensation Committee believes that a strong foundation for our compensation program is necessary to execute our executive compensation
philosophy effectively. The following key aspects of executive compensation best practices serve as the foundation for our compensation program:
-
ü
-
Use
a mix of short- and long-term incentive compensation, with an emphasis on long-term compensation.
-
ü
-
Use
a mix of fixed and variable compensation, with an emphasis on variable, at-risk performance-based
compensation.
-
ü
-
Require
a "double-trigger" (both a change in control and termination without cause or for good reason)
for cash payments and accelerated vesting of equity awards where the surviving or acquiring entity substitutes or assumes outstanding equity awards.
-
ü
-
Do
not provide income tax gross-ups (except on relocation benefits).
-
ü
-
Do
not provide any excise tax gross-ups on severance or other payments in the event of a change in
control.
-
ü
-
Maintain
stock ownership guidelines for our executives and directors.
-
ü
-
Have
a policy for the recovery, commonly referred to as a "claw-back," of all or a portion of certain
incentive compensation awards under certain circumstances.
-
ü
-
Use
internal pay equity analysis.
-
ü
-
Use
peer group company comparative analysis.
-
ü
-
Engage
an independent compensation consultant reporting directly to the Compensation Committee.
-
ü
-
Perform
risk assessment of incentive compensation policies and programs.
91
Table of Contents
-
ü
-
Do
not pay dividend equivalents on unvested performance-based DSUs or service-based DSUs.
-
ü
-
Do
not permit repricing of underwater stock options without stockholder approval.
-
ü
-
Prohibit
pledging or hedging of the economic value of our common stock by our executives and directors.
Pay for Performance
We believe our emphasis on at-risk, performance-based incentive compensation — consisting of our Annual Bonus Plan awards
and long-term equity awards — aligns our executives with our business strategy and the short- and long-term interests of our stockholders, providing "pay for performance" and
putting a significant portion of our executives' pay "at risk."
A Significant Portion of our NEOs' 2016 Target TDC is At-Risk, Performance-Based Compensation
Our Compensation Committee ties a significant portion of the primary elements of our executives' target TDC to at-risk, performance-based incentive
opportunities. For 2016, 84% of the target value of the primary elements of TDC for our NEOs as a group (including our CEO) consisted of at-risk, performance-based incentive compensation, which was
comprised of the following:
-
•
-
15% Short-Term Cash Incentive Awards, with:
-
Ø
-
Funding
of the Total Bonus Pool tied to Company performance measured against adjusted EPS and SFX net sales performance
targets.
-
Ø
-
Allocation
of the Total Bonus Pool, as funded, based on business and functional performance measured against their
respective financial and/or operational performance targets.
-
Ø
-
Actual
payout adjusted based on each individual's performance.
-
•
-
69% Long-Term Equity Incentive Awards, with mix of opportunity comprised of:
-
Ø
-
25%
Company performance-based DSUs, a percentage of which is earned based on the TSR of our common stock relative to that
of the other companies in the S&P 500 Healthcare Index over a three-year performance period.
-
Ø
-
25%
performance-based DSUs, a percentage of which is earned based on our adjusted free cash flow measured against our
target performance over a one-year performance period and subject to service-based vesting over a three-year period (inclusive of the performance period).
-
Ø
-
25%
stock options, with ultimate value tied to the performance of our stock price.
-
Ø
-
25%
service-based DSUs, with ultimate value tied to the performance of our stock price.
The
percentages above were calculated using the 2016 base salary, target equity values and target Annual Bonus Plan award amounts for our NEOs set forth in the footnote to the chart below. The
92
Table of Contents
allocation
of the target value of the primary elements of TDC for our NEOs as a group (including our CEO) in 2016 was as follows:
|
|
|
|
|
(1)
|
|
The chart reflects the value of the primary elements of 2016 TDC opportunity as considered by the Compensation Committee as follows: (i) the annual equity awards granted to our NEOs on February 22, 2016, with
stock options valued in accordance with FASB ASC Topic 718, as described in the footnotes to the Executive Compensation section titled "
Summary Compensation Table,"
and with both service-based DSUs and
Company performance-based DSUs valued at target (using the number of units and target units awarded multiplied by the closing price of our common stock on the date of grant); (ii) the target Annual Bonus Plan awards; and (iii) the annual
base salaries approved in February 2016.
|
For
further discussion of the allocation of the target value of the primary elements of TDC for our Chief Executive Officer and for our other NEOs as a group in 2016, please see the Compensation
Discussion & Analysis section titled "
Pay for Performance
."
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 Item 402 of Regulation S-K, including the Compensation Discussion & Analysis, compensation tables and narrative discussion."
While
the vote is advisory in nature, which means that it is non-binding on us, our Compensation Committee values the opinions of our stockholders and will take into consideration the outcome of the
vote when considering future executive compensation arrangements.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO ITEM 402 OF REGULATION
S-K.
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Table of Contents
PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY
VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the provisions of Section 14A of the Exchange Act, also
requires that we provide our stockholders with the opportunity to vote to approve, on a non-binding advisory basis, how frequently we should seek future advisory votes to approve the compensation of
our named executive officers as disclosed in our proxy statements pursuant to the SEC's compensation disclosure rules. By voting on this Proposal 3, our stockholders may indicate whether they would
prefer an advisory vote to approve named executive officer compensation once every one year (annual basis), two years (biennial basis), or three years (triennial basis), or abstain from voting on this
proposal.
We
have determined that an annual advisory vote to approve named executive officer compensation will allow our stockholders to provide timely, direct input on the executive compensation of our named
executive officers as disclosed in our proxy statement each year pursuant to the SEC's compensation disclosure rules. We believe that an annual advisory vote on executive compensation is consistent
with the Company's willingness to engage in on-going dialogue with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices. Accordingly, we
ask that our stockholders vote "FOR" an annual advisory vote on our executive compensation.
We
recognize that our stockholders may have different views as to what is the most appropriate approach for the Company, and therefore stockholders may cast a vote on the preferred frequency of an
advisory vote to approve our executive compensation by selecting the option of one year (annual), two years (biennial), three years (triennial) or abstain when voting in response to the resolution set
forth below at the Annual Meeting:
"RESOLVED,
that the option of every year (annual basis), two years (biennial basis) or three years (triennial basis) that receives the highest number of votes cast for this resolution will be
determined to be the preferred frequency of the Company's stockholders, on an advisory basis, with which the Company holds an advisory vote on the compensation of our named executive officers as
disclosed in our proxy statement pursuant to the Securities and Exchange Commission's compensation disclosure rules."
While
the vote is advisory in nature, which means that it is non-binding on us, our Compensation Committee values the opinions of our stockholders and will take into consideration the outcome of the
vote when considering the frequency of future advisory votes on our executive compensation.
OUR BOARD UNANIMOUSLY RECOMMENDS YOU VOTE "FOR" THE OPTION OF
ONCE EVERY YEAR AS THE FREQUENCY WITH WHICH OUR STOCKHOLDERS
WILL BE PROVIDED AN ADVISORY VOTE TO APPROVE OUR
NAMED EXECUTIVE
OFFICER COMPENSATION.
94
Table of Contents
EQUITY COMPENSATION PLANS
The following table summarizes information as of December 31, 2016 relating to our equity compensation plans pursuant to which grants
of stock options, deferred stock units, restricted stock grants or other rights to acquire shares may be granted from time to time.
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of
Securities to Be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights (a)
|
|
Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights (b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a)) (c)
|
|
|
|
Equity compensation plans approved by security holders(1)
|
|
46,639,266
|
|
$11.11(2)
|
|
82,901,482(3)
|
|
Equity compensation plans not approved by security holders(4)
|
|
—
|
|
$—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total
|
|
46,639,266
|
|
$11.11(2)
|
|
82,901,482(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts in columns (a) and (b) include outstanding options under our 2000, 2003 and 2011 LTIPs. Our 2000 LTIP expired on February 28, 2010 and our 2003 LTIP expired on June 1, 2011; however, awards
made under these plans still remain outstanding. The amount in column (a) also includes 19,947,612 shares awarded under our 2000, 2003 and 2011 LTIPs in the form of service-based DSUs, Company performance-based DSUs and restricted stock. Of such
amount, approximately 2,943,779 shares are issuable upon settlement of outstanding Company performance-based DSUs. Shares underlying the 2014, 2015 and 2016 TSR performance-based DSUs are earned over a three-year performance and service period. 2014
TSR performance-based DSUs have been included based on actual performance. The 2015 performance-based DSUs have been included assuming maximum achievement of the Company performance criteria and achievement of the individual service criteria of the
program (200% of the target units awarded). We have included the number of shares underlying the maximum number of units in column (a) because the Company's TSR performance during the two-year period from January 1, 2015 through
December 31, 2016 under the 2015 TSR PSP was at the maximum level of performance under the program. The 2016 TSR performance-based DSUs have been included assuming maximum achievement of the Company performance criteria and achievement of the
individual service criteria of the programs (200% of the target units awarded). We have included the number of shares underlying the maximum number of units in column (a) because the Company's TSR performance during the one-year period from
January 1, 2016 through December 31, 2016 under the 2016 TSR PSP was between the target and the maximum level of performance under the programs. Shares underlying the 2014, 2015 and 2016 FCF performance-based DSUs have been included at
101.8%, 108.8% and 114.2% of target, respectively, the actual number of units for which the performance criteria under the program have been satisfied. Such units remain subject to the individual service criteria under the program.
|
(2)
|
|
This number reflects the exclusion of 19,947,612 shares in the form of service-based DSUs, Company performance-based DSUs and restricted stock granted pursuant to our equity plans included in column (a). These awards
allow for the distribution of shares to the grant recipient upon vesting and do not have an associated exercise price. Accordingly, these awards are not reflected in the weighted-average exercise price.
|
(3)
|
|
This number reflects, as of December 31, 2016, the 67,879,031 shares available for issuance under our 2011 LTIP and 15,022,451 shares available for purchase by our employees under our GESOP, which are not
available for grant in any other form.
|
(4)
|
|
We have acquired a number of companies over the past several years. From time to time, we have assumed the acquired company's incentive plan(s), including the outstanding stock options and warrants, if any, granted
under those plan(s). No further stock options are outstanding under assumed plans and no additional stock options may be granted under the assumed plans beyond those assumed in connection with the acquisitions. Assumed stock options that terminate
prior to expiration are not available for re-grant.
|
95
Table of Contents
AUDIT COMMITTEE REPORT
The Audit Committee oversees our Company's financial reporting process on behalf of the Board of Directors and has other responsibilities as
set forth in the Audit Committee charter, which is available on our website at
www.bostonscientific.com
under the "
Investor
Relations
" section. Management has the primary responsibility for our Company's financial statements and reporting process, including the systems of internal controls.
Ernst & Young LLP (Ernst & Young), our independent registered public accounting firm for fiscal year 2016, is responsible for expressing an opinion on the conformity of our
Company's audited financial statements with generally accepted accounting principles and on our Company's internal control over financial reporting.
In
fulfilling its oversight responsibilities, the Audit Committee reviewed with management and Ernst & Young the audited financial statements included in the Boston Scientific Annual Report on
Form 10-K for the year ended December 31, 2016, including a discussion about the quality, not just the
acceptability, of our Company's accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements, and Ernst & Young's evaluation of
the Company's internal control over financial reporting.
The
Audit Committee also discussed with Ernst & Young the matters that are required to be discussed by Auditing Standard No. 16,
Communications with Audit
Committees
. Ernst & Young has also provided the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and the Audit Committee has discussed with
Ernst & Young that firm's independence. The Audit Committee has concluded that Ernst & Young's provision of audit and non-audit services to the Company and its affiliates is compatible
with Ernst & Young's independence.
The
Audit Committee further discussed with the Company's internal auditors and Ernst & Young the overall scope and plans for their respective audits. The Audit Committee meets at least
quarterly with the internal auditors and Ernst & Young, with and without management present, to discuss the results of their examinations, their evaluations of the Company's internal controls,
and the overall quality of the Company's financial reporting.
Based
on the reviews and discussions referred to above, the Audit Committee approved the inclusion of the audited financial statements in the Annual Report on Form 10-K for the year ended
December 31, 2016, which has been filed with the Securities and Exchange Commission. The Audit Committee has also approved the selection of Ernst & Young as the Company's independent
registered public accounting firm for fiscal year 2017.
This Audit Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Boston Scientific filing with the
SEC, except to the extent that Boston Scientific specifically incorporates this Report by reference into another Boston Scientific filing.
THE
AUDIT COMMITTEE
Charles
J. Dockendorff,
Chairman
Edward J. Ludwig
David J. Roux
John E. Sununu
Ellen M. Zane
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Table of Contents
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed Ernst & Young LLP as our independent registered public accounting firm for the
2017 fiscal year. The Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm (including
resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related
work. In making its determination regarding whether to appoint or retain a particular independent registered public accounting firm, the Audit Committee takes into account the views of management and
our internal auditors, and will take into account the vote of our stockholders with respect to the ratification of the selection of our independent registered public accounting firm.
Representatives
of Ernst & Young LLP are expected to attend the Annual Meeting and respond to questions and, if they desire, make a statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE 2017 FISCAL YEAR.
Principal Accountant Fees
The following table presents the aggregate fees billed for professional services rendered by Ernst & Young LLP for the fiscal
years ended December 31, 2015 and December 31, 2016.
|
|
|
|
|
|
Type of Fees
|
|
2015
|
|
2016
|
|
|
|
Audit Fees(1)
|
|
$9,911,000
|
|
$9,044,000
|
|
Audit-Related Fees(2)
|
|
1,108,000
|
|
1,548,000
|
|
Tax Fees(3)
|
|
306,000
|
|
230,000
|
|
All Other Fees(4)
|
|
2,000
|
|
2,000
|
|
|
|
|
|
|
|
Total
|
|
$11,327,000
|
|
$10,824,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit fees are fees for professional services rendered in connection with the audit of our consolidated financial statements (including an assessment of our internal control over financial reporting) included in
Item 8 of our Annual Reports filed on Form 10-K, reviews of our condensed consolidated financial statements included in our Quarterly Reports filed on Form 10-Q, statutory filings and registration statements. Certain audit fees were
incurred in connection with our 2015 and 2016 goodwill and other intangible asset impairment tests, acquisitions, system implementations and other accounting matters.
|
(2)
|
|
Audit-related fees are fees for services related to employee benefit plan audits, accounting consultation, and compliance with regulatory requirements.
|
(3)
|
|
Tax fees are for services related to tax compliance, tax planning, and tax advice. These services included international corporate tax return compliance, annual domestic tax return compliance for employee benefit
plans, foreign country tax planning with respect to global stock option and employee stock purchase programs and stock programs, assistance filing advanced pricing agreements with tax authorities, assistance related to foreign tax authority transfer
pricing inquiries, and domestic tax technical advice.
|
(4)
|
|
All other fees are fees for other assurance services not related to the audit and an online accounting research tool.
|
97
Table of Contents
Audit Committee's Pre-Approval Policy
It is the Audit Committee's policy to approve in advance the types and amounts of audit, audit-related, tax and any other services to be
provided by our independent registered public accounting firm. In situations where it is not possible to obtain full Audit Committee approval, the Audit Committee has delegated authority to the
Chairman of the Audit Committee to grant pre-approval of auditing, audit-related, tax and all other services. Any pre-approved decisions by the Chairman are required to be reviewed with the Audit
Committee at its next scheduled meeting. The Audit Committee approved all of Ernst & Young LLP's services for 2015 and 2016 and, in doing so, considered whether the provision of such
services is compatible with maintaining independence.
98
Table of Contents
STOCKHOLDER PROPOSALS AND COMPANY INFORMATION
In
accordance with Rule 14a-8 under the Exchange Act and the advance notice provisions of our By-Laws, stockholder proposals and director nominations for the 2018 Annual
Meeting of Stockholders must be received by our Secretary at our principal executive office on or before November 28, 2017. Any proposals or nominees received after this date will be considered
untimely under Rule 14a-8 under the Exchange Act and the advanced notice provisions of our By-Laws. Should you wish to submit a proposal or director nomination, have it addressed to our
Secretary at Boston Scientific Corporation, 300 Boston Scientific Way, Marlborough, Massachusetts 01752. In order to be considered for inclusion in next year's Proxy Statement, proposals must also
satisfy the other procedures set forth in Rule 14a-8 under the Exchange Act. Proposals that are submitted outside of Rule 14a-8, as well as director nominees, must also satisfy the
procedures set forth in the advance notice provision of our By-Laws.
|
Annual Report to Stockholders and Form 10-K
|
Our
2016 Annual Report to Stockholders, including financial statements for the fiscal year ended December 31, 2016, accompanies this Proxy Statement. The Annual Report is also
available on our website at
www.bostonscientific.com
under "
Financial Information
" in the
"
Investor Relations
" section. Copies of our 2016 Annual Report on Form 10-K, which is on file with the SEC, are available to any stockholder free
of charge who submits a request in writing to Investor Relations, Boston Scientific Corporation, 300 Boston Scientific Way, Marlborough, Massachusetts 01752, or by calling (508) 683-5670.
Copies of any exhibits to the Form 10-K are also available upon written request and payment of a fee covering our reasonable expenses in furnishing the exhibits.
|
Householding of Proxy Materials
|
Applicable
rules permit us and brokerage firms to send one Notice or Proxy Statement and Annual Report to multiple stockholders who share the same address unless we have received
instructions to the contrary from one or more of the stockholders. This practice is known as householding. If you hold your shares through a broker, you may have consented to reducing the number of
copies of materials delivered to your address. In the event that you wish to revoke a householding consent you previously provided to a broker, you must contact that broker to revoke your consent. If
you (i) are eligible for householding and you currently receive multiple copies of either our Notice or Proxy Statement and our Annual Report but you wish to receive only one copy of each of
these documents for your household or (ii) you currently receive only one set of these documents due to householding and wish to revoke your consent for future mailings, please contact
Broadridge Financial Solutions, Inc. by mail at Householding Department, Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York 11717 or by telephone at
1-800-542-1061.
If
you are currently subject to householding and wish to receive a separate Proxy Statement or Annual Report, you may find these materials on our website at
www.bostonscientific.com
under "
Financial Information
" in the "
Investor
Relations
" section. You may also request printed copies of our Notice or Proxy Statement and Annual Report free of charge by contacting Investor Relations, Boston Scientific
Corporation, 300 Boston Scientific Way, Marlborough, Massachusetts 01752, or by calling 508-683-5670. We will deliver promptly, upon written or oral request, a separate copy of the Notice, Proxy
Statement or Annual Report to a stockholder at a shared address to which a single copy of the documents was delivered.
99
Table of Contents
OTHER INFORMATION
|
Other Matters That May Come Before the Annual Meeting
|
We
do not know of any other matters that may be presented for consideration at the Annual Meeting. If any other business is properly presented for consideration before the Annual
Meeting, the persons named as proxies on the enclosed proxy card, or proxy voting instruction form, will vote as they deem in the best interests of the Company.
|
Solicitation of Proxies at the Annual Meeting
|
We
will pay the costs of this solicitation. Our directors, officers or other employees may solicit proxies on behalf of the Board primarily by mail and via the Internet, but
additional solicitations may be made in person, by electronic delivery, telephone, facsimile or other medium. No additional compensation will be paid to our directors, officers or other employees in
connection with this solicitation. We may enlist the assistance of brokerage houses, fiduciaries, custodians and other third parties in soliciting proxies. We will, upon request, reimburse brokerage
firms and other third parties for their reasonable expenses incurred for forwarding solicitation material to beneficial holders of our common stock. We have also retained Alliance Advisors, a proxy
solicitation firm, to assist in the solicitation of proxies, as need be, for a fee of approximately $10,500, plus reimbursement of expenses. All solicitation expenses, including costs of preparing,
assembling and mailing proxy materials, will be borne by us.
Information
on or connected to our website (or the website of any third party) referenced in this Proxy Statement is in addition to and not a part of or incorporated by reference
into this Proxy Statement. Such additional information speaks as of the date thereof and is not intended to be confirmed or updated by reference herein. Boston Scientific disclaims any liability or
responsibility for or endorsement of the information on or connected to the website of a third party.
100
Table of Contents
ANNEX A
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures Used as
Performance Metrics Under Certain of Our Short- and Long-Term Incentive Compensation Plans and Programs
The following is a reconciliation of cash provided by operating activities prepared in accordance with generally accepted accounting principles in the United
States (GAAP) to adjusted free cash flow as used in our 2016 Free Cash Flow Performance Share Program (2016 FCF PSP):
|
|
|
|
|
|
in millions
|
|
2016
|
|
|
|
|
|
Cash Provided by Operating Activities
|
|
$
|
972
|
|
|
Add: Proceeds on disposals of property, plant and equipment
|
|
|
29
|
|
|
Less: Purchases of property, plant and equipment
|
|
|
376
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
$
|
625
|
|
|
Adjustments:
|
|
|
|
|
|
Add: Acquisition-related contingent payments
|
|
|
57
|
|
|
Add: Restructuring payments
|
|
|
82
|
|
|
Add: Tax-related items
|
|
|
(74
|
)
|
|
Add: Legal settlements
|
|
|
896
|
|
|
Add: Other
|
|
|
21
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
|
|
$
|
1,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following is a reconciliation of net sales prepared in accordance with GAAP to net sales on an assumed standard constant currency basis (SFX net sales) as used in our 2016 Annual Bonus Plan:
|
|
|
|
|
|
|
|
|
|
|
2016 Sales
|
|
in millions
|
|
As Reported
Currency
Basis
|
|
Less:
Impact of
Foreign
Currency
|
|
Assumed
Standard
Constant
Currency
Basis
|
|
|
|
|
|
Interventional Cardiology
|
|
$2,281
|
|
$(243)
|
|
$2,524
|
|
|
Cardiac Rhythm Management
|
|
1,850
|
|
(144)
|
|
1,994
|
|
|
Endoscopy
|
|
1,440
|
|
(125)
|
|
1,565
|
|
|
Peripheral Interventions
|
|
1,011
|
|
(82)
|
|
1,093
|
|
|
Urology and Pelvic Health
|
|
1,005
|
|
(60)
|
|
1,065
|
|
|
Neuromodulation
|
|
556
|
|
(18)
|
|
574
|
|
|
Electrophysiology
|
|
243
|
|
(18)
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide Net Sales
|
|
$8,386
|
|
$(690)
|
|
$9,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A-1
Table of Contents
The
following is a reconciliation of earnings per share prepared in accordance with GAAP to adjusted earnings per share (adjusted EPS) as used in our 2016 Annual Bonus Plan:
|
|
|
|
|
|
|
2016
|
|
|
|
Earnings
Per
Diluted
Share
|
|
|
|
|
|
GAAP earnings per share
|
|
$0.25
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
Intangible asset impairment charges
|
|
0.01
|
|
|
Acquisition-related net charges
|
|
0.09
|
|
|
Restructuring and restructuring-related net charges
|
|
0.04
|
|
|
Litigation-related net charges
|
|
0.37
|
|
|
Amortization expense
|
|
0.35
|
|
|
|
|
|
|
|
Adjusted earnings per share
|
|
$1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures. These non-GAAP
financial measures are not prepared in accordance with GAAP. Management uses non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in our business,
to assess our performance relative to our competitors, to assess our performance relative to our internal financial and operating plans, to execute our capital allocation strategy and/or to establish
operational goals and forecasts that are used in allocating resources. In addition, management uses non-GAAP financial measures to further its understanding of the performance of our operating
segments.
To
describe the relationship between pay and performance, we disclose certain non-GAAP financial measures used as performance metrics under certain of our short- and long-term incentive compensation
plans and programs, including SFX net sales, adjusted EPS and adjusted free cash flow. These non-GAAP financial measures are not prepared in accordance with GAAP.
Adjusted
free cash flow as used in our 2016 FCF PSP excludes certain cash items included in cash flow from operating activities (the most-directly comparable GAAP financial measure) and includes
certain cash items not included in cash flow from operating activities as these items are highly variable period to period, difficult to predict and/or we believe are not indicative of cash flow from
operating activities. Accordingly, management excluded/included these cash items for purposes of reviewing our cash flow performance in calculating this non-GAAP financial measure under our 2016 FCF
PSP to facilitate an evaluation of our cash flow performance relative to our internal financial plan in accordance with the program.
SFX
net sales as used in our 2016 Annual Bonus Plan excludes the impact of changes in foreign currency exchange rates included in our net sales (the most directly comparable GAAP financial measure) as
the impact of changes in foreign currency exchange rates is highly variable period to period and difficult to predict. Accordingly, management excluded the impact of changes in foreign currency
exchange rates, through the use of a standard assumed constant currency rate, for purposes of reviewing our sales performance in calculating this non-GAAP financial measure under our 2016 Annual Bonus
Plan to facilitate an evaluation of our performance relative to our operating plan in accordance with the Annual Bonus Plan.
A-2
Table of Contents
Adjusted
EPS excludes certain items included in earnings per share (the most-directly comparable GAAP financial measures) as these items are highly variable period to period, difficult to predict
and/or we believe are not indicative of future performance. These amounts are excluded by management in assessing our performance, as well as from our operating segments' measures of profit and loss
used for assessing their performance. Accordingly, management excluded these items for purposes of reviewing our performance in calculating this non-GAAP financial measure under our 2016 Annual Bonus
Plan to facilitate an evaluation of our performance relative to our internal financial plan in accordance with the Annual Bonus Plan.
We
believe that presenting the non-GAAP financial measures that are used as performance metrics under certain of our short- and long-term incentive compensation plans and programs, in addition to the
corresponding GAAP financial measures, provides investors greater transparency to information relevant to the relationship between pay and performance and allows investors to see our results "through
the eyes" of management.
A-3
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 8, 2017, the day before the meeting. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. BOSTON SCIENTIFIC CORPORATION 300 BOSTON SCIENTIFIC WAY MARLBOROUGH, MASSACHUSETTS 01752 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 8, 2017, the day before the meeting. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E16509-P85440 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. BOSTON SCIENTIFIC CORPORATION The Board of Directors recommends a vote "For" all Director Nominees. For Withhold ! ! ! ! ! ! ! ! ! ! 1. Proposal to elect ten Director Nominees: ! ! ! ! ! ! ! ! ! ! ! Yes 1a. Nelda J. Connors The Board of Directors recommends a vote "For" Proposal 2. For Against Abstain 1b. Charles J. Dockendorff ! 2 Years ! 3 Years ! Abstain 1c. Yoshiaki Fujimori 2. To approve, on a non-binding, advisory basis, named executive officer compensation. 1d. Donna A. James The Board of Directors recommends a vote 1 Year of "1 Year" on Proposal 3. ! ! ! ! 1e. Edward J. Ludwig 3. To approve, on a non-binding, advisory basis, the frequency of future named executive officer compensation advisory votes. 1f. Stephen P. MacMillan The Board of Directors recommends a vote "For" Proposal 4. 1g. Michael F. Mahoney For Against Abstain ! ! ! 1h. David J. Roux 4. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2017 fiscal year. 1i. John E. Sununu NOTE: Such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. 1j. Ellen M. Zane ! No MARK HERE IF YOU PLAN TO ATTEND THE MEETING Sign exactly as your name appears on the Proxy. If the shares are registered in the names of two or more persons, each person should sign. Executors, administrators, trustees, partners, custodians, guardians, attorneys and corporate officers, please add your full title(s). Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date V.1.1
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. E16510-P85440 PROXY BOSTON SCIENTIFIC CORPORATION Proxy for Annual Meeting of Stockholders on May 9, 2017 This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints TIMOTHY A. PRATT, VANCE R. BROWN and JEFF MANN, and each of them acting solely, as proxies, with full power of substitution and with all powers the undersigned would possess if personally present, to represent and vote, as designated hereon, all of the shares of common stock of Boston Scientific Corporation (the "Company"), par value $.01 per share, and if applicable, hereby directs the trustees and fiduciaries of the employee benefit plans in which the undersigned participates to vote all of the shares of common stock allocated to the account of the undersigned, which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Company's Corporate Headquarters located at 300 Boston Scientific Way, Marlborough, MA 01752 on Tuesday, May 9, 2017 at 8:00 A.M. (Eastern Time), and any adjournment or postponement of the meeting. THE UNDERSIGNED HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN AND ACKNOWLEDGES RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS, "FOR" PROPOSALS 2 AND 4, "1 YEAR" ON PROPOSAL 3, AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF. (Please sign and date on reverse side and return promptly in the enclosed envelope) V.1.1
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