|
Item 11.
|
EXECUTIVE COMPENSATION
|
Compensation Discussion and
Analysis
This Compensation Discussion and Analysis (the ‘‘CD&A’’) describes our executive compensation program for the following
named executive officers (‘‘NEOs’’):
|
|
|
|
|
NEO
|
|
TITLE
|
|
Kent J. Thiry
|
|
Chairman and Chief Executive Officer, DaVita HealthCare Partners, and Chief Executive Officer, HealthCare Partners
|
|
Javier J. Rodriguez
|
|
Chief Executive Officer, Kidney Care
|
|
Michael D. Staffieri
|
|
Chief Operating Officer, Kidney Care
|
|
Dennis L. Kogod
|
|
President, HealthCare Partners, and Chief Executive Officer, International
|
|
James K. Hilger
|
|
Interim Chief Financial Officer (effective March 30, 2015) and Chief Accounting Officer
|
|
Dr. Garry E. Menzel
|
|
Chief Financial Officer through March 30, 2015
1
|
|
1
|
Dr. Menzel served as the Company’s Chief Financial Officer from November 7, 2013 to March 30, 2015.
|
Executive Summary
Our Business
The Company consists of two major divisions, Kidney Care and HealthCare Partners (HCP). Our Kidney Care division is comprised of our U.S. dialysis and related lab
services, our ancillary services and strategic initiatives, including our international operations, and our corporate administrative support.
Our largest line of
business is our U.S. dialysis and related lab services business, which is a leading provider of kidney dialysis services in the United States. As of December 31, 2015, we operated or provided administrative services through a network of 2,251
outpatient dialysis centers in the U.S., serving a total of approximately 180,000 patients in 46 states and
the District of Columbia. We also provide acute inpatient dialysis services in approximately 900 hospitals. In 2015, our overall network of U.S. outpatient dialysis centers increased by
72 centers primarily as a result of opening new centers and acquisitions. In addition, the overall number of patients that we serve in the U.S. increased by approximately 4.1% from 2014.
Our other major line of business is HCP, a patient-and physician-focused integrated health care delivery and management company with over two decades of experience
providing coordinated, outcomes-based medical care in a cost-effective manner. Through capitation contracts with some of the nation’s leading health plans, HCP had approximately 807,400 members under its care in southern California,
8
Colorado, central and south Florida, southern Nevada, central New Mexico and central Arizona as of December 31, 2015. In addition to its managed care business, HCP provides care in all of
its markets to over 612,200 patients whose health coverage is structured on a fee-for-service basis, including patients enrolled through traditional Medicare and Medicaid programs, preferred provider organizations and other third party payors.
The HCP patients as well as the patients of HCP’s associated physicians, physician groups and independent practice associations benefit from an integrated approach
to medical care that places the physician at the center of patient care. As of December 31, 2015, HCP delivered services to its members via a network of 547 associated group full-time primary care physicians, over 2,900 associated group and
other network primary care physicians, 240 network hospitals, and several thousand associated group and network specialists. Together with hundreds of case managers, registered nurses and other care coordinators, these medical professionals utilize
a comprehensive information technology system, sophisticated risk management techniques and clinical protocols to provide high-quality, cost-effective care to HCP’s members.
Our executive compensation program is best understood within the context of the business environment in which we currently operate. This includes increasing regulation
by numerous federal, state and local government entities, reductions in reimbursements under federal and state healthcare programs, including Medicare and Medicaid, continued downward pressure on our commercial payment rates, and the continued
integration of HCP into the enterprise.
Our Executive Compensation Structure
Our executive compensation program is designed to align our executive compensation structure with our strategic and financial objectives in creating stockholder value.
Our executive compensation structure is comprised of both short- and long-term incentives, which include challenging performance goals that we
believe are aligned with our strategic objectives to provide high quality care to our patients, increase profitability, maximize growth and increase stockholder value.
The 2015 short- and long-term criteria, described in further detail starting on page 14, emphasized our objectives as a Company, and our resulting compensation
structure incorporated incentives tied to clinical care, profit and growth.
We will continue our ongoing engagement with our stockholders on corporate governance
issues that are of interest to them or that our Board might be evaluating. The Compensation Committee will consider the feedback we receive from our stockholders in making future compensation decisions for our NEOs. We also believe it is important
to maintain consistency with our compensation philosophy and approach, described in further detail below in the section entitled ‘‘Our Compensation Design and Philosophy,’’ to continue to incentivize management toward short and
long-term financial and operating goals, which are intended to create long-term stockholder value.
Consideration of Say-on-Pay Results and
Pay for Performance
In June 2015, approximately 96% of the votes cast by stockholders at the annual meeting were voted in favor of the compensation
program applicable to our NEOs, as described in the 2015 proxy statement. We believe the votes reflect support for our executive compensation program, particularly the scope and effectiveness of the changes we initially adopted in March 2014, and
strong pay for performance alignment. We reached out to our largest institutional stockholders in late 2015 to discuss our existing compensation structure. During these discussions, stockholders expressed general satisfaction with our executive
compensation program, and emphasized continued pay-for-performance. While we did not modify our executive compensation program in response to the prior year say-on-pay vote, based on the feedback we received from our stockholders, we refined our
short-term incentive and long-term
incentive programs to tailor the programs to each
9
NEO by adding performance measures reflective of the particular NEO’s business division.
Our Compensation Design and Philosophy
Our ability to recruit and retain highly qualified executives is essential to our long-term
success. An important goal in the design of our executive compensation program, in addition to clinical differentiation and creating stockholder value, is to attract and retain outstanding leaders who possess the skills and talent necessary to
achieve our business goals and objectives, and who embody our mission and values. We believe it is in the best interests of our stockholders to attract and retain talented leaders, and we strive to do so by providing compensation that we believe is
reasonable, provides the best value for our stockholders, aligns incentives, and is sufficient to achieve our recruitment and retention objectives.
Our ultimate
objective is to continue to create long-term stockholder value by being a leader in clinical differentiation, generating strong overall revenue growth, increasing market share, improving clinical outcomes, growing operating margins, increasing
Medicare Advantage enrollment, and delivering consistently strong total stockholder return.
In order to achieve this objective, we have established an executive
compensation program that we believe:
|
|
(i)
|
rewards superior clinical outcomes;
|
|
|
(ii)
|
rewards strong Company performance;
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|
|
(iii)
|
aligns our executives’ interests with our stockholders’ interests; and
|
|
|
(iv)
|
is competitive within the health care services, diagnostics, managed care and solutions markets so that we can attract and retain outstanding executives.
|
2015 Financial and Performance Highlights
Our overall financial and operating performance was strong for 2015 despite the challenges we faced with Medicare reimbursement and a large increase in pharmaceutical
costs in the Kidney Care division and Medicare Advantage reimbursement in the HCP division. We believe that the NEOs were instrumental in achieving these results, including the following major achievements and financial operating performance
indicators in 2015:
|
|
•
|
|
improved clinical outcomes in our U.S. dialysis operations, including second year in a row as leader of the Five-Star Quality Rating System created by the Centers for Medicare and Medicaid Services;
|
|
|
•
|
|
consolidated net revenue growth of 7.7%;
|
|
|
•
|
|
net revenue growth of 5.2% related to our U.S. dialysis segment operations as a result of an increase in revenue per treatment of $6;
|
|
|
•
|
|
an increase in HCP’s net revenue of 9.6% related to an increase of its fee-for-service business and senior capitated revenue;
|
|
|
•
|
|
an increase in other ancillary services and strategic initiatives net revenue of 21.3%;
|
|
|
•
|
|
U.S. dialysis treatment growth of 4.1%;
|
|
|
•
|
|
normalized non-acquired U.S. dialysis treatment growth of 3.9%;
|
|
|
•
|
|
net addition of 72 U.S. dialysis centers and 27 international dialysis centers;
|
|
|
•
|
|
strong operating cash flows of $1.557 billion, which have been reduced by approximately $304 million of after-tax payments made in connection with the settlement of the Vainer private civil suit; and
|
|
|
•
|
|
a $1.5 billion financing to lower interest rate, extend maturities and enhance liquidity.
|
The Company’s TSR from
the first quarter of 2000 (our CEO’s first full quarter with the Company) through the fourth quarter of 2015 was approximately 3,298%, putting the Company in the top 10 of all current S&P 500 companies over that period.
We believe our U.S. dialysis and related lab services clinical outcomes compare favorably
10
with other dialysis providers in the United States and generally exceed the dialysis outcome quality indicators of the National Kidney Foundation. Our clinical outcomes mean better quality of
life for approximately 180,000 dialysis patients we serve.
Linking 2015 NEO Compensation to Performance
Our compensation program for our NEOs emphasizes compensation based on performance and is designed to align our NEOs’ interests with those of our stockholders, and
to permit individuals who have performed well in creating and protecting significant long-term value for the Company and its stockholders to share in the value generated. To this end, our compensation program emphasizes variable compensation in the
form of cash and equity awards over fixed compensation.
When establishing the compensation for our NEOs for 2015, the Compensation Committee gave significant
weight to our sustained record of strong operating performance as highlighted above, our improvement in strategic positioning and our continued strong clinical performance, particularly in light of ongoing general economic volatility and significant
industry regulatory challenges and uncertainty. In 2015, we continued to lead industry public policy efforts, achieving favorable outcomes for the industry and the Company. The Compensation Committee balanced its evaluation of the Company’s
financial and clinical performance by also considering the Company’s implementation of the Corporate Integrity Agreement with the United States Department of Health and Human Services, Office of Inspector General, healthcare
reform, changes to government reimbursement policies, other significant healthcare regulatory changes, as well as the government investigations affecting the Company. The Compensation Committee
also took into account Kidney Care’s strong performance and HCP’s underperformance. HCP has experienced declines in its financial performance, thereby partially offsetting Kidney Care’s strong financial performance. HCP’s
underperformance is primarily driven by government reimbursement cuts and our inability to mitigate those cuts in their entirety. When establishing 2015 compensation for our NEOs, the Compensation Committee considered these and other factors in the
context of evaluating the impact that individual NEO performance had in achieving these results and responding to these challenges. The following table shows the 2015 total direct compensation (base salary, annual performance-based cash award and
long-term incentive award) determined by the Compensation Committee for each NEO who remained an executive officer on December 31, 2015. This table is not a substitute for the information disclosed in the 2015 Summary Compensation Table and
related footnotes, which begin on page 30.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base
Salary
1
|
|
|
Annual
Cash
Award
|
|
|
Annual LTI
Award
2
|
|
|
2015
Supplemental
STI Program
|
|
|
Kent J. Thiry
|
|
|
$1,200,000
|
|
|
|
$2,225,186
|
|
|
|
$7,142,616
|
|
|
|
—
|
|
|
Javier J. Rodriguez
|
|
|
$800,000
|
|
|
|
$1,700,000
|
|
|
|
$6,407,089
|
|
|
|
$2,363,661
|
|
|
Michael D. Staffieri
|
|
|
$583,270
|
|
|
|
$1,020,000
|
|
|
|
$3,674,047
|
|
|
|
$1,240,922
|
|
|
Dennis L. Kogod
|
|
|
$800,000
|
|
|
|
$200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
James K. Hilger
|
|
|
$366,635
|
|
|
|
$195,000
|
|
|
|
$489,141
|
|
|
|
—
|
|
|
1
|
The amounts reported here reflect the base salary amounts actually paid during the 2015 fiscal year.
|
|
2
|
The amounts reported under the Annual LTI Award column consist of the grant date fair value of all 2015 equity awards (both SSARs and PSUs) as well as the target value of the 2015 performance-based cash awards.
|
Given the emphasis on variable compensation, the
Compensation Committee determined to limit increases to fixed compensation amounts in 2015 such that the base salaries of our NEOs were retained at 2014 levels, other than Mr. Staffieri’s base salary, which was increased in 2015 pursuant
to the Compensation Committee’s review of his performance as the Chief Operating Officer of Kidney Care and consideration of comparative market data provided by the committee’s outside compensation consultant, Compensia, and
Mr. Hilger’s base salary, which was increased in 2015 in connection with
11
his expanded role as the Interim Chief Financial Officer. The following pie charts illustrate the allocation of the total direct compensation that the NEOs above earned or, in the case of the
long-term incentives, were granted with respect to 2015:
The Compensation Committee believes that the above compensation structure struck an appropriate balance by promoting long-term
stockholder value creation without motivating or rewarding excessive risk-taking.
Stockholder Interest Alignment
Our executive compensation is designed to focus on pay-for-performance and to align the interests of our executives with the long-term interests of our stockholders.
Our incentive criteria focus on performance-based compensation that aligns with our strategic, operational and financial objectives in creating stockholder value. Our CEO receives all long-term compensation in the form of equity compensation, while
other executives receive long-term compensation in the form of both equity compensation and cash-based incentive compensation. Our long-term equity compensation is comprised of stock-settled stock appreciation rights (‘‘SSARs’’)
and performance stock units (‘‘PSUs’’). At least 50% of our CEO’s equity awards and at least 25% of the other executive officers’ awards are in the form of
PSUs. To create close alignment with stockholder value creation, relative TSR was selected as the performance criteria for 50% of the PSUs granted to each of our participating NEOs in 2015. The
equity awards are further subject to time vesting — equity awards granted in 2015 vest 50% on each of the third and fourth anniversaries of the grant date. The combination of performance-based metrics and extended vesting schedules is
intended to assist in the long-term retention of executives and further the alignment of the interests of our executives with the long-term interests of our stockholders. A key component of our executive compensation philosophy and design is that
stock-based compensation creates an incentive for the executives to contribute to the overall success of the Company and to take actions that result in the creation of long-term stockholder value.
12
Key Features of Our Executive Compensation Program
|
|
|
|
|
We Do
|
|
We Do Not
|
|
Have double trigger change of control provisions for acceleration of equity award vesting
|
|
Provide excise tax gross-ups on change of control payments for new or materially amended agreements entered into since 2008
1
|
|
Limit severance payments to not more than three times base salary and bonus
|
|
Re-price or replace underwater stock options or stock appreciation rights
|
|
Provide for multi-year vesting periods for equity award grants to reinforce a culture in which the Company’s long-term success takes precedence over volatile short-term results
|
|
Have our Compensation Committee’s independent compensation consultant provide any other services to the Company
|
|
Have our Compensation Committee use an independent compensation consultant
|
|
Have a defined benefit pension plan
|
|
Have a clawback policy that permits recovery of bonuses, incentive and equity-based compensation from executives
|
|
Allow hedging of the Company’s securities by directors, executives and other employees
|
|
Seek stockholder feedback on our executive compensation program
|
|
Allow directors, executives and other employees to pledge the Company’s securities as collateral for a loan
|
|
Apply meaningful stock ownership guidelines to strengthen alignment of executives’ and stockholders’ interests
|
|
|
|
1
|
We have not provided for tax gross-ups in any employment agreements or amended employment agreements entered into after July 2008. Our CEO has the only remaining legacy agreement that contains a tax gross-up; however,
no gross-up would have been payable under his agreement in any of the prior five years if a change of control had occurred. See ‘‘Potential Payments Upon Termination or Change of Control’’ on pages 36 to 43.
|
Elements of Compensation
The elements of direct compensation offered under our executive compensation program include both fixed (base salaries)
and variable (annual and long-term incentives) compensation.
Base Salary
We compensate our executives with a base salary because we believe it is appropriate that some portion of compensation be provided in a form that is liquid and assured.
Base salaries are initially established at levels necessary to enable us to attract and retain highly qualified executives with reference to comparative pay within the Company for executives with similar levels of responsibility, the prior
experience of the executive, and expected contributions to Company performance.
We do not guarantee salary adjustments on an annual basis. During March of each year, the Compensation Committee considers
adjustments to base salary as part of the overall annual compensation assessment for our executives. Our CEO typically provides the Compensation Committee with his recommendation regarding merit-based increases for each executive officer other than
himself. The CEO’s base salary is recommended by the Compensation Committee with input from Compensia, the Compensation Committee’s independent compensation consultant, and Compensia’s analysis of CEO compensation of our comparator
peer group, and approved by the independent members of the Board of Directors.
13
Consistent with our emphasis on performance-based compensation and the Compensation Committee’s decision to limit
increases to fixed compensation amounts in 2015, the Compensation Committee maintained the base salaries of Mr. Thiry, Mr. Rodriguez and Mr. Kogod at 2014 levels. Mr. Staffieri’s base salary was increased in 2015 pursuant to
the Compensation Committee’s review of his performance as Chief Operating Officer of the Company’s Kidney Care division and consideration of comparative market data provided by the Compensation Committee’s outside compensation
consultant, Compensia. Mr. Hilger’s base salary was also increased in 2015 in connection with the increasing accounting complexity of the Company’s business operations and transactions. The base salaries for 2014 and 2015 for our NEOs
who remained executive officers on December 31, 2015 are shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2014 Base
Salary
1
|
|
|
2015 Base
Salary
2
|
|
|
Kent J. Thiry
|
|
|
$1,200,000
|
|
|
|
$1,200,000
|
|
|
Javier J. Rodriguez
|
|
|
$800,000
|
|
|
|
$800,000
|
|
|
Michael D. Staffieri
|
|
|
$550,000
|
|
|
|
$600,000
|
|
|
Dennis L. Kogod
|
|
|
$800,000
|
|
|
|
$800,000
|
|
|
James K. Hilger
|
|
|
$350,000
|
|
|
|
$375,000
|
|
|
1
|
The amounts reported reflect the annual base salaries approved in March 2014.
|
|
2
|
The amounts reported reflect the annual base salaries approved in April 2015.
|
Short-Term
Incentive Program (STI Program) for 2015
The STI program awards in 2015 were granted pursuant to the DaVita HealthCare Partners Inc. 2011 Incentive
Award Plan, as amended and restated (the ‘‘2011 Plan’’), which permits the
issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock units, equity and cash-based performance awards, as well as other forms of equity
awards.
Under the STI program in 2015, each NEO was eligible for a maximum annual performance-based bonus potential calculated as a multiple of the annual salary
approved in March 2015 by the Compensation Committee, and with respect to the CEO, the Board, as summarized in the table below. Since Mr. Hilger is the Interim Chief Financial Officer, he is not subject to the terms of the 2015 STI program.
Instead, for 2015, Mr. Hilger received a discretionary cash bonus equal to $195,000 in recognition of his performance as Interim Chief Financial Officer during 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2015 Base
Salary
|
|
|
Multiple of
2015 Base
Salary
|
|
|
2015 STI
Maximum
Bonus
Potential
|
|
|
Kent J. Thiry
|
|
|
$1,200,000
|
|
|
|
3.0x
|
|
|
|
$3,600,000
|
|
|
Javier J. Rodriguez
|
|
|
$800,000
|
|
|
|
2.5x
|
|
|
|
$2,000,000
|
|
|
Michael D. Staffieri
|
|
|
$600,000
|
|
|
|
2.0x
|
|
|
|
$1,200,000
|
|
|
Dennis L. Kogod
|
|
|
$800,000
|
|
|
|
2.5x
|
|
|
|
$2,000,000
|
|
Each performance metric under our STI program was assigned a relative weight to determine the percentage of the maximum bonus potential
for which each executive was eligible. The percentage of the maximum bonus potential was determined based on results achieved in 2015, and the Compensation Committee could then exercise negative discretion to reduce the annual bonus payment based on
changed or special circumstances, or factors that may not have been anticipated when the criteria range for the metrics was established.
14
The tables below summarize the relative weights, criteria range, maximum performance based eligibility range, actual
performance and maximum eligible payout achieved for each of the 2015 STI performance metrics, as well as the actual payout percentage and amount for each NEO who remained an executive officer as of December 31, 2015, other than
Mr. Hilger.
Kent J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Performance Based
Eligibility Range
|
|
|
|
|
|
Maximum Eligible
Payout Achieved
|
|
|
2015 STI Performance Metrics
|
|
Weight
|
|
|
Criteria Range
|
|
(%)
|
|
|
($)
|
|
|
Actual
Performance
|
|
|
(%)
|
|
|
($)
|
|
|
Enterprise Adjusted Operating Income
|
|
|
50
|
%
|
|
$1,788 million to
$1,900 million
1
|
|
|
25% - 100%
|
|
|
|
$450,000 - $1,800,000
|
|
|
|
$1,898 million
|
|
|
|
75
|
%
|
|
|
$1,350,000
|
|
|
HCP Adjusted Operating Income
|
|
|
20
|
%
|
|
$238 million to $275 million
1
|
|
|
25% - 100%
|
|
|
|
$180,00 - $720,000
|
|
|
|
$240 million
|
|
|
|
25
|
%
|
|
|
$180,000
|
|
|
Kidney Care Catheter Rate
|
|
|
5
|
%
|
|
13.35% to 13.15% (lower is better) and 15% better than industry
|
|
|
50% - 100%
|
|
|
|
$90,000 - $180,000
|
|
|
|
13.06%
|
|
|
|
100
|
%
|
|
|
$180,000
|
|
|
Kidney Care Non Acquired Growth
|
|
|
10
|
%
|
|
4.3% to 4.9%
2
|
|
|
50% - 100%
|
|
|
|
$180,000 - $360,000
|
|
|
|
3.9%
|
|
|
|
0
|
%
|
|
|
$0
|
|
|
HCP Star Metrics
|
|
|
5
|
%
|
|
Customized index range
|
|
|
30% - 100%
|
|
|
|
$54,00 0 - $180,000
|
|
|
|
Internal index value
|
|
|
|
86.2
|
%
|
|
|
$155,186
|
|
|
HCP Medicare Advantage Enrollment Growth
|
|
|
10
|
%
|
|
5% to 20% above industry
|
|
|
25% - 100%
|
|
|
|
$90,000 - $360,000
|
|
|
|
>20%
|
|
|
|
100
|
%
|
|
|
$360,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
|
61.8
|
%
|
|
|
$2,225,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
|
61.8
|
%
|
|
|
$2,225,186
|
|
|
1
|
The percentage of maximum bonus for which Mr. Thiry is eligible is determined based on the top 75% of the guidance ranges for fiscal year 2015 provided to our investors with our fourth quarter 2014 earnings
release, the latest guidance ranges available to the Compensation Committee at the time it approved this performance condition.
|
|
2
|
For relative context, overall industry growth in 2013 (the latest information available as of 3/31/16) was 3.5% and the compound annual growth rate from 2009 to 2013 was 3.6%. The foregoing data are based on the 2015
Annual Data Report, United States Renal Data System, Table D.1 ‘‘Percentages and counts of reported ESRD patients: by treatment modality.’’ This includes the results of our Company, without which the industry growth rates would
be lower.
|
Javier J. Rodriguez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Performance Based
Eligibility Range
|
|
|
|
|
|
Maximum Eligible
Payout Achieved
|
|
2015 STI Performance
Metrics
|
|
Weight
|
|
|
Criteria Range
|
|
(%)
|
|
|
($)
|
|
|
Actual
Performance
|
|
|
(%)
|
|
|
($)
|
|
|
Core Kidney Care Adjusted Operating Income
|
|
|
70
|
%
|
|
$1,550 million to
$1,625 million
1
|
|
|
25% - 100%
|
|
|
|
$350,000 - $1,400,000
|
|
|
|
$1,658 million
|
1
|
|
|
100
|
%
|
|
|
$1,400,000
|
|
|
Kidney Care Catheter Rate
|
|
|
15
|
%
|
|
13.35% to 13.15% (lower is better) and 15% better than industry
|
|
|
50% - 100%
|
|
|
|
$150,000 - $300,000
|
|
|
|
13.06
|
%
|
|
|
100
|
%
|
|
|
$300,000
|
|
|
Kidney Care Non Acquired Growth
|
|
|
15
|
%
|
|
4.3% to 4.9%
2
|
|
|
50% - 100%
|
|
|
|
$150,000 - $300,000
|
|
|
|
3.9
|
%
|
|
|
0
|
%
|
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
|
85
|
%
|
|
|
$1,700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
|
85
|
%
|
|
|
$1,700,000
|
|
|
1
|
Criteria range represents the top 75% of the public guidance range for fiscal year 2015 for our Kidney Care division at the time this performance metric was developed. Core Kidney Care Adjusted Operating Income is a
subset of Kidney Care Adjusted Operating Income that excludes certain non-core business units. Actual Performance represents actual Adjusted Operating Income for our Kidney Care division.
|
|
2
|
For relative context, overall industry growth in 2013 (the latest information available as of 3/31/16) was 3.5% and the compound annual growth rate from 2009 to 2013 was 3.6%. The foregoing data are based on the 2015
Annual Data Report, United States Renal Data System, Table D.1 ‘‘Percentages and counts of reported ESRD patients: by treatment modality.’’ This includes the results of our Company, without which the industry growth rates would
be lower.
|
15
Michael D. Staffieri
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Performance Based
Eligibility Range
|
|
|
|
|
|
Maximum Eligible
Payout Achieved
|
|
2015 STI Performance
Metrics
|
|
Weight
|
|
|
Criteria Range
|
|
(%)
|
|
|
($)
|
|
|
Actual
Performance
|
|
|
(%)
|
|
|
($)
|
|
|
Core Kidney Care Adjusted Operating Income
|
|
|
70
|
%
|
|
$1,550 million to
$1,625 million
1
|
|
|
25% -100%
|
|
|
|
$210,000 - $840,000
|
|
|
|
$1,658 million
|
1
|
|
|
100
|
%
|
|
|
$840,000
|
|
|
Kidney Care Catheter Rate
|
|
|
15
|
%
|
|
13.35% to 13.15% (lower is better) and 15% better than industry
|
|
|
50% -100%
|
|
|
|
$90,000 - $180,000
|
|
|
|
13.06%
|
|
|
|
100
|
%
|
|
|
$180,000
|
|
|
Kidney Care Non Acquired Growth
|
|
|
15
|
%
|
|
4.3% to 4.9%
2
|
|
|
50% - 100%
|
|
|
|
$90,000 - $180,000
|
|
|
|
3.9%
|
|
|
|
0
|
%
|
|
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
|
85
|
%
|
|
|
$1,020,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
|
85
|
%
|
|
|
$1,020,000
|
|
|
1
|
Criteria range represents the top 75% of the public guidance range for fiscal year 2015 for our Kidney Care division at the time this performance metric was developed. Core Kidney Care Adjusted Operating Income is a
subset of Kidney Care Adjusted Operating Income that excludes certain non-core business units. Actual Performance represents actual Adjusted Operating Income for our Kidney Care division.
|
|
2
|
For relative context, overall industry growth in 2013 (the latest information available as of 3/31/16) was 3.5% and the compound annual growth rate from 2009 to 2013 was 3.6%. The foregoing data are based on the 2015
Annual Data Report, United States Renal Data System, Table D.1 ‘‘Percentages and counts of reported ESRD patients: by treatment modality.’’ This includes the results of our Company, without which the industry growth rates would
be lower.
|
Dennis L. Kogod
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Performance
Based Eligibility Range
|
|
|
|
|
|
Maximum Eligible
Payout Achieved
|
|
2015 STI Performance
Metrics
|
|
Weight
|
|
|
Criteria Range
|
|
(%)
|
|
|
($)
|
|
|
Actual
Performance
|
|
|
(%)
|
|
|
($ )
|
|
|
HCP Adjusted Operating Income
|
|
|
30
|
%
|
|
$238 million to $275 million
1
|
|
|
25% - 100%
|
|
|
|
$150,000 - $600,000
|
|
|
|
$240 million
|
|
|
|
25%
|
|
|
|
$150,000
|
|
|
Specified HCP Market Adjusted Operating Income
|
|
|
30
|
%
|
|
Range related to internal
budget
|
|
|
25% - 100%
|
|
|
|
$150,000 - $600,000
|
|
|
|
Below
budget
|
|
|
|
0%
|
|
|
|
$0
|
|
|
International Adjusted Operating Income
|
|
|
20
|
%
|
|
Range related to internal
budget
|
|
|
25% - 100%
|
|
|
|
$100,000 - $400,000
|
|
|
|
Below
budget
|
|
|
|
0%
|
|
|
|
$0
|
|
|
HCP Star Metrics
|
|
|
20
|
%
|
|
Customized index range
|
|
|
30% - 100%
|
|
|
|
$120,000 - $400,000
|
|
|
|
Internal
index value
|
|
|
|
86.2%
|
|
|
|
$344,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Eligible STI Bonus
|
|
|
|
24.7%
|
|
|
|
$494,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Actual STI Bonus
|
|
|
|
10%
|
|
|
|
$200,000
|
2
|
|
1
|
The percentage of maximum bonus for which Mr. Kogod is eligible is determined based on the top 75% of the guidance range for fiscal year 2015 for our HealthCare Partners division provided to our investors with our
fourth quarter 2014 earnings release, the latest guidance range available to the Compensation Committee at the time it approved this performance condition.
|
|
2
|
The Compensation Committee exercised negative discretion to reduce Mr. Kogod’s STI bonus to $200,000 as a result of underperformance in our HealthCare Partners division and our international business.
|
Supplemental STI Program for 2015
The 2015 Supplemental STI Program is a one-time program created under the 2011 Plan to provide our non-CEO NEOs cash
incentive award opportunities that are: (1) tied to 2015 operating results in the dialysis and related lab services operating segment and (2) comparable to that of other non-NEO executives. Mr. Thiry was not eligible to participate in
the 2015 Supplemental STI Program because his LTI awards are all equity-based.
The cash-based LTI Program the Company created in early 2013 contemplated a payout of at least 50% of target to the
program participants if the 2015 adjusted operating income for the dialysis and related lab services operating segment exceeded $1,597 million, and a payout of at least 150% if the 2015 adjusted operating income was at least or exceeded $1,742
million.
16
Under the 2013 cash-based LTI Program, the maximum payout an NEO could receive was 150%, whereas other non-NEO executives
could receive additional amounts by participating in a funding pool, the size of which was a function of 2015 adjusted operating income for the dialysis and related lab services operating segment in excess of $1,742 million. The reason for this
restriction on NEOs was that any payout beyond 150% under the program was to be based on a retrospective non-formulaic assessment of each individual participant of the program, and payment based on such a retrospective non-formulaic assessment for
NEOs would not be tax-deductible to the Company.
When it became clear that the Kidney Care NEOs were the primary drivers of the 2015 adjusted operating income for
the dialysis and related lab services operating segment, the Compensation Committee implemented the 2015 Supplemental STI Program to give the Kidney Care NEOs an opportunity to earn additional compensation comparable to non-NEO executives. Each NEO
was eligible for an incremental 0% to 250% payout (in addition to the 150% formulaically earned under the 2013 cash-based LTI Program) to the extent the 2015 adjusted operating income for the dialysis and related lab services operating segment
exceeded $1,742 million (the threshold for 150% payout under the 2013 cash-based LTI Program). To be eligible for the maximum 250% payout under the 2015 Supplemental STI Program, the 2015 adjusted operating income for the dialysis and related lab
services operating segment would have to be at least $2,143 million. Since the 2015 adjusted operating income for the dialysis and related lab services operating segment was $1,857 million, the NEOs were eligible for an incremental 72% payout.
Specifically, Messrs. Rodriguez and Kogod each had a target under the 2013 cash-based LTI Program of $3,300,000 and earned 150%, or $4,950,000, based on the 2015 adjusted operating income for the dialysis and related lab services operating segment
exceeding the threshold for 150% payout, payable 50% in 2016 and 50% in 2017. In addition, each was eligible for an incremental 72%, or $2,363,661, under the 2015 Supplemental STI Program. Similarly, Mr. Staffieri had a target under the 2013
cash-
based LTI Program of $1,732,500 and earned 150%, or $2,598,750, payable 50% in 2016 and 50% in 2017. In addition, he was eligible for an incremental 72%, or $1,240,922 under the 2015 Supplemental
STI Program. Messrs. Rodriguez and Staffieri received the maximum eligible amounts under the 2015 Supplemental STI Program because both NEOs were determined to be instrumental in driving the results for the 2015 dialysis and related lab services
operating segment. The Compensation Committee exercised its negative discretion for Mr. Kogod, who transitioned from Kidney Care to HCP in March 2014, given his minimal role in dialysis and related lab services, resulting in Mr. Kogod
receiving no amount under the 2015 Supplemental STI Program. All amounts under the 2015 Supplemental STI Program were paid to Messrs. Rodriguez and Staffieri in 2016.
Long-Term Incentive Program (LTI Program) for 2015
LTI program awards are granted pursuant to the 2011 Plan. Our LTI program is designed to provide a link to long-term stockholder value through equity awards for all
executives, while also providing a more direct tie to our various lines of business for which executives are responsible through cash-based performance awards targeting internal operating performance metrics consistent with our existing compensation
philosophy.
Equity Awards
While we
emphasize stock-based compensation, we do not designate a target percentage of total compensation as stock-based. We instead maintain discretion to respond to changes in executives and Company performance and related objectives, as well as to
changes in remaining relative values that have yet to be vested. We believe that our emphasis on stock-based compensation creates an alignment of interests between our executives and our stockholders. Grants of equity awards also serve as an
important tool for attracting and retaining executives. To vest in equity awards and earn the full benefit of the award, executives must remain employed for a multi-year vesting period, typically over four years, which reinforces a
17
culture in which the Company’s long-term success takes precedence over volatile and unsustainable short-term results.
Each year, the Compensation Committee recommends to the full Board an aggregate equity award pool that will be available for grants to all eligible recipients of equity
awards, based on (i) the historical amounts granted, (ii) the amount of equity held by participants that is currently in-the-money, (iii) the number of shares we expect to be forfeited due to anticipated departures, and (iv) the
number of shares that will likely be required both to retain and incentivize our highest-potential and highest-performing employees and to attract new employees we expect to hire during the coming year. The Compensation Committee may also recommend
the establishment of special purpose share budgets for proposed interim grants. After considering such recommendations, the Board approves a budget and delegates authority to the Compensation Committee to make awards to our executive officers and
other employees. The equity awards that are granted to our executives are generally made annually (typically in the first half of the year). Discretionary interim awards to our executives may be made during the year to address special circumstances,
such as retention concerns, promotions and special performance recognition awards, and new hire awards. Our annual equity awards are generally awarded upon the completion of performance reviews and in connection with the Compensation
Committee’s decision and review process regarding other forms of direct compensation. The timing of the interim grants is contingent upon individual circumstances. Under the terms of the 2011 Plan, awards are granted with an exercise or base
price not less than the closing price of our common stock on the date of grant. Furthermore, the 2011 Plan prohibits repricing or replacing underwater stock options or stock appreciation rights without prior stockholder approval.
Stock-settled Stock Appreciation Rights
The majority-of our equity awards to executives are in the form of stock-settled stock appreciation rights, which only derive value if the market value of our common
stock increases. The economic value and tax and accounting treatment of SSARs are comparable to those of stock options, but SSARs are less dilutive to our stockholders because only shares with a total value equal to the grantee’s gain (the
difference between the fair market value of the base shares and their base price) are ultimately issued. SSARs are granted with a base price not less than the closing price of our common stock on the date of grant and vest based on the passage of
time. SSARs granted in 2015 vest 50% on each of June 2, 2018 and June 2, 2019.
Performance Stock Units
As part of our compensation program, we also award PSUs to our top executives who become one of the NEOs in any given year. PSUs are granted under the 2011 Plan and
typically vest based on a combination of accomplishment of performance metrics and passage of time over a period of three or more years, but the Compensation Committee may approve alternative vesting schedules based on performance, timing of vesting
of individual outstanding grants and other retention related factors.
A minimum of 50% of the CEO’s equity compensation and 25% of each of Messrs. Rodriguez
and Staffieri’s equity compensation is awarded in the form of PSUs, which fully vest in four years (50% on June 2, 2018, and 50% on June 2, 2019) so long as performance goals have been met. Based on the level of achievement, more or
less than 100% of the target PSUs can vest based on the achievement of the underlying performance. Mr. Hilger was not granted PSUs due to his interim status as Chief Financial Officer.
18
The tables below summarize the criteria range and percent range of target PSUs for each of the 2015 PSU performance metrics
and detail the relative weightings of each 2015 PSU performance metric for Messrs. Thiry, Rodriguez and Staffieri. The performance periods for these metrics run through 2017, or in the case of Relative TSR through March 31, 2019 and, therefore,
we are not able to present performance against these metrics at this time. Given the market and operating conditions at the time the targets were set, the target vesting levels were designed to be achievable with strong management performance, while
maximum vesting levels were designed to be difficult to achieve.
|
|
|
|
|
|
|
|
|
2015 PSU Performance Metrics
|
|
Criteria Range
|
|
Percent of Target PSUs
|
|
|
Kidney Care Quality Incentive Program
|
|
10% to 40% (below rest of industry)
|
|
|
50% - 100%
|
|
|
Kidney Care Non Acquired Growth
|
|
3.95% to 4.70%
|
|
|
50% - 150%
|
|
|
HCP New Market Success
|
|
2 to 6 markets that meet threshold
|
|
|
50% - 200%
|
|
|
HCP New Market Adjusted Operating Income
|
|
50% to 200% of internal goal
|
|
|
50% - 200%
|
|
|
DaVita Rx Specialty Drugs Contracts
|
|
50% to 200% of internal goal
|
|
|
50% - 200%
|
|
|
Paladina Members
|
|
180% to 541% growth over 3 years
|
|
|
50% - 200%
|
|
|
Village Health Hospital Admission Rate
|
|
Range tied to internal goal
|
|
|
50% - 200%
|
|
|
Relative TSR
|
|
40
th
percentile to 90
th
percentile
|
|
|
50% - 200%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Metrics Weightings
|
|
|
2015 PSU Performance Metrics
|
|
Kent J. Thiry
|
|
Javier J. Rodriguez
|
|
|
Michael D. Staffieri
|
|
|
Kidney Care Quality Incentive Program
|
|
10%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
Kidney Care Non Acquired Growth
|
|
10%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
HCP New Market Success
|
|
7.5%
|
|
|
|
|
|
|
|
|
|
HCP New Market Adjusted Operating Income
|
|
7.5%
|
|
|
|
|
|
|
|
|
|
DaVita Rx Specialty Drugs Contracts
|
|
5%
|
|
|
|
|
|
|
|
|
|
Paladina Members
|
|
5%
|
|
|
|
|
|
|
|
|
|
Village Health Hospital Admission Rate
|
|
5%
|
|
|
10
|
%
|
|
|
10
|
%
|
|
Relative TSR
|
|
50%
|
|
|
50
|
%
|
|
|
50
|
%
|
Cash-Based Performance Awards
In 2015, the Compensation Committee granted cash-based performance awards to Messrs. Rodriguez, and Staffieri. Mr. Thiry received all of his 2015 LTI awards in the
form of equity (SSARs and PSUs). Mr. Kogod’s cash-based performance award for 2014 and his cash-based and equity awards for 2015 were delayed to 2016, when cash-based performance awards for 2014 and cash and equity-based awards for 2015
will be made to other executives of the Company’s HCP division. Since there was no long-term cash-based incentive plan at HCP, and no such plan had previously existed at HCP, the grant of cash-based performance awards to HCP executives was
delayed to allow time for the proper structuring of a long-term cash-based incentive plan. In addition, because the value of the cash-based award is linked to the value of the equity-based awards, the 2015 equity awards to HCP executives were also
delayed to 2016. As a
result, LTI awards for HCP executives in 2016, including Mr. Kogod, will appear greater than a typical annual grant since they will effectively represent grants for multiple years.
The Compensation Committee determines the target award value for NEOs’ cash-based performance awards in a manner similar to how it determines the amount of equity
awards to grant; that is, based on individual and Company historical and expected performance, including an executive’s ability to influence the targeted performance measure. The aggregate target value of cash-based performance awards available
for allocation to our executives is approved by the full Board for administration by the Compensation Committee along with the aggregate equity award pool.
The
cash-based performance awards granted in 2015 will vest on April 1, 2018, subject to the NEO’s continued employment and the
19
achievement of performance conditions relating to adjusted operating income of the Company’s dialysis and related lab services segment in 2017. Under the terms of the 2011 Plan, the maximum
annual amount of any cash-based performance awards payable to any executive is $10,000,000 in a 12 month period. However, the Compensation Committee established target award values for each of Messrs. Rodriguez, Staffieri and Hilger at the time of
grant, at amounts substantially lower than the maximum under the 2011 Plan.
In early 2016, Messrs. Rodriguez, Staffieri, Kogod and Hilger received payouts under
the 2013 long-term cash-based performance awards granted under the Company’s 2011 Plan. Payouts under the 2013 long-term cash-based performance awards are paid 50% in early 2016 and 50% in early 2017. The payment in 2017 is not subject to any
incremental performance conditions, but only to continued employment at the time of vesting, April 1, 2017. Mr. Rodriguez and Mr. Kogod each earned $4,950,000. Mr. Staffieri earned $2,598,750, and Mr. Hilger earned $309,375
for performance exceeding the maximum 150% payout level as a result of adjusted operating income achieved for the dialysis and related lab services operating segment of $1,857 million for fiscal year 2015 compared to a target of $1,669 million at
the 100% payout level. These earned amounts were paid 50% in 2016, and the remaining 50% will be paid in 2017. In addition, as discussed above under ‘‘Supplemental STI Program for 2015,’’ Messrs. Rodriguez, Kogod and Staffieri
were eligible for additional amounts subject to negative discretion based on exceptional performance above the maximum 150% payout level under the 2013 long-term cash-based incentive program. They became eligible for these additional amounts through
the 2015 STI program put in place in early 2015 to make their incentive award opportunity tied to 2015 operating results in the dialysis and related lab services operating segment comparable to that of other non-NEO executives, while maintaining the
additional discipline of negative discretion by the Compensation Committee. Please see ‘‘Supplemental STI Program for 2015’’ for further information regarding these payouts.
Determining LTI Program Award Amounts
The Compensation Committee reviews the annual LTI program award recommendations for our NEOs and other executives in advance of the grant date with the input of our CEO
and the committee’s outside compensation consultant, Compensia. Based upon a review of equity award shares available, their dilutive effect on stockholders, long-term share budgeting restrictions, cash-based performance award dollars available
and recommendations from management, the Compensation Committee recommends for Board approval the aggregate equity and cash LTI program award pools for the year. In considering how to distribute the equity and cash-based performance award units in
the respective LTI program award pools, our CEO, together with a team that includes other senior executives, gives differential attention to high-potential individuals whom the Company believes will be the future senior leaders of the Company, and
to other high-performing individuals whose performance in their current positions exceeded expectations.
Each such high-potential and/or high-performing employee
is then individually reviewed, from a holistic perspective, starting with a review of such employee’s historical compensation, including his or her initial base salary, any base salary increases during his or her tenure with the Company and
performance cash bonuses and equity and long-term cash-based incentive award grants over his or her career at the Company. A determination is then made as to the amount and number of cash and equity LTI program award units that should be granted and
the appropriate vesting schedules and performance conditions that should be implemented for such awards in order to retain and continue to motivate these high-quality, high-performing individuals. Our goal is to achieve fairness in compensation and
motivate performance over the course of multiple years, which is the reason we take into account all compensation that has been awarded to such individuals over their respective careers at the Company when making prospective award decisions.
20
The Compensation Committee also evaluates the market competitiveness of the Company’s compensation for its NEOs and
other executive officers by analyzing its historical and proposed compensation changes in light of compensation practices among its comparator peer group as provided in an annual assessment by Compensia, the Compensation Committee’s independent
compensation consultant.
After taking into account the elements set forth above, the Compensation Committee approved LTI program award grants to our NEOs in 2015,
except for Mr. Thiry, whose LTI program award grant was approved by the independent members of the Board as required by the committee’s charter. All of the SSARs, PSUs and cash-based performance awards granted to our NEOs were granted in
June 2015 after the completion of the review and approval by the Compensation Committee, and with respect to Mr. Thiry, by the independent members of the Board. The table below shows the aggregate number of shares subject to SSARs and PSUs, and
the base target value of the cash-based performance awards granted to each of our NEOs in 2015, who remained executive officers as of December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Long-term
Incentive Awards
|
|
Shares
Subject to
SSARs
(#)
|
|
|
Shares
Subject
to
PSUs
(#)
|
|
|
Shares
Subject
to
RSUs
(#)
|
|
|
Target
Cash-Based
Performance
Award Value
($)
|
|
|
Kent J. Thiry
|
|
|
179,041
|
|
|
|
48,323
|
|
|
|
—
|
|
|
|
—
|
|
|
Javier J. Rodriguez
|
|
|
46,551
|
|
|
|
12,564
|
|
|
|
—
|
|
|
|
4,550,000
|
|
|
Michael D. Staffieri
|
|
|
40,284
|
|
|
|
3,624
|
|
|
|
—
|
|
|
|
2,625,000
|
|
|
Dennis L. Kogod
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
James K. Hilger
|
|
|
5,968
|
|
|
|
—
|
|
|
|
1,492
|
|
|
|
250,000
|
|
The 2015 SSAR, PSU and RSU awards above vest 50% on each of June 2, 2018 and June 2, 2019, the third and fourth anniversaries,
respectively, of the grant date. In each case, vesting is subject to the NEO’s continued employment and, in the case of PSUs, the achievement of the underlying performance conditions. The cash-based performance awards vest 100% on April 1,
2018, subject to the NEO’s continued employment and the achievement of performance conditions relating to adjusted operating income of the Company’s dialysis and related lab services segment in
2017. Given the market and operating conditions at the time the targets were set, the target vesting levels were designed to be achievable with strong management performance.
Executive Compensation Program for 2016
We are
using performance metrics consistent with 2015 for our 2016 STI Program. We are currently in the process of finalizing the 2016 LTI Program, and anticipate that the broad structure will remain the same as for 2015. Consistent with our practice, we
also plan to reach out to our stockholders for feedback on compensation of our executive officers and consider any changes and adjustments to our compensation policies and practices suggested by our stockholders.
Personal Benefits and Perquisites
As described
above, our compensation program for NEOs emphasizes compensation based on performance and compensation which serves to align our NEOs’ interests with those of our stockholders. As a result, the Compensation Committee has determined that the
Company should provide few perquisites to NEOs. We believe that the perquisites and personal benefits that we provide support important attraction and retention objectives. We also consider the extent to which the perquisite or personal benefit
provided serves to enhance the performance of our NEOs in light of the demands on these individuals’ time. The perquisites and personal benefits available to our NEOs are reviewed annually by the Compensation Committee.
The Compensation Committee has authorized the personal use of fractionally-owned or chartered corporate aircraft by some of our NEOs. The Compensation Committee
believes that access to an aircraft for personal travel enables our NEOs to maximize their work hours, particularly in light of their demanding business travel schedules. One of the Compensation Committee’s objectives is to ensure that our NEOs
are afforded adequate flexibility to allow for sufficient personal time in light of the significant demands of the Company. The Compensation Committee and our CEO allocate a fixed number of hours for personal use
21
by identified NEOs and consider the allocated amount as part of the NEO’s total compensation. The Compensation Committee and our CEO use their discretion when determining the number of
allocated hours and displace other forms of compensation that otherwise would have been awarded to the NEO.
Our CEO is authorized by the Compensation Committee to
use a fractionally-owned or chartered corporate aircraft for business purposes and long-distance commuting, and for a fixed number of hours per year for personal use instead of additional cash compensation that would have otherwise been paid. Other
executives of the Company are authorized on a limited basis to use a fractionally-owned or chartered corporate aircraft for a fixed number of hours for business purposes and to a much lesser extent for a fixed number of hours per year for personal
use. As part of our CEO’s aggregate compensation package, the Compensation Committee approves a fixed number of hours for personal use each year and unused hours from the prior year are available for use the following year. When determining the
number of hours of personal use of aircraft to award, the Compensation Committee takes into consideration Mr. Thiry’s overall compensation package. If Mr. Thiry were to exceed the fixed number of hours for personal use that is
unrelated to business or long-distance commuting in a given year, the excess hours of personal use would offset the number of hours approved by the Compensation Committee the following year for personal use or Mr. Thiry would be required to
compensate us directly, although historically he has not exceeded the hours authorized for personal use. The Compensation Committee reviews all business and personal use of the aircraft annually, including detailed passenger logs with special
attention to mixed business and personal use and required reimbursements to the Company.
Deferred Compensation Program
Our deferred compensation program permits certain employees, including our NEOs, to defer compensation at the election of the participant or at the election of the
Company. We maintain a
Deferred Compensation Plan which allows certain employees, including our NEOs, to defer a percentage of their base salary, cash bonus and other compensation as identified by the Company. We do
not utilize deferred compensation as a significant component of compensation and there are no Company contributions thereto or above-market returns available thereunder.
Severance and Change of Control Arrangements
We have entered into employment agreements with each of our NEOs. These agreements, among other things, provide for severance benefits in the event of a termination of
employment in certain circumstances, including, with respect to certain NEOs, the departure of the NEO following a change of control of our Company. Each agreement is individually negotiated and the terms vary. When entering into employment
agreements with our NEOs, we attempt to provide severance and change of control benefits which strike a balance between providing sufficient protections for the NEO while still providing post-termination compensation that we consider reasonable and
in the interests of the Company and our stockholders. See ‘‘Potential Payments Upon Termination or Change of Control’’ beginning on page 36 of this
Form 10-K/A
for a description
of the severance and change of control arrangements set forth in our employment agreements with the NEOs.
The terms of individual agreements vary but under our
current stock-based award agreements, accelerated vesting of stock-based awards is generally triggered when a change of control event occurs and either the acquiring entity fails to assume, convert or replace the stock-based award or the
grantee’s employment is terminated following a change of control or if the executive resigns for ‘‘good reason’’ or is terminated by the Company without ‘‘cause’’ as provided in his or her applicable
employment agreement, all within a certain period of time after the effective date of the change of control event. The additional acceleration provisions in our stock-based award agreements further serve to secure the continued employment and
commitment of our NEOs prior
22
to or following a change of control. See ‘‘Potential Payments Upon Termination or Change of Control’’ beginning on page 36 of this Form 10-K/A for more information
regarding accelerated vesting under our stock-based award agreements.
Dr. Menzel stepped down as our Chief Financial Officer effective March 30, 2015, and in accordance with his
then-existing compensation arrangement, received his base salary of $510,000 over a 12-month period beginning on May 5, 2015.
Process for Determining NEO
Compensation
Role of Independent Compensation Committee
Our executive compensation and benefits programs are designed and administered under the direction and control of the Compensation Committee. Our Compensation
Committee, composed solely of independent directors, reviews and approves our overall executive compensation program, strategy and policies and sets the compensation of our executive officers.
When recruiting new executives, the Compensation Committee and our CEO evaluate the comparative compensation of executives within the Company with similar levels of
responsibility, the prior experience of the executive and expected contributions to Company performance. Thereafter, each executive’s compensation is reviewed annually by the Compensation Committee and CEO, and considered for adjustment based
on individual performance and other factors.
When evaluating performance, we base compensation decisions on an assessment of Company and individual performance
over the year, taking individual accomplishments into consideration in light of the totality of circumstances together with individual potential to contribute to the Company’s future growth. We believe that all of our NEOs have the ability to
influence overall Company policies and performance and, accordingly, should be accountable for Company-wide performance as well as the areas over which they have direct influence. The differences in total annual compensation levels among the NEOs
are based on their individual roles and responsibilities within the Company and their relative individual performance. The Compensation Committee uses
its judgment in awarding compensation to our NEOs in accordance with the overall objectives of the Company’s compensation program.
The Compensation Committee takes into consideration a number of factors when determining the elements and amounts of compensation awarded to our NEOs, including
individual performance, overall financial and non-financial performance of the Company for the year, individual skill sets and experience relative to industry peers, readiness for promotion, past and expected future performance, the importance and
difficulty of achieving future Company and individual objectives, the value of each executive’s outstanding equity awards, aggregate historical compensation, levels of responsibility and performance relative to other executives within the
Company, importance to the Company and difficulty of replacement. The Compensation Committee also gives significant weight to our clinical performance and quality of patient care. Accordingly, Company-wide patient clinical outcomes and improvements
in quality of patient care, and each NEO’s contributions in those areas, can have a significant impact on NEO compensation.
The Company-wide factors taken
into consideration by the Compensation Committee include, but are not limited to, the following:
|
|
•
|
|
overall revenue growth, increases in our treatment volume, market share increases, improvements in controlling treatment costs, operating income growth, operating margin growth and increases in earnings per share;
|
|
|
•
|
|
healthcare regulatory compliance initiatives;
|
|
|
•
|
|
improved strategic positioning;
|
|
|
•
|
|
improved positioning of the Company for continued growth and diversification;
|
23
|
|
•
|
|
improved organizational capabilities;
|
|
|
•
|
|
patient growth and geographic expansion;
|
|
|
•
|
|
relationships with private payors;
|
|
|
•
|
|
improved clinical outcomes, vaccination rates and other measures of quality of care;
|
|
|
•
|
|
relationships with medical directors and other physicians involved in our patient care;
|
|
|
•
|
|
selection and implementation of improved financial, operating and clinical information systems;
|
|
|
•
|
|
management performance in attracting and retaining high-performing employees throughout our organization and succession planning;
|
|
|
•
|
|
implementation of successful public policy efforts;
|
|
|
•
|
|
good corporate citizenship; and
|
|
|
•
|
|
advancement of strategic business initiatives supporting our mission to be the provider, partner and employer of choice.
|
The Compensation Committee retains discretion as to how to weigh these factors. There is no formal weighting of the individual elements considered and no particular
elements are required to be considered with respect to a given individual or in any particular year.
When determining annual compensation for our NEOs, other than
for our CEO, the Compensation Committee works closely with our CEO to review each individual’s performance for the year and determine such NEO’s compensation. Shortly following the end of each year, our CEO provides his assessment of each
NEO’s performance during the year based on his personal experience with the individual, the NEO’s achievement of success in areas determined to be significant to the Company, and any changes in responsibility levels. The Compensation
Committee also considers performance discussions that have taken place at the Board and Compensation Committee level regarding the NEOs, retention objectives and the future growth potential of the individual executive. Our CEO recommends to the
Compensation Committee the amounts of cash and stock-based compensation for each of the NEOs. The Compensation Committee considers the recommendations made by the CEO regarding the other NEOs but retains the discretion to deviate from those
recommendations. Neither the CEO nor other members of management provide a recommendation to the Compensation Committee with regard to the CEO’s compensation.
The Compensation Committee evaluates our CEO’s performance at the same time it sets the compensation of the other NEOs. When evaluating the performance of our CEO
and making decisions about his compensation, the Compensation Committee considers overall Company performance as part of the assessment of our CEO’s performance, in addition to the achievement of specific objectives to determine his
compensation. The Compensation Committee also considers a self-assessment prepared by our CEO. As part of this self-assessment, our CEO reviews with the Compensation Committee the overall annual management objectives of the Company and his
participation in the attainment, or level of responsibility for the shortfall, of such objectives. Approximately every other year, the Compensation Committee engages an outside independent consultant to conduct an in-depth analysis of our CEO’s
performance as a manager during the year. The most recent assessment took place in 2015. This evaluation involves a rigorous assessment of our CEO’s performance by members of the senior management team. This assessment is reviewed by the Board
and the Compensation Committee and is one of the many factors considered when making compensation decisions. As further described below, the Compensation Committee’s independent compensation consultant provides the Compensation Committee with
an analysis of comparative market data on the cash, stock-based compensation and total compensation for senior executives, including the CEO, at a group of comparable companies within our industry. The compensation package for our CEO is approved by
the independent members of the Board after the Compensation Committee’s recommendation for approval.
Role of Independent Compensation
Consultant
The Compensation Committee has selected and directly retains the services of Compensia, an independent national compensation consulting
24
firm. The Compensation Committee has the sole authority to retain or replace Compensia in its discretion. Compensia does not provide consulting services to the Company and may not provide such
services without prior approval of the chair of the Compensation Committee. Accordingly, Compensia only provides compensation consulting services to the Compensation Committee, and works with the Company’s management only on matters for which
the Compensation Committee provides direction and is responsible. The Compensation Committee has assessed the independence of
Compensia pursuant to the rules of the SEC and NYSE and concluded that Compensia’s work for the Compensation Committee does not raise any conflicts of interest. The Compensation Committee
periodically seeks input from Compensia on a range of external market factors, including evolving compensation trends, appropriate peer companies and market survey data. Compensia also provides general observations on the Company’s compensation
program, but it does not determine or recommend the amount or form of compensation for the NEOs.
Market Competitiveness
We evaluate the overall competitiveness of our executives’ total direct compensation each year in order to assist in executive retention. In 2014
and 2015, the Compensation Committee retained Compensia to perform a comprehensive market analysis of our executive compensation programs and pay levels and based upon the recommendation of Compensia adopted a revised comparator peer group in late
2014 to be used to evaluate 2014 bonus payouts and 2015 compensation decisions.
Compensia provided the Compensation Committee with an analysis of comparative
market data on the cash, stock-based compensation and total compensation for senior executives at the companies within our comparator peer group. In addition to public executive compensation data, the Compensation Committee reviewed the compensation
practices of our comparator peer group for purposes of benchmarking and understanding the general compensation practices of our peers. Our comparator peer group consists of the following companies, which are all in the health care services,
diagnostics, managed care and solutions markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
1
|
|
1-Year
TSR
2
|
|
|
3-Year
Compound
Annual
TSR
2
|
|
|
Market
Capitalization
(in millions)
2
|
|
|
Net Income
for Last 4
Quarters
(in millions)
3
|
|
|
Revenue for
Last 4
Quarters
(in millions)
3
|
|
|
Abbott
Laboratories
4
|
|
|
-13.6%
|
|
|
|
5.9%
|
|
|
|
$55,740
|
|
|
|
$4,423
|
|
|
|
$20,405
|
|
|
Aetna
4
|
|
|
11.9%
|
|
|
|
29.7%
|
|
|
|
$35,593
|
|
|
|
$2,390
|
|
|
|
$60,227
|
|
|
Anthem
4
|
|
|
-1.7%
|
|
|
|
28.4%
|
|
|
|
$34,089
|
|
|
|
$2,560
|
|
|
|
$79,156
|
|
|
Baxter
International
4
|
|
|
-3.1%
|
|
|
|
2.0%
|
|
|
|
$20,044
|
|
|
|
$968
|
|
|
|
$9,968
|
|
|
Centene Corp.
|
|
|
13.7%
|
|
|
|
42.2%
|
|
|
|
$7,468
|
|
|
|
$355
|
|
|
|
$22,760
|
|
|
Community Health Systems, Inc.
|
|
|
-54.4%
|
|
|
|
-17.6%
|
|
|
|
$2,422
|
|
|
|
$158
|
|
|
|
$19,437
|
|
|
HCA Holdings, Inc.
|
|
|
-1.7%
|
|
|
|
22.7%
|
|
|
|
$27,744
|
|
|
|
$2,129
|
|
|
|
$39,678
|
|
|
Laboratory Corporation of America Holdings
|
|
|
-2.1%
|
|
|
|
7.9%
|
|
|
|
$11,381
|
|
|
|
$437
|
|
|
|
$8,680
|
|
|
Molina Healthcare, Inc.
|
|
|
7.9%
|
|
|
|
24.1%
|
|
|
|
$3,075
|
|
|
|
$143
|
|
|
|
$14,178
|
|
|
Quest Diagnostics Incorporated
|
|
|
-5.6%
|
|
|
|
6.5%
|
|
|
|
$9,391
|
|
|
|
$709
|
|
|
|
$7,493
|
|
|
Tenet Healthcare, Inc.
|
|
|
-35.9%
|
|
|
|
-11.3%
|
|
|
|
$2,671
|
|
|
|
$(140)
|
|
|
|
$18,634
|
|
|
Thermo Fisher Scientific
4
|
|
|
6.0%
|
|
|
|
23.0%
|
|
|
|
$52,775
|
|
|
|
$1,975
|
|
|
|
$16,965
|
|
|
Universal Health Services, Inc.
|
|
|
10.2%
|
|
|
|
26.1%
|
|
|
|
$11,072
|
|
|
|
$681
|
|
|
|
$9,042
|
|
|
WellCare Health
Plans
4
|
|
|
4.3%
|
|
|
|
14.4%
|
|
|
|
$3,352
|
|
|
|
$119
|
|
|
|
$13,890
|
|
|
Summary Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
th
Percentile
|
|
|
7.4%
|
|
|
|
25.6%
|
|
|
|
$32,503
|
|
|
|
$2,091
|
|
|
|
$22,171
|
|
|
50
th
Percentile
|
|
|
-1.7%
|
|
|
|
18.6%
|
|
|
|
$11,227
|
|
|
|
$695
|
|
|
|
$17,800
|
|
|
25
th
Percentile
|
|
|
-5.0%
|
|
|
|
6.0%
|
|
|
|
$4,381
|
|
|
|
$207
|
|
|
|
$10,949
|
|
|
DaVita
|
|
|
-10.6%
|
|
|
|
5.2%
|
|
|
|
$14,079
|
|
|
|
$270
|
|
|
|
$13,782
|
|
|
DaVita Percentage Rank
|
|
|
18%
|
|
|
|
22%
|
|
|
|
56
|
%
|
|
|
27
|
%
|
|
|
31
|
%
|
25
|
1
|
The Company’s peer group was compiled by Compensia and approved by the Compensation Committee. The following companies were deleted from the Company’s 2014 peer group in late 2015 due to differences in size
and/or business model or the peer group company ceasing to be an independent publicly- traded company: Catamaran, Health Net, HealthSouth, Humana, MEDNAX and Omnicare. These companies, however, were included in the Company’s peer group at the
beginning of the year to evaluate initial 2015 compensation decisions.
|
|
2
|
Data as of January 29, 2016.
|
|
3
|
Financial data generally publicly available as of January 29, 2016.
|
|
4
|
Added to the Company’s comparator peer group in late 2015.
|
Our 2015 comparator peer group includes a diverse representation of various health care services, diagnostics, managed
care, and solutions markets because we compete in these broad industry groups for executive talent. The Compensation Committee, in conjunction with Compensia, reviews the composition of this group annually and makes adjustments to the composition of
the group as it deems appropriate in order to provide a fairly consistent measure for comparing executive compensation. We believe that our comparator peer companies are comparable to us in their size, as measured by market capitalization, net
income and revenues. Compensation paid by this comparator peer group is representative of the compensation we believe is required to attract, retain and motivate our executive talent.
The Compensation Committee considered the comparator peer group together with market data information analysis from Compensia and other factors, in determining 2015
base salary amounts and LTI program awards granted in April and June 2015, respectively. The comparator peer group together with market data and analysis from Compensia and other factors were considered by the Compensation Committee in determining
2016 base salary amounts and 2015 performance bonuses, and will be used in determining LTI program awards expected to be granted in 2016.
The Compensation
Committee considered Compensia’s analysis (based on publicly disclosed compensation practices) of the compensation of executives serving in similar positions at comparable companies to obtain a general understanding of current compensation
practices in our industry. The analysis provided by Compensia was used to provide context for the compensation decisions made by the Compensation Committee, but the Compensation Committee’s decisions were not directly related to
or otherwise based upon the comparative data. Instead, the Compensation Committee used this comparative data as one of many factors considered to set the compensation for our NEOs. The
Compensation Committee also used the analysis as a tool to assess how well the Company is implementing its core compensation objective of awarding compensation weighted heavily in favor of variable compensation tied to performance.
In approving executive compensation, the Compensation Committee considered the Company’s market capitalization, which is at the 56th percentile of our comparator
peer group, and the Company’s size, in terms of net income and revenue, which is at the 27th and 31st percentiles, respectively, of our comparator peer group. The Compensation Committee also considered each NEO’s roles and responsibilities
within the Company, individual performance, Company performance and internal pay equity in addition to the results of the competitive pay analysis.
Risk Considerations in Our Compensation Program
The Compensation Committee, with the assistance of Compensia, conducted a review of
the Company’s material compensation policies and practices applicable to its employees, including its executive officers. Based on this review, the Compensation Committee concluded that these policies and practices do not create risks that are
reasonably likely to have a material adverse effect on the Company. The key features of the executive compensation program that support this conclusion include:
|
|
•
|
|
a balance between cash and equity compensation;
|
|
|
•
|
|
a balance between short-term and long-term performance focus;
|
26
|
|
•
|
|
short-term incentive opportunities are capped and are not linked to any one specific goal;
|
|
|
•
|
|
severance payments are limited to 3x base salary and bonus;
|
|
|
•
|
|
equity awards have meaningful vesting requirements;
|
|
|
•
|
|
a clawback policy that permits the Board to recover annual bonuses and longer-term
|
|
|
|
incentive and equity-based compensation from executive officers and members of the Board;
|
|
|
•
|
|
stock ownership guidelines; and
|
|
|
•
|
|
significant independent Compensation Committee oversight.
|
Compensation Policies and Practices
We are committed
to strong governance standards with respect to our compensation program, procedures and practices. We believe that the following aspects of our compensation program are indicative of this commitment.
Management Share Ownership Policy
We have a share ownership policy that applies to members of our management team at the executive level. The management share ownership policy is similar to our share
ownership policy that applies to all non-employee members of the Board. The purpose of the policy is to ensure that our executive officers accumulate a meaningful ownership stake in the Company over time by retaining a specified financial interest
in our common stock. Both shares owned directly and shares underlying vested but unexercised stock appreciation rights, restricted stock units, and stock options are included in the determination of whether the share ownership guidelines are met.
The total net realizable share value retained must have a current market value of not less than the lower of 25% of the total equity award value in excess of $100,000 realized to date by the executive (since promotion to Vice President); or a
specific multiple of the executive’s base salary. The salary multiple requirement for our current NEOs is 5.0 for Mr. Thiry, and 3.0 for Mr. Rodriguez, Mr. Kogod, and Mr. Staffieri. Mr. Hilger is not subject to the
requirements under this policy because he is serving as our chief financial officer on an interim basis. As of December 31, 2015, all of the NEOs met or exceeded the guidelines under our share ownership policy.
Policy Regarding Clawback of Bonuses and Incentive Compensation
In 2010, the Board adopted a clawback policy that permits the Board to recover annual bonuses and longer-term incentive and equity-based compensation from executive
officers and non-employee members of the Board whose fraud or intentional misconduct was a significant contributing factor to the Company having to restate all or a portion of its financial statements. In December 2014, the policy was further
amended to add significant misconduct as another possible clawback triggering event, in accordance with the executive financial compensation recoupment requirements under the Corporate Integrity Agreement.
This new provision applies to all senior vice presidents and above of the Company’s domestic dialysis business, in addition to the executive officers and
non-employee members of the Board. The clawback policy allows for the recovery of any bonus or incentive compensation paid to those executive officers or directors, the cancellation of restricted or deferred stock awards and outstanding stock awards
granted to those executive officers or directors, and the reimbursement of any gains realized that are attributable to such awards to the fullest extent permitted by law. The policy allows for the foregoing actions to the extent that the amount of
incentive compensation was calculated based
27
upon the achievement of certain financial results that were subsequently reduced due to a restatement; the executive officer or director engaged in any fraud or intentional misconduct that was a
significant contributing factor to the Company having to restate its financial statements; where the amount of the bonus or incentive compensation that would have been awarded to the officer had the financial results been properly reported would
have been lower
than the amount actually awarded; and, where the amount of the bonus or incentive compensation that was awarded to the officer would not have been awarded had any significant misconduct been
known. The Company will not seek to recover bonuses or incentive or equity-based compensation paid or vested more than three years prior to the date the applicable restatement is disclosed or the significant misconduct is discovered.
Tax and Accounting Considerations
Deduction Limit
When reviewing compensation matters, the Compensation Committee considers the anticipated tax treatment of various payments and benefits to the Company and, when
relevant, to its executives. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for compensation in excess of $1 million paid to the chief executive officer and the three other most highly compensated NEOs employed
at the end of the year (other than the chief financial officer), such executives are referred to as ‘‘covered employees.’’
Certain compensation
is specifically exempt from the deduction limit to the extent that it is ‘‘performance-based’’ as defined in Section 162(m). While the Compensation Committee recognizes the desirability of preserving and strives to maintain
the
deductibility of payments made to the NEOs, the Compensation Committee believes that it must maintain flexibility in its approach in order to structure a program that it believes to be the most
effective in attracting, motivating and retaining the Company’s key executives.
Accounting for Stock-Based Compensation
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 SSARs, RSUs, PSUs and other forms of equity compensation). FASB ASC Topic 718 is taken into account by the Compensation Committee in determining to issue various types of equity awards, considering the natural
economic exchange ratios implied by their approximate respective fair values.
28
Compensation Committee Report
The Compensation Committee of the Board is currently composed of four independent directors. The Compensation Committee
oversees the Company’s compensation program on behalf of the Board. The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis set forth in this
Form 10-K/A
with
management.
Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in the Company’s Proxy Statement for the Company’s 2016 annual meeting of stockholders and the Company’s annual report on Form 10-K.
COMPENSATION COMMITTEE
Pamela M. Arway, Chair
Paul J. Diaz
Peter T. Grauer
Roger J. Valine
The information contained above under the caption ‘‘Compensation Committee Report’’ will not be considered ‘‘soliciting
material’’ or to be ‘‘filed’’ with the SEC, nor will that information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent
that we specifically incorporate it by reference into a filing.
29
Executive Compensation
2015 Summary Compensation Table
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Name and Principal Position
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Year
|
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|
Salary
($)
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|
Bonus
1
($)
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|
Stock
Awards
2
($)
|
|
|
Option
Awards
3
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
4
($)
|
|
|
All Other
Compensation
5
($)
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|
Total ($)
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Kent J. Thiry
Chairman of the Board of Directors,
Chief Executive Officer and Chief Executive
Officer, HealthCare Partners
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2015
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1,200,000
|
|
|
|
—
|
|
|
|
3,720,140
|
|
|
|
3,422,476
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|
|
|
2,225,186
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|
|
|
471,020
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|
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|
11,038,822
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2014
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|
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1,200,000
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|
|
—
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|
|
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4,905,159
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|
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4,558,730
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2,610,000
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|
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517,134
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|
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|
13,791,023
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2013
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|
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1,148,077
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|
|
—
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|
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|
—
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|
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12,272,760
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3,000,000
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678,420
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|
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17,099,257
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|
|
Javier J. Rodriguez
Chief Executive
Officer, Kidney Care
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|
2015
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|
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|
800,000
|
|
|
|
—
|
|
|
|
967,239
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|
|
|
889,850
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|
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9,013,661
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164,816
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|
11,835,566
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|
2014
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|
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|
800,000
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|
|
|
—
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|
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|
1,376,459
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|
|
|
1,279,239
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8,142,500
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151,140
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|
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11,749,338
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|
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2013
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|
|
|
765,385
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|
|
|
—
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|
|
|
—
|
|
|
|
3,780,980
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|
|
|
1,600,000
|
|
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|
13,245
|
|
|
|
6,159,610
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|
|
Michael D. Staffieri
Chief Operating Officer, Kidney Care
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2015
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583,270
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|
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|
3,415
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|
|
|
278,994
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|
|
|
770,053
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|
|
|
4,859,672
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|
|
|
64,719
|
|
|
|
6,560,123
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|
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|
|
2014
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|
|
|
515,385
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|
|
|
38,363
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|
|
|
450,495
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|
|
|
418,657
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|
|
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3,392,500
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|
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29,981
|
|
|
|
4,845,381
|
|
|
Dennis L. Kogod
President,
HealthCare Partners and Chief Executive
Officer, International
|
|
|
2015
|
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|
800,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
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|
|
|
5,150,000
|
|
|
|
120,441
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|
|
|
6,070,441
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|
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|
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2014
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|
|
|
800,000
|
|
|
|
200,000
|
|
|
|
667,422
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|
|
|
1,860,796
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|
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6,142,500
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104,792
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|
|
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9,775,510
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|
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2013
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|
|
|
800,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,970,770
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1,100,000
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90,042
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|
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4,960,812
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|
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James K. Hilger
Interim Chief Financial Officer,
and Chief Accounting Officer
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2015
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366,635
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195,000
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|
|
125,059
|
|
|
|
114,082
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|
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309,375
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|
|
|
360
|
|
|
|
1,110,511
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|
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2014
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350,000
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|
|
225,000
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|
|
|
124,953
|
|
|
|
116,302
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|
|
|
1,092,500
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|
|
|
336
|
|
|
|
1,909,091
|
|
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2013
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350,000
|
|
|
|
300,000
|
|
|
|
—
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|
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|
189,049
|
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|
|
—
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|
544
|
|
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839,593
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|
|
Garry E. Menzel
Former Chief Financial Officer
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2015
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188,308
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|
|
|
—
|
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|
|
—
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|
—
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|
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—
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510,204
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698,512
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2014
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510,000
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44,548
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|
|
—
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|
—
|
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|
|
—
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|
480
|
|
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|
555,028
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2013
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147,115
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66,484
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|
|
—
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1,624,716
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—
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45
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|
1,838,360
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1
|
The amounts reported in this column for 2015 represent annual performance bonuses for non-STIP participants, namely Mr. Hilger, discretionary bonuses, including relocation bonuses, earned with respect to 2015. The
cash component of our 2015 short-term incentive program (the ‘‘2015 STI program’’) under the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan is included in the ‘‘Non-Equity Incentive Plan
Compensation’’ column.
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2
|
The amounts shown in this column reflect restricted and performance stock unit awards and represent the aggregate grant date fair value of all such awards granted to the executive during the year as estimated by the
Company in accordance with FASB ASC Topic 718. In accordance with SEC rules, the amounts included in the Stock Awards column for the performance stock unit awards granted during 2015 are calculated based on the most probable outcome of the
performance conditions for such awards on the grant date. If the most probable outcome of the performance conditions as of grant date had been maximum performance, then the grant date fair value of the PSUs would have been as follows: Mr. Thiry
— $5,137,787; Mr. Rodriguez — $1,191,700; and Mr. Staffieri — $343,750. See Note 19 to the Consolidated Financial Statements included in our Original 2015 Form 10-K for a discussion of the relevant assumptions used in
calculating these amounts pursuant to FASB ASC Topic 718.
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3
|
The amounts shown in this column reflect SSAR awards and represent the aggregate grant date fair value of all such awards granted to the executive during the year as estimated by the Company in accordance with FASB ASC
Topic 718. See Note 19 to the Consolidated Financial Statements included in our Original 2015 Form 10-K for a discussion of the relevant assumptions used in calculating these amounts pursuant to FASB ASC Topic 718.
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4
|
For 2013, the amounts shown in this column constitute amounts earned under the Company’s expired employee incentive
program (EIP). For 2014 and 2015, the amounts shown in this column represent amounts earned for performance periods ending in 2014 and 2015, respectively. For 2015, these amounts include the 2015 STI program and 2013 Cash LTI program. In early 2016,
Messrs. Rodriguez, Staffieri, Kogod and Hilger received payouts under the 2013 long-term cash-based performance awards and the 2015 Supplemental STI program which was put in place in early 2015 to make their incentive award opportunity tied to 2015
operating results in the dialysis and related lab services operating segment comparable to that of other non-NEO executives, while maintaining the additional discipline of negative discretion by the Compensation Committee, all granted under the
Company’s 2011 Incentive Award Plan. As a result of these two performance-based cash awards, Mr. Rodriguez earned $7,313,661 for performance at the 221.6% payout level, Mr. Kogod earned $4,950,000 for performance at the 150% payout
level as the Compensation Committee exercised negative discretion to reduce the payout, Mr. Staffieri earned $3,839,672 for performance at the 221.6% payout level, all as a result of adjusted operating income
|
30
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|
achieved for the dialysis and related lab services operating segment of $1,857 million for fiscal year 2015 compared to a target of $1,669 million at the 100% payout level.
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Name
|
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2015 STI Program
|
|
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2015 Supplemental STI Program
|
|
|
2013 Cash LTI Program
|
|
|
Total Non-Equity
Incentive Plan
Compensation
|
|
|
Kent J. Thiry
|
|
|
$2,225,186
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$2,225,186
|
|
|
Javier J. Rodriguez
|
|
|
$1,700,000
|
|
|
|
$2,363,661
|
|
|
|
$4,950,000
|
|
|
|
$9,013,661
|
|
|
Michael D. Staffieri
|
|
|
$1,020,000
|
|
|
|
$1,240,922
|
|
|
|
$2,598,750
|
|
|
|
$4,859,672
|
|
|
Dennis L. Kogod
|
|
|
$200,000
|
|
|
|
—
|
|
|
|
$4,950,000
|
|
|
|
$5,150,000
|
|
|
James K. Hilger
|
|
|
—
|
|
|
|
—
|
|
|
|
$309,375
|
|
|
|
$309,375
|
|
|
Dr. Garry E. Menzel
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
The awards are reported for the year with respect to which they were earned, regardless of when the award is paid. Please see ‘‘Compensation Discussion and Analysis — Elements of Compensation —
Short-Term Incentive Program (STI Program) for 2015’’ in this Form 10-K/A for a discussion of the performance criteria under the 2015 STI program.
|
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5
|
Amounts included in this column are set forth by category below. The amounts disclosed, other than use of a fractionally-owned or chartered corporate aircraft, are the actual or share of actual costs to the Company of
providing these benefits. Because a fractionally-owned or chartered corporate aircraft is used primarily for business purposes, we do not include in incremental cost the fixed costs that do not change based on usage. The incremental cost to us of
personal use of a fractionally-owned or chartered corporate aircraft, including use for commuting, is calculated based on the variable operating costs related to the operation of the aircraft, including fuel costs and landing fees, trip-related
repairs and maintenance, catering and other miscellaneous variable costs. Fixed costs that do not change based on usage, such as pilot salaries, training, utilities, depreciation, management fees, taxes and general repairs and maintenance are
excluded. The value of the personal use of a fractionally-owned or chartered corporate aircraft by our NEOs is included in their personal income in accordance with applicable tax regulations.
|
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|
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|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Aircraft
Usage
*
($)
|
|
|
Life
Insurance
Premiums
($)
|
|
|
Termination
Benefits ($)
|
|
|
Total All Other
Compensation
($)
|
|
|
Kent J. Thiry
|
|
|
2015
|
|
|
|
$469,867
|
|
|
|
$1,153
|
|
|
|
—
|
|
|
|
$471,020
|
|
|
Javier J. Rodriguez
|
|
|
2015
|
|
|
|
$164,336
|
|
|
|
$480
|
|
|
|
—
|
|
|
|
$164,816
|
|
|
Michael D. Staffieri
|
|
|
2015
|
|
|
|
$64,239
|
|
|
|
$480
|
|
|
|
—
|
|
|
|
$64,719
|
|
|
Dennis L. Kogod
|
|
|
2015
|
|
|
|
$119,879
|
|
|
|
$562
|
|
|
|
—
|
|
|
|
$120,441
|
|
|
James K. Hilger
|
|
|
2015
|
|
|
|
—
|
|
|
|
$360
|
|
|
|
—
|
|
|
|
$360
|
|
|
Dr. Garry E. Menzel
|
|
|
2015
|
|
|
|
—
|
|
|
|
$204
|
|
|
|
$510,000
|
|
|
|
$510,204
|
|
|
*
|
For purposes of calculating the incremental costs to the Company of each NEO’s personal use of Company aircraft, the total cost of the flight is allocated to personal use based upon the relative ratio of personal
mileage to total mileage. Costs for fuel, ground costs, catering costs, landing fees, domestic passenger fees and federal excise tax charges are also included, if applicable.
|
31
The following table sets forth information concerning awards made to each of the NEOs under the Company’s equity
compensation plans during 2015.
2015 Grants of Plan-Based Awards
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan
Awards
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
1
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
|
|
|
All Other
Options
Awards:
Number of
Securities
Underlying
Options
(#)
5
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
|
Grant Date
Fair
Value
of Stock
and Option
Awards
($)
6
|
|
|
|
|
|
—
|
1
|
|
|
|
|
—
|
|
|
|
2,225,186
|
|
|
|
3,600,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Kent J. Thiry
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
36,243
|
|
|
|
48,323
|
|
|
|
65,236
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,720,140
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
179,041
|
|
|
$
|
83.82
|
|
|
|
3,422,476
|
|
|
|
|
|
—
|
1
|
|
|
|
|
—
|
|
|
|
1,700,000
|
|
|
|
2,000,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
2
|
|
|
|
|
—
|
|
|
|
2,363,661
|
|
|
|
8,250,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Javier J. Rodriguez
|
|
|
6/2/2015
|
3
|
|
|
|
|
2,275,000
|
|
|
|
4,550,000
|
|
|
|
10,000,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
9,424
|
|
|
|
12,564
|
|
|
|
15,077
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
967,239
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
46,551
|
|
|
$
|
83.82
|
|
|
|
889,850
|
|
|
|
|
|
—
|
1
|
|
|
|
|
—
|
|
|
|
1,020,000
|
|
|
|
1,200,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
2
|
|
|
|
|
|
|
|
|
1,240,922
|
|
|
|
4,331,250
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Michael D. Staffieri
|
|
|
6/2/2015
|
3
|
|
|
|
|
1,312,500
|
|
|
|
2,625,000
|
|
|
|
10,000,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
2,719
|
|
|
|
3,624
|
|
|
|
4,349
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
278,994
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
40,284
|
|
|
$
|
83.82
|
|
|
|
770,053
|
|
|
Dennis L. Kogod
7
|
|
|
—
|
1
|
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
2,000,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
2
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,250,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
3
|
|
|
|
|
125,000
|
|
|
|
250,000
|
|
|
|
1,000,000
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
James K. Hilger
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,492
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,059
|
|
|
|
|
|
6/2/2015
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
5,968
|
|
|
$
|
83.82
|
|
|
|
114,082
|
|
|
Dr. Garry E. Menzel
7
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
1
|
Represents applicable amounts for our 2015 short-term incentive program (2015 STI program) under the Company’s 2011 Incentive Award Plan. The amount in the ‘‘Maximum’’ column represents the
maximum amount the executive was eligible to earn under the 2015 STI Program if all performance criteria were achieved at their highest payout level. Since 2015 is now complete, the amount in the ‘‘Target’’ column represents the
payout amounts awarded under the 2015 STI program, considering both the formulaic criteria and any further negative discretion the Committee applied thereunder. Since the Committee may use discretion to reduce amounts awarded to zero, there are no
fixed threshold amounts under the 2015 STI Program. Accordingly this table reflects a zero amount in the ‘‘Threshold’’ column.
|
|
2
|
Represents applicable amounts for our 2015 Supplemental STI Program as described in further detail beginning on page 16.
|
|
3
|
Represents long-term cash-based performance awards granted in June 2015 (2015 cash LTI program awards) under the Company’s 2011 Incentive Award Plan. For a description of these 2015 cash LTIP awards, see
‘‘Compensation Discussion and Analysis — Elements of Compensation — Long-term Incentive Program (LTI Program) for 2015’’ in this Form 10-K/A.
|
|
4
|
This number represents performance stock unit awards awarded under the Company’s 2011 Incentive Award Plan. The PSU awards above vest 50% each on June 2, 2018 and June 2, 2019, subject to the NEO’s
continued employment and the achievement of the underlying performance conditions. For a description of the PSUs, see ‘‘Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentive Program (LTI Program)
for 2015 — Equity Awards — Performance Stock Units’’ in this Form 10-K/A.
|
|
5
|
This number represents SSARs awarded under the Company’s 2011 Incentive Award Plan. The SSARs vest 50% each in the third and fourth years from the date of grant, subject to the NEO’s continued employment. For
a description of the SSARs, see ‘‘Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2015 — Equity Awards — Stock-settled Stock Appreciation
Rights’’ in this Form 10-K/A.
|
|
6
|
The amounts for SSARs and performance stock unit awards are the aggregate grant date fair values of each award determined pursuant to FASB ASC Topic 718 and, in the case of the performance stock unit awards, are based
upon the
|
|
|
probable outcome of the applicable performance conditions on the grant date. See Note 19 to the Consolidated Financial Statements included in our Original 2015 Form 10-K for a discussion of the relevant assumptions used
in calculating grant date fair value pursuant to FASB ASC Topic 718.
|
|
7
|
Mr. Kogod received no LTI program awards during the year ended December 31, 2015 and Dr. Menzel received no grants of plan-based awards for the year ended December 31, 2015.
|
32
The following table sets forth information concerning outstanding SSARs and unvested stock awards held by each of the NEOs
at December 31, 2015.
2015 Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Stock Awards
|
|
|
Name
|
|
Grant
Date
|
|
|
Number
of Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
|
|
Number
of Shares
or Units of
Stock That
Have Not
Vested (#)
|
|
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
1
($)
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other
Rights that
Have Not
Vested
(#)
2
|
|
|
Equity Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested
($)
1
|
|
|
|
|
|
12/18/2012
|
|
|
|
500,000
|
|
|
|
500,000
|
4
|
|
$
|
55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3/20/2013
|
|
|
|
—
|
|
|
|
900,000
|
3
|
|
$
|
59.52
|
|
|
|
3/20/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
282,339
|
3
|
|
$
|
69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Kent J. Thiry
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
179,041
|
|
|
|
83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
72,064
|
5
|
|
|
5,023,581
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63,022
|
2
|
|
|
4,393,264
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,323
|
8
|
|
|
3,368,596
|
|
|
|
|
|
4/13/2011
|
|
|
|
216,667
|
3
|
|
|
—
|
|
|
$
|
43.35
|
|
|
|
4/13/2016
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/8/2011
|
|
|
|
80,000
|
6
|
|
|
—
|
6
|
|
$
|
36.96
|
|
|
|
12/8/2016
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
56,250
|
4
|
|
|
56,250
|
4
|
|
$
|
55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3/19/2013
|
|
|
|
—
|
|
|
|
280,000
|
3
|
|
$
|
58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Javier J. Rodriguez
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
79,228
|
3
|
|
$
|
69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
46,551
|
3
|
|
$
|
83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
14,063
|
5
|
|
|
980,332
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
22,403
|
5
|
|
|
1,561,713
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,685
|
2
|
|
|
1,232,821
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,564
|
8
|
|
|
875,836
|
|
|
|
|
|
3/29/2011
|
|
|
|
40,000
|
3
|
|
|
—
|
|
|
$
|
41.51
|
|
|
|
3/29/2016
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
8/9/2011
|
|
|
|
36,668
|
7
|
|
|
3,332
|
7
|
|
$
|
37.19
|
|
|
|
8/9/2016
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
12,600
|
3
|
|
|
12,600
|
3
|
|
$
|
55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3/19/2013
|
|
|
|
—
|
|
|
|
50,800
|
3
|
|
$
|
58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Michael D. Staffieri
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
25,929
|
3
|
|
$
|
69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
40,284
|
3
|
|
$
|
83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,350
|
5
|
|
|
94,109
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3,584
|
5
|
|
|
249,841
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,788
|
2
|
|
|
403,481
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,624
|
8
|
|
|
252,629
|
|
|
|
|
|
4/13/2011
|
|
|
|
250,000
|
3
|
|
|
—
|
|
|
$
|
43.35
|
|
|
|
4/13/2016
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
56,250
|
4
|
|
|
56,250
|
4
|
|
$
|
55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Dennis L. Kogod
|
|
|
3/19/2013
|
|
|
|
—
|
|
|
|
220,000
|
3
|
|
$
|
58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
115,246
|
3
|
|
$
|
69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
36,466
|
5
|
|
|
2,542,045
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,575
|
2
|
|
|
597,763
|
|
|
|
|
|
12/18/2012
|
|
|
|
20,000
|
4
|
|
|
20,000
|
4
|
|
$
|
55.34
|
|
|
|
12/18/2017
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3/19/2013
|
|
|
|
—
|
|
|
|
14,000
|
3
|
|
$
|
58.94
|
|
|
|
3/19/2018
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
7,203
|
3
|
|
$
|
69.38
|
|
|
|
4/24/2019
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
James K. Hilger
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
5,968
|
3
|
|
$
|
83.82
|
|
|
|
6/2/2020
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
12/18/2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
3,983
|
5
|
|
|
277,655
|
5
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
4/24/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,801
|
9
|
|
|
125,548
|
9
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
6/2/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1,492
|
10
|
|
|
104,007
|
10
|
|
|
—
|
|
|
|
—
|
|
|
Dr. Garry E. Menzel
No Awards Outstanding
at 12/31/2015
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
33
|
1
|
The market value of shares or units of stock that have not vested reflects the $69.71 closing price of our common stock on December 31, 2015, as reported by the NYSE.
|
|
2
|
These PSUs vest 50% each on May 15, 2017 and May 15, 2018, subject to achievement of the performance conditions for PSUs. The amounts listed here are the target number of PSUs awarded.
|
|
3
|
These SSARs vest 50% on the third and fourth anniversaries of the grant date.
|
|
4
|
These remaining SSARs vest 50% on April 1, 2015 and 50% on April 1, 2016.
|
|
5
|
These remaining RSUs vest 50% on May 15, 2015 and 50% on May 15, 2016.
|
|
6
|
These SSARs vest 33% on the second, third and fourth anniversaries of the grant date.
|
|
7
|
These SSARs vest 50% on the second anniversary and 8.33% every three months thereafter.
|
|
8
|
These performance stock units vest 50% each on June 2, 2018 and June 2, 2019, subject to the performance conditions for PSUs. The amounts listed here are the target number of shares awarded.
|
|
9
|
These RSUs vest 50% each on May 15, 2017 and May 15, 2018.
|
|
10
|
These RSUs vest 50% each on June 2, 2018 and June 2, 2019.
|
The following table sets forth information
concerning the exercise of stock options and SSARs and the vesting of stock awards held by each of the NEOs during 2015.
2015 Option
Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Stock Awards
|
|
|
Name
|
|
Number
of
Shares
Acquired on
Exercise
(#)
|
|
|
Value
Realized on
Exercise
($)
1
|
|
|
|
|
Number of
Shares
Acquired
on
Vesting (#)
|
|
|
Value
Realized on
Vesting ($)
2
|
|
|
Kent J. Thiry
|
|
|
1,000,000
|
|
|
|
$33,919,985
|
|
|
|
|
|
72,064
|
|
|
|
$5,871,775
|
|
|
Javier J. Rodriguez
|
|
|
48,000
|
|
|
|
$1,980,165
|
|
|
|
|
|
36,466
|
|
|
|
$2,972,001
|
|
|
Michael D. Staffieri
|
|
|
217,000
|
|
|
|
$8,657,189
|
|
|
|
|
|
4,934
|
|
|
|
$402,022
|
|
|
Dennis L. Kogod
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
36,466
|
|
|
|
$2,971,250
|
|
|
James K. Hilger
|
|
|
17,500
|
|
|
|
$679,299
|
|
|
|
|
|
3,983
|
|
|
|
$324,535
|
|
|
Dr. Garry E. Menzel
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
1
|
Value realized on exercise is determined by subtracting the exercise or base price from the market price of our common stock at exercise, and multiplying the remainder by the number of shares exercised.
|
|
2
|
Value realized on vesting is determined by multiplying the number of shares underlying RSUs by the closing price for our common stock on the date of vesting, as reported by the NYSE.
|
No Pension Benefits
The Company does not have
a defined benefit pension plan in which any employee, including the NEOs, can participate to receive payments or other benefits at, following, or in connection with retirement.
Nonqualified Deferred Compensation
The
following table sets forth information concerning the Company’s nonqualified deferred compensation plans.
34
2015 Nonqualified Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last FY
($)
|
|
|
Registrant
Contributions
in Last
FY
($)
|
|
|
Aggregate
Earnings in
Last FY
($)
1
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance at
Last FYE
($)
4
|
|
|
Kent J. Thiry
Deferred Compensation Plan
|
|
|
$1,928,
|
077
2
|
|
|
—
|
|
|
|
(32,977)
|
|
|
|
—
|
|
|
|
$10,397,128
|
3
|
|
Javier J. Rodriguez
Voluntary Deferral Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
(36,52
|
0)
|
|
|
—
|
|
|
|
$573,297
|
|
|
Michael D. Staffieri
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Dennis L. Kogod
Executive Retirement Plan
|
|
|
—
|
|
|
|
—
|
|
|
|
$14,562
|
|
|
|
—
|
|
|
|
$326,796
|
|
|
James K. Hilger
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
1
|
None of the earnings in this column are included in the 2015 Summary Compensation Table because they are not preferential or above market.
|
|
2
|
This amount is reported in the ‘‘Salary’’ column in the 2015 Summary Compensation Table.
|
|
3
|
Mr. Thiry deferred $1,928,077 in 2015 into the Deferred Compensation Plan, and $2,076,923 in 2014 and $385,557 in 2013 into the Voluntary Deferral Plan.
|
|
4
|
Mr. Hilger, Mr. Staffieri and Dr. Menzel did not participate in any of the Company’s nonqualified deferred compensation plans in 2015.
|
Voluntary Deferral Plan and Deferred Compensation Plan
The 2015 Nonqualified Deferred Compensation Table presents amounts deferred under our Voluntary Deferral Plan and our Deferred Compensation Plan, which replaced the
Voluntary Deferral Plan effective January 1, 2015.
Contributions
Under the Voluntary Deferral Plan, participants could defer (i) up to 50% of their base salary, (ii) all or a portion of their annual bonus payment that is
earned in the same year as their base salary but payable in the following year and (iii) all or a portion of their other compensation as determined by the Company for deferrals prior to 2015. Under the Deferred Compensation Plan, participants
may defer i) up to 50% of their base salary, and (ii) all or a portion of their annual bonus payment that is earned in the same year as their base salary but payable in the following year. Under both plans, deferred amounts are credited with
earnings or losses based on the rate of return of one or more investment alternatives selected by the participant from among the investment funds selected by the Company.
Participants may change their investment elections daily. We do not make company
contributions to participants’ accounts under either the Voluntary Deferral Plan or the Deferred Compensation Plan. All participant contributions are irrevocably funded into a rabbi trust
for the benefit of those participants. Assets held in the trust are subject to the claims of the Company’s general creditors in the event of the Company’s bankruptcy or insolvency until paid to the plan participants.
Payment of benefits
Distributions are generally
paid out in cash at the participant’s election. Under the Voluntary Deferral Plan, distributions can be made commencing in the first or second year following retirement or in a specified year at least three to four years after the deferral
election was effective, and participants can elect to receive distributions in the form of one, five, ten, fifteen or twenty annual installments. Under the Deferred Compensation Plan, distributions can be made commencing in the second year following
the year to which the deferral election applies, after separation from service, or on any other scheduled payment date, and participants can elect to receive either a lump sum distribution or annual installments over any period from two to twenty
years; provided, that, if the Deferred Compensation Plan balance does not exceed $20,000, a lump sum will be paid. If the
35
participant has not elected a specified year for payout and the participant has a separation from service, distributions generally will be paid in a lump sum cash distribution after separation
from service.
In the event of a participant’s unforeseeable emergency, the plan administrator may, in its sole discretion, authorize the cessation of
deferrals by a participant, provide for immediate distribution to a participant in the form of a lump sum cash payment to cover the unforeseeable emergency, or provide for such other payment schedule as the plan administrator deems appropriate.
Executive Retirement Plan
The table also presents
amounts deferred under our Executive Retirement Plan. The Executive Retirement Plan was assumed by the Company from Gambro Healthcare, Inc. following our acquisition of Gambro Healthcare in October 2005. Amounts contributed to the plan were based on
a percentage of an executive’s annual base salary and such contributions were made prior to our assumption of the plan. We did not make any contributions to the Executive Retirement Plan following our assumption of the plan, and effective
February 1, 2006, we amended the plan to eliminate the obligation to make further contributions under the plan. All amounts contributed under this plan and currently in deferred accounts are fully vested. Deferred amounts are credited with
earnings or losses based on the rate of return of one or more investment alternatives selected by the participant from among the investment funds selected by the Company. Participants may change their investment elections daily. All contributions
are irrevocably funded into a rabbi trust for the benefit of plan participants. Assets held in the trust are subject to the claims of the Company’s general creditors in the event of the Company’s bankruptcy or insolvency until paid to the
plan participants. Benefits under the Executive Retirement Plan are distributed upon separation from service from the Company.
Potential Payments Upon Termination or Change of Control
General Terms and Definitions
For purposes of
the table below:
“Cause
” is defined in Mr. Thiry’s employment agreement as any of the following: (i) conviction of a felony;
(ii) any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of the Company; (iii) repeated failure or refusal by the executive to follow policies established by the Board
or written directives of the Board that goes uncorrected for a period of 30 consecutive days after notice of such failure or refusal, and that is material and willful and has a material adverse effect on the Company’s business; or (iv) a
material breach of the executive’s employment agreement that goes uncorrected for a period of 30 consecutive days after written notice has been provided to the executive.
Involuntary termination for
“Material Cause
” occurs if the Company terminates employment for any of the following reasons: (i) conviction of a
felony or plea of no contest to a felony; (ii) any act of fraud or dishonesty in connection with the performance of the executive’s duties; (iii) repeated failure or refusal by the executive to follow lawful policies or directives
reasonably established by the CEO of the Company or his designee that goes uncorrected for a period of 10 consecutive days after written notice has been provided to the executive; (iv) a material breach of the executive’s employment
agreement; (v) any gross or willful misconduct or gross negligence by the executive in performance of the executives duties; (vi) egregious conduct by the executive that brings the Company or any of its subsidiaries or affiliates into
public disgrace or disrepute; (vii) an act of unlawful discrimination, including sexual harassment; (viii) a violation of the duty of loyalty or of any fiduciary duty; or (ix) exclusion or notice of exclusion of the executive from
participating in any federal health care program. With respect to Mr. Staffieri’s employment agreement, clause ‘‘(iv)’’ also includes a breach
36
of the executive’s Noncompetition, Nonsolicitation and Confidentiality Agreement.
“Material
Cause
” is defined in the employment agreement of Mr. Kogod as any of the following: (i) conviction of a felony or plea of no contest to a felony; (ii) the adjudication by a court of competent jurisdiction that the executive
has committed any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of the Company; (iii) repeated failure or refusal by the executive to follow policies or directives
reasonably established by the CEO of the Company or his designee that goes uncorrected for a period of 30 consecutive days after written notice has been provided to the executive; (iv) a material breach of the executive’s employment
agreement that goes uncorrected for a period of 30 consecutive days after written notice has been provided to the executive; (v) any gross or willful misconduct or gross negligence by the executive in the performance of his duties;
(vi) egregious conduct by the executive that brings the Company or any of its subsidiaries or affiliates into public disgrace or disrepute; (vii) an act of unlawful discrimination, including sexual harassment; (viii) a violation of
the duty of loyalty or of any fiduciary duty; or (ix) exclusion or notice of exclusion of the executive from participating in any federal health care program.
Except with respect to Mr. Thiry, as noted below, a
“Change of Control
” means (i) any transaction or series of transactions in which any
person or group (within the meaning of
Rule 13d-5
under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect ‘‘beneficial owner’’ (as
defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted basis as if all convertible
securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of the Company (including any transaction in which the Company becomes a wholly-owned or majority-owned subsidiary of
another corporation), (ii) any merger or consolidation or reorganization in which the Company does not survive, (iii) any
merger or consolidation in which the Company survives, but the shares of the Company’s common stock outstanding immediately prior to such merger or consolidation represent 40% or less of the
voting power of the Company after such merger or consolidation, and (iv) any transaction in which more than 40% of the Company’s assets are sold. However, despite the occurrence of any of the above-described events, a ‘‘Change of
Control’’ will not have occurred if Mr. Thiry remains the CEO of the Company for at least one year after the Change of Control or becomes the CEO or executive chair of the surviving company with which the Company merged or
consolidated and remains in that position for at least one year after the Change of Control.
“Good Cause
” means the occurrence of the following
events without the executive’s express written consent: (i) the Company materially diminishes the scope of the executive’s duties and responsibilities; or (ii) the Company materially reduces the executive’s base
compensation. Notwithstanding the above, the occurrence of any such condition shall not constitute Good Cause unless the executive provides notice to the Company of the existence of such condition not later than 90 days after the initial existence
of such condition, and the Company shall have failed to remedy such condition within 30 days after receipt of such notice.
With respect to Mr. Thiry’s
employment agreement,
“Good Reason
” means during the employment period, without the written consent of the executive, any one or more of the following (provided that an isolated, insubstantial or inadvertent action not taken in bad
faith or failure not occurring in bad faith which is remedied by the Company promptly after receipt of notice thereof given by the executive shall not constitute Good Reason): (i) the assignment to the executive of any duties inconsistent in
any material and adverse respect with the executive’s then current duties and responsibilities; (ii) the material and adverse change in the executive’s titles or positions; (iii) reduction in the executive’s base salary or
target annual incentive opportunity, unless such reductions are part of an across-the-board reduction that applies to all senior executives of the Company and takes effect prior
37
to a Change in Control (as defined below for Mr. Thiry); or (iv) any material breach by the Company of the employment agreement, that is not corrected within 30 days after notice of
such breach.
For purposes of the definition of ‘‘Good Reason’’ in Mr. Thiry’s employment agreement above, a
“Change of
Control
” means (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) under the Exchange Act) becomes the direct or indirect
‘‘beneficial owner’’ (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 40% of the total voting power (on a
fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of the Company (including any transaction in which the Company becomes a
wholly-owned or majority-owned subsidiary of another corporation), (ii) consummation of any merger or consolidation in which the shares of the Company’s common stock outstanding immediately prior to such merger or consolidation represent
50% or less of the voting power of the corporation resulting from such merger or consolidation, or, if applicable, the ultimate parent corporation of such corporation, (iii) during any twenty-four month period, individuals who, as of the
beginning of such period, constitute the Board (the ‘‘Incumbent Board’’) cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the
beginning of such period whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the directors
then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result
of an actual or threatened solicitation by a person other than the Board for the purpose of opposing a solicitation by any other person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies
or consents by or on behalf of any person other than the Board shall not be deemed a member of the Incumbent Board, (iv) consummation of any transaction in which all or substantially all of the Company’s assets are sold, or (v) the
approval by the Company’s stockholders of a plan of complete liquidation or dissolution of the Company; provided, however, that no transaction contemplated by clauses (i) through (iv) above shall constitute a Change of Control if the
person acting as the CEO of the Company for the twelve months prior to such transaction continues as the CEO or executive chairman of the Board of Directors of the Company or becomes the CEO or executive chairman of the Board of Directors of the
entity that has acquired control of the Company as a result of such transaction (the ‘‘Acquiror’’) immediately after such transaction and remains the CEO or executive chairman of the Board of Directors of the Company or the
Acquiror for not less than twelve months following the transaction, and further provided, that in the event that the person acting as the CEO of the Company for the twelve months prior to such transaction ceases to be CEO or executive chairman of
the Board of Directors of the Company or of the Acquiror during the twelve months following the transaction, a Change of Control shall be deemed to have occurred on the date on which such person ceases to be CEO or executive chairman of the Board of
Directors of the Company or the Acquiror.
38
Severance Payments and Benefits
The following tables and summary set forth the Company’s payment obligations pursuant to the terms of the employment agreements for each of our NEOs, under the
circumstances described below, assuming that their employment was terminated on December 31, 2015. For a description of the value of stock-based awards held by Messrs. Thiry, Rodriguez, Staffieri, Kogod, and Hilger that are subject to
accelerated vesting upon a Change of Control, see ‘‘— Accelerated Vesting of Stock-Based Awards’’ below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of Base
Salary (or multiple
thereof) in effect at
termination for a
specified
period
following
termination
|
|
|
Bonus
1
|
|
|
Continued
Health
Benefits for a
Specified
Period
Following
Termination
|
|
|
Office and
Secretarial
Assistance
|
|
|
Tax
Gross-
Up
|
|
|
Total Value
|
|
|
Kent J. Thiry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
$2,225,186
|
2
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$2,225,186
|
|
|
Disability
|
|
|
—
|
|
|
|
$2,225,186
|
2
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$2,225,186
|
|
|
Involuntary Termination without Cause
|
|
|
$12,015,000
|
3
|
|
|
$2,225,186
|
4
|
|
|
$74,670
|
5
|
|
|
$308,787
|
6
|
|
|
—
|
|
|
|
$14,623,643
|
|
|
Involuntary Termination without Cause (prior to age 62)
7
|
|
|
$6,007,500
|
8
|
|
|
$2,225,186
|
4
|
|
|
$74,670
|
5
|
|
|
$308,787
|
6
|
|
|
—
|
|
|
|
$8,616,143
|
|
|
Resignation for Good Reason
|
|
|
$12,015,000
|
3
|
|
|
$2,225,186
|
4
|
|
|
$74,670
|
5
|
|
|
$308,787
|
6
|
|
|
—
|
|
|
|
$14,623,643
|
|
|
Javier J. Rodriguez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Involuntary Termination for Other than Material Cause
|
|
|
$1,200,000
|
9
|
|
|
$2,000,000
|
10
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$3,200,000
|
|
|
Resignation for Good Cause
|
|
|
$1,200,000
|
9
|
|
|
$2,000,000
|
10
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$3,200,000
|
|
|
Resignation Following a Good Cause Event after a Change of Control
|
|
|
$1,600,000
|
11
|
|
|
$2,000,000
|
10
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$3,600,000
|
|
|
Michael D. Staffieri
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Involuntary Termination for Other than Material Cause
|
|
|
$600,000
|
12
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$600,000
|
|
|
Good Cause Resignation after a Change of Control
|
|
|
$600,000
|
13
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$600,000
|
|
|
Dennis L. Kogod
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Involuntary Termination for Other than Material Cause
|
|
|
$800,000
|
14
|
|
|
$200,000
|
15
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$1,000,000
|
|
|
Resignation Following a Good Cause Event Unrelated to a Change of Control
|
|
|
$800,000
|
14
|
|
|
$200,000
|
15
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$1,000,000
|
|
|
Resignation Following a Good Cause Event after a Change of Control
|
|
|
$1,600,000
|
16
|
|
|
$200,000
|
15
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$1,800,000
|
|
|
James K. Hilger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Involuntary Termination for Other than Material Cause
|
|
|
$375,000
|
17
|
|
|
—
|
|
|
|
$23,429
|
18
|
|
|
—
|
|
|
|
—
|
|
|
|
$398,429
|
|
|
Good Cause Resignation after a Change of Control
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Dr. Garry E. Menzel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination for Other than Material Cause
|
|
|
$510,000
|
19
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$510,000
|
|
39
|
1
|
Does not include any amounts payable to Messrs. Thiry, Rodriguez or Kogod pursuant to our Voluntary Deferral Plan or Deferred Compensation Plan which amounts are included in the 2015 Nonqualified Deferred Compensation
Table. Such amounts are currently vested, but payment thereof may be accelerated in the event of death, disability or termination of employment.
|
|
2
|
Mr. Thiry (or his estate) will be entitled to receive the amount of any bonus earned and payable but not yet paid for the fiscal year prior to the year in which the termination occurs. On December 31, 2015,
Mr. Thiry had fully earned his bonus for 2015, so he would have received the full amount of his annual incentive bonus as reported in the 2015 Summary Compensation Table upon termination.
|
|
3
|
Mr. Thiry will be entitled to receive a lump-sum payment equal to the product of (x) three, and (y) the sum of his base salary in effect as of the date of termination and the Prior Bonus.
‘‘Prior Bonus’’ means the average of the annual incentive bonus earned under the Company’s 2011 Incentive Award Plan (including any bonus earned and payable but not yet paid) for the last two fiscal years before the fiscal
year in which Mr. Thiry’s employment was terminated.
|
|
|
The amount reported in the table above reflects the product of (x) three, and (y) the sum of Mr. Thiry’s base salary as of December 31, 2015, which was $1,200,000, and the average of
Mr. Thiry’s 2014 annual incentive bonus in the amount of $2,610,000 and Mr. Thiry’s 2013 annual incentive bonus in the amount of $3,000,000.
|
|
4
|
Mr. Thiry will be entitled to receive the amount of any bonus earned and payable but not yet paid for the fiscal year prior to the year in which the termination occurs. Mr. Thiry will also be entitled to
receive a prorated annual incentive bonus (based on the actual bonus earned under the objective standards set forth under the Company’s 2011 Incentive Award Plan for the fiscal year in which the termination occurs) through and including the
date of termination. On December 31, 2015, Mr. Thiry had fully earned his annual incentive bonus for 2015, so he would have received the full amount of his annual incentive bonus as reported in the 2015 Summary Compensation Table upon
termination.
|
|
5
|
Mr. Thiry will continue to receive his health benefits for the three-year period following termination. The amount reported in the table above is the estimated actual cost of COBRA insurance premiums for
Mr. Thiry for the three-year period following termination.
|
|
6
|
Mr. Thiry will be entitled to the use of an office and services of an administrative assistant for three years or until he obtains other full-time employment. The amounts above reflect the estimated costs to us of
providing the office and secretarial services for three years.
|
|
7
|
Mr. Thiry will be entitled to receive the payments set forth in this row in the event that, prior to the date on which Mr. Thiry attains age 62, the Board gives Mr. Thiry written notice that the term of
his employment agreement shall not be extended.
|
|
8
|
Mr. Thiry will be entitled to receive a lump sum payment equal to the product of (x) one and one-half, and (y) the sum of his base salary in effect as of the date of termination and the Prior Bonus (as
defined above). The amount reported in the table above reflects the product of (x) one and one-half, and (y) the sum of Mr. Thiry’s base salary as of December 31, 2015, which was $1,200,000, and the average of
Mr. Thiry’s 2014 annual incentive bonus in the amount of $2,610,000 and Mr. Thiry’s 2013 annual incentive bonus in the amount of $3,000,000.
|
|
9
|
Mr. Rodriguez will be entitled to receive his salary for the 18-month period following his termination without material cause or resignation for good cause. As of December 31, 2015, Mr. Rodriguez’s
base salary was $800,000.
|
|
10
|
If Mr. Rodriguez is terminated after April in a given year, he will be entitled to receive a lump-sum payment equal to the bonus paid in the year prior to the termination, pro-rated for the number of months served
in the year his employment is terminated. The Company interprets this severance provision to mean the severance is based on the bonus paid ‘‘for’’ the year prior to the year for which a bonus was most recently earned. This
severance amount is reported as the bonus paid to Mr. Rodriguez for 2014, which was $2,000,000.
|
|
11
|
Mr. Rodriguez will be entitled to receive his salary for the two-year period following his resignation for good cause following a change in control.
|
|
12
|
Mr. Staffieri will be entitled to receive his salary for the one-year period following his termination. As of December 31, 2015, Mr. Staffieri’s base salary was $600,000. Effective March 30,
2016, Mr. Staffieri’s base salary was increased to $700,000.
|
|
13
|
Mr. Staffieri will be entitled to receive his salary for the one-year period following his resignation for good cause following a change in control. As of December 31, 2015, Mr. Staffieri’s base
salary was $600,000. Effective March 30, 2016, Mr. Staffieri’s base salary was increased to $700,000.
|
|
14
|
Mr. Kogod will be entitled to receive his salary for the one-year period following his termination or resignation. As of December 31, 2015, Mr. Kogod’s base salary was $800,000.
|
|
15
|
Mr. Kogod will be entitled to receive a lump-sum payment equivalent to the bonus that he had been paid in the year before the termination. The Company interprets this severance provision to mean the severance is
based on the bonus paid ‘‘for’’ the year prior to the year for which a bonus was most recently earned. This severance amount is reported as the bonus paid to Mr. Kogod for 2014, which was $200,000.
|
|
16
|
Mr. Kogod will be entitled to receive his salary for the two-year period following his resignation for good cause following a change in control.
|
|
17
|
Mr. Hilger will be entitled to receive payment in an amount equal to his salary for the 12-month period following his termination. As of December 31, 2015, Mr. Hilger’s base salary was $375,000. Such
payment obligation will be reduced dollar-for-dollar by the amount of any compensation received by Mr. Hilger from another employer during the severance payment period, and Mr. Hilger is obligated to use reasonable efforts to find
employment during such period.
|
40
|
18
|
Mr. Hilger will continue to receive his health benefits for the one-year period following termination. The amount reported in the table above is the estimated actual cost of COBRA insurance premiums for
Mr. Hilger for the one-year period following termination.
|
|
19
|
Dr. Menzel stepped down as our Chief Financial Officer effective March 30, 2015 and is entitled to receive his salary for the one-year period following his termination. As of his termination,
Dr. Menzel’s base salary was $510,000, which was paid over a 12-month period beginning on May 5, 2015.
|
Other
Severance Payments and Benefits
The Company’s obligation to provide continued health benefits under the circumstances set forth in the tables above
is subject to earlier termination in connection with the executive accepting employment with another employer.
In the event of termination as a result of death,
the estates of the NEOs identified in the tables above will also receive the proceeds of the respective term life insurance policy for each NEO. The coverage amount for each NEO is as follows: $1,201,000 for Mr. Thiry, $500,000 for
Mr. Rodriguez, $500,000 for Mr. Staffieri, $585,000 for Mr. Kogod and $375,000 for Mr. Hilger.
Pursuant to the terms of his employment
agreement, Mr. Thiry will be eligible to receive a ‘‘gross-up’’ payment to the extent that any payment or benefit received or to be received by him is reduced by tax obligations possibly imposed by Sections 280G or 4999 of
the Internal Revenue Code. Assuming a triggering event took place on December 31, 2015, there would not be any tax gross-up amount payable. Moreover, no gross-up would have been payable under his agreement in any of the prior five years
if a change of control had occurred. Mr. Thiry has the only remaining legacy agreement that contains a tax gross-up. We have not provided for tax gross-ups in any employment agreements or
amended employment agreements entered into after July 2008.
To receive the severance payments and benefits described above, each NEO must execute the
Company’s standard severance and general release agreement. In addition, the employment agreements with each of our NEOs include confidentiality provisions that would apply until the confidential information becomes publicly available (other
than through breach by the NEO). These employment agreements also include nonsolicitation provisions which prohibit each NEO from soliciting any patient or customer of the Company to patronize a competing dialysis facility or from soliciting any
patient, customer, supplier or physician to terminate their business relationship with the Company, for a period of two years following the termination of the NEO’s employment. However, with respect to Mr. Kogod, the nonsolicitation
provision would apply for a period of one year following termination.
Accelerated Vesting of
Stock-Based Awards
For grants and awards of SSARs and/or RSUs to our NEOs, the stock-based award agreements provide that in the event that
either (i) in connection with a Change of Control (as defined below), the acquiring entity fails to assume, convert or replace the NEO’s options or awards, or (ii) the NEO’s employment is terminated within the twenty-four-month
period following a Change of Control by the Company (or the acquiring entity) other than for Cause (as defined below) or, if applicable, by the NEO in accordance with the termination for Good Reason provisions of the NEO’s employment agreement,
if any, then, in any such case, the options or RSU awards shall automatically vest and
become immediately exercisable in their entirety, such vesting to be effective as of immediately prior to the effective date of the Change of Control in the case of (i), and as of the date of
termination of the NEO’s employment in the case of (ii). For grants of PSUs, upon a Change of Control, all PSU awards immediately vest, and all PSU performance metrics are converted to the relative TSR metric. The number of shares issuable are
then determined based on the Company’s relative TSR performance (as described in the Compensation Discussion and Analysis) through an ending average price period of the approximately 30 calendar days immediately preceding the Change of Control.
41
The table below sets forth the value of the Company’s obligations upon the automatic vesting of the stock-based awards
of our NEOs as described above and assumes that the triggering event took place on December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Value of SSARs
1
|
|
|
Value of Stock
Awards
2
|
|
|
Tax
Gross-Up
|
|
|
Kent J.
Thiry
3,4
|
|
|
$16,449,172
|
|
|
|
$5,023,581
|
|
|
|
—
|
|
|
Javier J. Rodriguez
|
|
|
$3,850,058
|
|
|
|
$2,542,045
|
|
|
|
N/A
|
|
|
Michael D. Staffieri
|
|
|
$845,108
|
|
|
|
$343,949
|
|
|
|
N/A
|
|
|
Dennis L. Kogod
|
|
|
$3,215,774
|
|
|
|
$2,542,045
|
|
|
|
N/A
|
|
|
James K. Hilger
|
|
|
$440,557
|
|
|
|
$507,210
|
|
|
|
N/A
|
|
|
Garry E. Menzel
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
1
|
Values are based on the aggregate difference between the respective base prices and the closing sale price of our common stock on December 31, 2015, which was $69.71 per share, as reported by the NYSE.
|
|
2
|
Values are based on the aggregate number of shares underlying PSUs and RSUs multiplied by the closing sale price of our common stock on December 31, 2015, which was $69.71 per share, as reported by the NYSE. Based
on the terms of the PSU agreement, as of December 31, 2015, any accelerated PSUs would be valued at $0.
|
|
3
|
Pursuant to the terms of his employment agreement entered into on July 25, 2008, Mr. Thiry would be entitled to receive a ‘‘gross-up’’ payment to the extent any benefit received is reduced
by tax obligations possibly imposed by Sections 280G or 4999 of the Internal Revenue Code. Any such tax gross-up amount would be calculated using a 20% excise tax rate and an approximately 40% individual income tax rate and assumes that the base
amount for purposes of Sections 280G and 4999 of the Internal Revenue Code has been allocated between the cash severance and equity components of the change of control benefits in proportion to the amounts of each component. Assuming a triggering
event took place on December 31, 2015, there would not be any tax gross-up amount payable.
|
|
4
|
Since Mr. Thiry has been employed with the Company for over ten years as of December 31, 2015, 50% of any unvested equity awards vest upon any termination by Mr. Thiry without Cause or for Good Reason.
The value of such accelerated vesting is equal to 50% of the amounts set forth in the table.
|
Definitions Under Stock-Based
Award Agreements
For purposes of the stock-based award agreements and the table above:
A “Change of Control” means (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the
Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect ‘‘beneficial owner’’ (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger,
consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in
the election of directors of the Company (including any transaction in which the Company becomes a wholly-owned or majority-owned subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which the Company does
not survive, (iii) any merger or consolidation in which the Company survives, but the shares of the Company’s
common stock outstanding immediately prior to such merger or consolidation represent 50% or less of the voting power of the Company after such merger or consolidation, and (iv) any
transaction in which more than 50% of the Company’s assets are sold.
No transaction will constitute a Change of Control under the stock-based award agreements
if both (x) the person acting as the CEO of the Company for the six months prior to such transaction becomes the CEO or executive chairman of the board of directors of the entity that has acquired control of the Company as a result of such
transaction immediately after such transaction and remains the CEO or executive chairman of the board of directors for not less than one year following the transaction and (y) a majority of the acquiring entity’s board of directors
immediately after such transaction consist of persons who were directors of the Company immediately prior to such transaction.
42
“Cause” means: (1) a material breach by the executive of those duties and responsibilities of the executive
which do not differ in any material respect from the duties and responsibilities of the executive during the 90-day period immediately prior to a Change of Control (other than as a result of incapacity due to physical or mental illness) which is
demonstrably willful and deliberate on the executive’s part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of
the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach; (2) willful misconduct or gross negligence which
results in material harm to the Company; (3) the conviction of the executive of, or a plea of nolo contendere by the executive to, a felony or other crime involving fraud or dishonesty; or (4) willful violation of Company policies which
results in material harm to the Company.
43
Compensation of Directors
The following table sets forth information concerning the compensation of our non-employee directors during 2015. Mr. Thiry also serves as a member of the Board. As
an executive officer of the Company, Mr. Thiry does not receive any additional compensation for his services as a member of the Board.
2015 DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
($)
1
|
|
|
Stock
Awards
($ )
2,3,4
|
|
|
SSAR
Awards
($)
5
|
|
|
Total
($)
|
|
|
Pamela M. Arway
|
|
|
$155,000
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$319,597
|
|
|
Charles G. Berg
|
|
|
$229,000
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$393,597
|
|
|
Carol Anthony (‘‘John’’) Davidson
|
|
|
$167,500
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$332,097
|
|
|
Barbara J. Desoer
|
|
|
$18,696
|
|
|
|
$22,168
|
|
|
|
$14,649
|
|
|
|
$55,513
|
|
|
Paul J. Diaz
|
|
|
$110,000
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$274,597
|
|
|
Peter T. Grauer
|
|
|
$132,500
|
|
|
|
$94,991
|
|
|
|
$101,662
|
|
|
|
$329,153
|
|
|
John M. Nehra
|
|
|
$132,500
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$297,097
|
|
|
Dr. William L. Roper
|
|
|
$127,500
|
|
|
|
$94,991
|
|
|
|
$69,606
|
|
|
|
$292,097
|
|
|
Roger J. Valine
|
|
|
$117,500
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$94,991
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|
|
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$69,606
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|
|
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$282,097
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1
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Consists of the amounts described below under “Annual Retainers,” “Meeting Fees,” and “Expense Reimbursement and Per Diem Compensation.” With respect to Mr. Grauer, includes the
$37,500 cash portion for service as lead independent director. With respect to Ms. Arway and Messrs. Davidson and Berg, includes the $50,000 cash portion for service as chair of the Compensation Committee, Audit Committee and Compliance
Committee, respectively. With respect to Mr. Nehra and Dr. Roper, includes the $25,000 cash portion for service as chair of the Public Policy Committee and Clinical Performance Committee, respectively. With respect to Mr. Berg,
includes the $59,000 of additional fees in the aggregate paid to Mr. Berg in his role as the chairman of the Board’s Compliance Committee, in overseeing the Corporate Integrity Agreement and the subpoenas received by HCP, at the request of
the Board
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2
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With respect to Mr. Grauer, includes the $43,750 equity portion denominated in direct stock issuances for service as lead independent director.
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3
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The amounts shown in this column reflect the aggregate grant date fair value of all common stock awards, restricted stock units and DSI awards granted to our directors during 2015 as estimated by the Company in
accordance with FASB ASC Topic 718. See Note 19 to the Consolidated Financial Statements included in our Original 2015 Form 10-K for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718.
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4
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The amounts shown in this column reflect the aggregate grant date fair value of all SSAR awards granted to our directors during 2015 as estimated by the Company in accordance with FASB ASC Topic 718. With respect to
Mr. Grauer, includes the $43,750 equity portion denominated in SSARs for service as lead independent director. See Note 19 to the Consolidated Financial Statements included in our Original 2015 Form 10-K for a discussion of the relevant
assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718.
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5
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As of December 31, 2015, each non-employee director had the following number of SSARs outstanding: Ms. Arway, 82,076; Mr. Berg, 58,076; Mr. Davidson, 46,076; Ms. Desoer, 1,223; Mr. Diaz,
10,076; Mr. Grauer, 122,717; Mr. Nehra, 118,076; Dr. Roper, 82,076; and Mr. Valine, 88,076.
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Our Non-Employee Director Compensation Policy (the ‘‘Director Compensation Policy’’) sets forth the
terms of our director compensation. There is no discretionary decision-making involved in director compensation. The Compensation Committee and the Board periodically review director compensation, except with respect to occasional meetings or
activities outside the scope of normal Board duties that are
compensated on a
per diem
basis (see description below under ‘‘Per Diem Compensation’’). The following describes the compensation paid to our non-employee directors for
service as a director during 2015 under the Director Compensation Policy as set forth in the table above. Directors who are our employees or officers do not receive compensation for service on the Board or any committee of the Board.
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Stock-Based Compensation
Annual Grant
. Under the Director Compensation Policy, each of our
non-employee directors is entitled to receive SSARs, granted on, and priced as of close of the market on, the date of our annual stockholder meeting. The number of SSARs to be granted shall be determined by dividing $95,000 by 25% of the closing
market price of our common stock on the grant date. The SSARs vest in full on the one year anniversary of the date of grant, with acceleration of vesting upon a Change of Control (as defined above under ‘‘Definitions Under Stock-Based
Award Agreements’’), and expiring five years after the date of grant. Each of our non-employee directors is also entitled to receive direct stock issuances (‘‘DSIs’’) to be granted quarterly on the last day of each
fiscal quarter. The number of DSIs to be granted quarterly shall be determined by dividing $23,750 by the closing market price of our common stock on the last trading day of each fiscal quarter. The DSIs are 100% vested upon issuance. The annual
grant of SSARs and DSIs shall be prorated, as applicable, including for new directors, based on the days of service on the Board within a fiscal year or fiscal quarter, respectively. SSARs granted on a prorated basis shall be granted and priced as
of the close of market on the first day of service on the Board, which date shall be determined by the Board upon such individual’s appointment as a director.
Additional Annual Grant to Lead Independent Director.
The lead independent
director is also entitled to receive additional SSARs, granted on, and priced as of the close of the market on, the date of our annual stockholder meeting. The number of SSARs to be granted shall be determined by dividing $43,750 by 25% of the
closing market price of our common stock on the grant date. The SSARs vest in full on the one year anniversary of the date of grant, with acceleration of vesting upon a Change of Control (as defined above under ‘‘Definitions Under
Stock-Based Award Agreements’’), and expiring five years after the date of grant. Vesting of these SSARs continues so long as the non-employee director continues to serve on the Board even if he or she is no longer lead independent
director. The lead independent director is also entitled to
receive DSIs to be granted quarterly on the last day of each fiscal quarter. The number of DSIs to be granted quarterly shall be determined by dividing $10,937.50 by the closing market price of
our common stock on the last trading day of each fiscal quarter. The DSIs are 100% vested upon issuance. The annual grant of SSARs and DSIs shall be prorated, as applicable, based on the days of service as lead independent director within a fiscal
year or fiscal quarter, as applicable. SSARs granted on a prorated basis shall be granted and priced as of the close of market on the first day of service as lead independent director on the Board.
If the lead independent director also serves as a chair of any committee of the Board, the lead independent director will also be entitled to receive the additional
retainer for serving as the chair of any such committee, in addition to the retainers and equity grants he or she is entitled to receive as the lead independent director.
Annual Retainers
Annual Retainer
. Pursuant to the Director Compensation Policy, each of our non-employee directors is entitled to receive an annual retainer of $80,000 in cash
per year, paid quarterly in arrears.
Lead Independent Director Retainer
. Under the Director Compensation Policy, the lead independent director receives an additional retainer of $37,500 in cash per year, paid quarterly in arrears.
Committee Chairs Retainer
. Under the Director Compensation Policy, the
chairs of the Audit, Compensation and Compliance Committees receive an additional retainer of $50,000 in cash per year, paid quarterly in arrears, and the chairs of the Public Policy and the Clinical Performance Committees receive an additional
retainer of $25,000 in cash per year, paid quarterly in arrears.
Proration of Quarterly Retainer —
Upon Appointment.
The quarterly retainer due to a director elected during a quarter is prorated based on the date of such director’s appointment.
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Proration of Quarterly Retainer — Upon Termination.
The quarterly retainer due to a director terminating service during a quarter is prorated based on the date of such director’s termination.
Meeting Fees
Board Meetings
. Under the Director Compensation Policy, our non-employee directors are not entitled to receive any additional compensation for regularly
scheduled Board meetings.
Special Board Meetings
. Non-employee
directors are entitled to receive $2,500 in cash for attendance at a special meeting regardless of the duration of such meeting, unless the meeting is held telephonically, in which case the meeting must last at least approximately one hour.
Committee Meetings
. For committee meetings, non-employee
directors are entitled to receive additional compensation of $2,500 in cash for attendance regardless of the duration of such meetings, unless it is a special committee meeting held telephonically, in which case the meeting must last at least
approximately one hour. In the case of Audit Committee meetings related to quarterly earnings releases, additional compensation of $2,500 in cash for each such meeting is paid regardless of the duration of such meetings.
Expense Reimbursement and Per Diem Compensation
Expense Reimbursement
. Under the Director Compensation Policy, we
reimburse our directors for their reasonable out-of-pocket expenses incurred in connection with their travel to and attendance at meetings of the Board or any committee thereof and other Board-related business.
Per Diem Compensation
. Additionally, under the Director Compensation
Policy, we compensate our non-employee directors on a per diem, hourly or other basis at a rate that is reasonable and fair to the Company as determined at the discretion of the lead independent director, the Board or the Compensation Committee, as
applicable, for significant time spent outside of Board or committee meetings or for meetings or activities outside the scope of normal board duties, including director training, meeting with Company management or external auditors, interviewing
director candidates or other activities deemed necessary by the chairman of the Board, the lead independent director, or the entire Board. The per diem rate is paid on a pro rata basis for activities that do not require a full day of service.
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Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has served as one of our officers or employees at any time. During 2015, none of our executive officers served as a member of
the compensation committee or board of directors of any other company whose executive officer(s) served as a member of our Compensation Committee or Board.
47