(including SSARs, RSUs, PSUs– | each of the CEO and CFO must repay any incentive-based compensation (net of any unreturnable taxes) paid to such person during the one-year period prior to the disclosure of such financial statement restatement (the “Covered Period”) which was awarded on the basis of the erroneous results and which is greater than the amount such person would have received had the Company’s financial statements been correctly reported (the “Excess Amount”); 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.
| | – | the Compensation Committee may recoup the Excess Amount of incentive-based compensation from any NEO serving during the Covered Period. |
| ● | In addition, if fraud or intentional misconduct of an executive officer or member of the Board was a significant contributing factor to a restatement, the Compensation Committee (or the Board, as applicable) may, among other things, (a) require reimbursement of any bonus or incentive-based compensation; (b) cause the cancellation of any outstanding restricted or deferred stock units, stock options, SSARs, PSUs or other stock-based awards; (c) cause the cancellation of any outstanding performance-based, cash-settled long-term or short-term incentive-based compensation awards; or (d) seek reimbursement of any income or gains realized that are attributable to stock-based or performance-based awards, provided, however, that the Compensation Committee (or the Board, as applicable) may take the foregoing actions only if and to the extent that (i) the amount of incentive-based compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement and (ii) the amount of the bonus or incentive compensation that would have been awarded to the officer had the financial results been correctly reported would have been lower than the amount actually awarded or realized. Notwithstanding the foregoing, the Company will not seek to recover any compensation realized, paid or that vested more than three years prior to the date the applicable financial statement restatement is disclosed by the Company. | 56● | | In the event of a determination by the Company’s recoupment committee that a Senior Vice President or above of the Company within the United States engaged in certain actions constituting significant misconduct, the Company may recover certain incentive compensation paid to such persons, including through the cancellation, forfeiture and/or repayment of paid and unpaid bonus monies and incentive compensation, vested or unvested long-term incentive program awards, payments made, income, gain or value realized attributable to long-term incentive program awards, or deferred compensation. The maximum amount of compensation at risk in this case is an amount equivalent to up to three years of his or her annual incentive compensation and such compensation is generally at risk for a period of three years from the date of such misconduct. |
The Compensation Committee of the Board is currently composed of four independent directors. The Compensation Committee oversees the Company'sCompany’s compensation program on behalf of the Board. The Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement with management. Statement.Based on the Compensation Committee'sCommittee’s review and discussion with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company'sCompany’s Proxy Statement for the Company's SpecialAnnual Meeting of Stockholders.
and the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.COMPENSATION COMMITTEE Barbara J. Desoer, Chair
Pamela M. Arway Chair Pascal Desroches
Paul J. Diaz
Peter T. Grauer
John M. NehraThe information contained above in this section titled "Compensation“Compensation Committee Report"Report” will not be considered "soliciting material"“soliciting material” or to be "filed"“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.
| | 76 |  | | | DaVita Inc. Notice of Special2021 Annual Meeting and Proxy Statement |
Table of Contents 57Risk Considerations in Our Compensation Program |
Risk Considerations in Our Compensation Program
The Compensation Committee, with the assistance of Compensia, conducts an annual reviewwith respect to our executive compensation policies and practices, and Willis Towers Watson, with respect to the non-executive compensation policies and practices, conducted reviews of the Company'sCompany’s material compensation policies and practices applicable to its employees, including its executive officers.employees. Based on the most recentthis 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;
short-term incentive opportunities are capped and are not linked to any one specific goal;
severance payments are limited to 3x base salary and target bonus;
equity awards have meaningful vesting requirements;
| – | a balance between cash and equity compensation; | | – | a balance between short-term and long-term performance focus; | | – | short-term incentive opportunities are capped and are not linked to any one specific goal; | | – | severance payments are limited to 3x base salary and target bonus; | | – | equity awards have meaningful vesting requirements and, in some cases, holding 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 under certain circumstances; | | – | stock ownership guidelines; | | – | significant independent Compensation Committee oversight; and | | – | appropriate prohibitions against hedging and pledging transactions involving equity securities of the Company by executives and members of the Board. |
Table of Contents 2020 Summary Compensation Table The following table contains compensation information for our NEOs for the fiscal year ended December 31, 2020 and, to the extent required under the SEC executive compensation disclosure rules, the fiscal years ended December 31, 2019 and December 31, 2018. In accordance with SEC executive compensation disclosure rules, the value associated with the CEO Premium-Priced SSAR Award is presented as 2020 compensation in the 'Option Awards' column below and represents the Black-Scholes value of the Board; stock ownership guidelines;
significant independententire grant on the Stockholder Approval Date although the award is intended to replace five-year's worth of grants (through 2024). The annualized grant equivalent value of the award would be approximately $13.7 million, resulting in a total compensation for the year, on an annualized basis, of approximately $18.6 million. This annualized total compensation amount is provided for additional context to illustrate how the Compensation Committee oversight;viewed the grant and
appropriate prohibitions against hedging and pledging transactions involving equity securities of is not intended to be a substitute for the Company by executives and members ofamount reported in the Board.
'Total' column below.Name and Principal
Position | | Year | | Salary1
($) | | Bonus2
($) | | Stock
Awards3
($) | | Option
Awards4
($) | | Non-Equity
Incentive
Plan
Compensation5
($) | | All Other
Compensation6
($) | | Total
($) | | Javier J. Rodriguez
Chief Executive
Officer | | 2020 | | 1,246,154 | | — | | — | | 68,496,958 | | 3,282,480 | | 406,773 | | 73,432,365 | 7 | | 2019 | | 1,066,154 | | — | | 8,748,533 | | — | | 6,745,168 | | 293,605 | | 16,853,460 | | | 2018 | | 900,000 | | — | | 3,497,922 | | 1,428,751 | | 1,947,978 | | 131,947 | | 7,906,598 | | Kent J. Thiry
Former Executive
Chairman | | 2020 | | 465,385 | | — | | — | | — | | 710,621 | | 12,103,936 | | 13,279,942 | | | 2019 | | 1,138,462 | | — | | 3,485,347 | | — | | 2,399,466 | | 608,570 | | 7,631,845 | | | 2018 | | 1,300,000 | | — | | 20,895,892 | | 5,710,778 | | 3,303,371 | | 807,460 | | 32,017,501 | | Joel Ackerman
Chief Financial Officer
and Treasurer | | 2020 | | 726,923 | | — | | 1,634,521 | | 1,590,167 | | 1,283,325 | | 3,840 | | 5,238,776 | | | 2019 | | 700,000 | | — | | 2,987,447 | | 1,565,971 | | 1,280,906 | | 3,840 | | 6,538,164 | | | 2018 | | 700,000 | | — | | 3,724,396 | | 911,966 | | 1,279,902 | | 4,018 | | 6,620,282 | | Michael D. Staffieri
Chief Operating Officer,
DaVita Kidney Care | | 2020 | | 796,154 | | — | | 2,451,795 | | 2,385,261 | | 1,954,155 | | 132,118 | | 7,719,483 | | | 2019 | | 700,000 | | 1,400,000 | | 4,000,023 | | 2,802,840 | | 4,283,204 | | 108,113 | | 13,294,180 | | Kathleen A. Waters
Chief Legal and Public
Affairs Officer | | 2020 | | 633,462 | | — | | 2,189,681 | | 530,056 | | 859,300 | | 3,840 | | 4,216,339 | | | 2019 | | 566,154 | | — | | 1,493,750 | | 1,138,888 | | 1,873,875 | | 3,840 | | 5,076,507 | | | 2018 | | 540,000 | | — | | 3,527,445 | | 547,186 | | 646,045 | | 3,840 | | 5,264,516 | | James O. Hearty
Chief Compliance Officer | | 2020 | | 519,231 | | — | | 556,353 | | 185,529 | | 547,080 | | 3,840 | | 1,812,033 | |
2018 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | | Salary
($) | | Bonus1
($) | | Stock
Awards2,3
($) | | Option
Awards4
($) | | Non-Equity
Incentive
Plan
Compensation5
($) | | All Other
Compensation6
($) | | Total
($) | | Adjusted Total Compensation Without Rule of 65 and Other Modification Charges ($)7 | Kent J. Thiry
Chairman and Chief Executive Officer, DaVita, and Chief Executive Officer, DaVita Medical Group | 2018 | | $ | 1,300,000 |
| | $ | — |
| | $ | 20,895,892 |
| | $ | 5,710,778 |
| | $ | 3,303,371 |
| | $ | 807,460 |
| | $ | 32,017,501 |
| | $ | 17,327,711 |
| | 2017 | | $ | 1,300,000 |
| | $ | — |
| | $ | 5,486,824 |
| | $ | 6,215,011 |
| | $ | 1,750,000 |
| | $ | 572,923 |
| | $ | 15,324,758 |
| | $ | 15,324,758 |
| | 2016 | | $ | 1,273,077 |
| | $ | — |
| | $ | 4,531,740 |
| | $ | 4,082,358 |
| | $ | 1,705,153 |
| | $ | 704,343 |
| | $ | 12,296,671 |
| | $ | 12,296,671 |
| Javier J. Rodriguez
Chief Executive
Officer, DaVita Kidney Care | 2018 | | $ | 900,000 |
| | $ | — |
| | $ | 3,497,922 |
| | $ | 1,428,751 |
| | $ | 1,947,978 |
| | $ | 131,947 |
| | $ | 7,906,598 |
| | $ | 7,906,598 |
| | 2017 | | $ | 900,000 |
| | $ | — |
| | $ | 1,047,499 |
| | $ | 1,186,505 |
| | $ | 5,133,777 |
| | $ | 97,626 |
| | $ | 8,365,407 |
| | $ | 8,365,407 |
| | 2016 | | $ | 865,385 |
| | $ | — |
| | $ | 911,452 |
| | $ | 1,740,575 |
| | $ | 5,069,405 |
| | $ | 185,709 |
| | $ | 8,772,526 |
| | $ | 8,772,526 |
| Joel Ackerman Chief Financial Officer and Treasurer | 2018 | | $ | 700,000 |
| | $ | — |
| | $ | 3,724,396 |
| | $ | 911,966 |
| | $ | 1,279,902 |
| | $ | 4,018 |
| | $ | 6,620,282 |
| | $ | 6,620,282 |
| | 2017 | | $ | 576,154 |
| | $ | 200,000 |
| | $ | 997,621 |
| | $ | 2,127,654 |
| | $ | 750,000 |
| | $ | 160 |
| | $ | 4,651,589 |
| | $ | 4,651,589 |
| Kathleen A. Waters
Chief Legal Officer | 2018 | | $ | 540,000 |
| | $ | — |
| | $ | 3,527,445 |
| | $ | 547,186 |
| | $ | 646,045 |
| | $ | 3,840 |
| | $ | 5,264,516 |
| | $ | 5,264,516 |
| | 2017 | | $ | 540,000 |
| | $ | — |
| | $ | 274,361 |
| | $ | 310,758 |
| | $ | 615,000 |
| | $ | 23,585 |
| | $ | 1,763,704 |
| | $ | 1,763,704 |
| | 2016 | | $ | 334,385 |
| | $ | 740,000 |
| | $ | 533,004 |
| | $ | 402,033 |
| | $ | — |
| | $ | 200 |
| | $ | 2,009,622 |
| | $ | 2,009,622 |
| LeAnne M. Zumwalt
Group Vice President, Purchasing and Public Affairs | 2018 | | $ | 400,000 |
| | $ | 280,000 |
| | $ | 497,705 |
| | $ | 607,988 |
| | $ | — |
| | $ | 3,792 |
| | $ | 1,789,485 |
| | $ | 1,789,485 |
| | 2017 | | $ | 400,000 |
| | $ | — |
| | $ | 274,361 |
| | $ | 310,758 |
| | $ | 150,000 |
| | $ | 192 |
| | $ | 1,135,311 |
| | $ | 1,135,311 |
| | 2016 | | $ | 400,000 |
| | $ | 200,000 |
| | $ | — |
| | $ | 371,130 |
| | $ | 584,210 |
| | $ | 384 |
| | $ | 1,555,724 |
| | $ | 1,555,724 |
|
| | | 1 | The amounts2020 salary earned for each NEO is higher than the NEO's base salary amount due to 27 pay periods in the year. For comparative purposes, 2019 and 2018 each had 26 pay periods. | | 2 | The amount reported in this column for 2018 representMr. Staffieri for 2019 represents an annual performance bonusesbonus for non-STIhim as he was not a STI program participants, namely Ms. Zumwalt, earned with respect to 2018. The amounts earned under our 2018 short-term incentive program (the “2018 STI Program”) under the 2011 Incentive Plan are includedparticipant in the “Non-Equity Incentive Plan Compensation” column. |
| 2019. | 23 | The amounts shownreported in this column reflect RSU and PSU awards and represent the aggregate grant date fair value of all such awards granted to the executiveNEO during the year as estimated by the Company in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation ("FASB ASC Topic 718.718"). In accordance with SEC rules, the amounts included in the Stock Awards column for the 2020 PSU awards granted during 2018 are calculated based on the probable outcome of the performance conditions for such awards on the grant date. If the probable outcome of the performance conditions as of grant date had been maximum performance, then the grant date fair value of thesuch PSUs would have been as follows: Mr. Thiry — $11,889,630; Mr. Rodriguez — $4,656,737; Mr. Ackerman — $2,972,475; and$3,269,041; Mr. Staffieri — $4,903,590; Ms. Waters —$2,179,393; and Mr. Hearty — $1,783,510. For Mr. Ackerman and Ms. Waters the amounts shown also include PSU awards granted during 2018 for which any vesting was contingent on closing of the DMG transaction. The Compensation Committee also retained the ability to reduce these transaction-related PSU awards, including to zero, at its sole discretion at any time prior to the closing of the DMG transaction. For these awards, target and maximum performance result in the same grant date fair value which is as follows: Mr. Ackerman ��� $1,491,666 and Ms. Waters — $2,187,768.$762,728. See Note 1918 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20182020 (the "2020 Annual Report") for a discussion of the relevant assumptions used in calculating these amounts pursuant to FASB ASC Topic 718. |
| | 3 | For Mr. Thiry, thesehis 2018 amounts also include the incremental fair value associated with (i) the modification of his outstanding equity awards as a result of the implementation of the Rule of 65 Retirement Policy and (ii) the modification of his outstanding PSU award granted in 2016 to reallocate the performance criteria related to a DMG performance metric, contingent on completion of the sale of DMG, given that upon close the performance of this criterion would not be measurable. Mr. Thiry was the only executiveNEO with outstanding PSUs that had a performance criteriacriterion linked to a DMG related metric. The Rule of 65 Retirement Policy is effective for all executive officers, however, under FASB ASC Topic 718 a modification charge only applied to Mr. Thiry. These modification charges do not represent newly granted awards. |
| 78 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents
| 4 | The amounts shownreported in this column represent the aggregate grant date fair value of SSAR awards granted to the executiveNEOs during the year as estimated by the Company in accordance with FASB ASC Topic 718. ForAs noted above, the CEO Premium-Priced SSAR Award granted to Mr. Thiry, the 2018 amount reflects the incrementalRodriguez, with a grant date fair value associated with(on the modificationStockholder Approval Date) of his outstanding equity awardsapproximately $68.5 million, is presented as a result2020 compensation in this column and represents the Black-Scholes value of the implementationentire grant on the Stockholder Approval Date. Since the CEO Premium-Priced SSAR Award is intended to replace five years of grants for the Rule of 65 Retirement Policy.CEO, the annualized grant equivalent value would be approximately $13.7 million. See Note 1918 to the Consolidated Financial Statements included in ourthe 2020 Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the relevant assumptions used in calculating these amounts pursuant to FASB ASC Topic 718. The | | For Mr. Thiry, his 2018 amounts also include the incremental fair value associated with the modification of his outstanding SSAR awards as a result of the implementation of the Rule of 65 Retirement Policy, is effective for all officers, however, under FASB ASC Topic 718 a modification charge only appliedas further described in footnote 3 to Mr. Thiry. This modification charge does not represent newly granted awards. |
| this table. | | 5 | The amounts shownreported in this column represent amounts earned for performance periods ending in 2020, 2019, and 2018, 2017, and 2016, respectively, as detailed below with respect to 2018.respectively. The awards are reported for the year with respect to which they were earned, regardless of when the award was granted or paid. For 2018 and 2020, these amounts represent payouts with respect to the 2018 STI Program. Please see the section titled "Compensation Discussion and Analysis — Elements of Compensation — Short-Term Incentive Program (STI Program)Programs for 2018” in this Proxy Statement for a discussion of the performance criteria under the 2018 STI Program. The 2016 long-term cash-based performance awards (the "2016 Cash LTI Program") did not pay out based on performance through the completion of the performance period, which ended December 31, 2018 and accordingly, there is no value included in this columnthose respective years. For 2019, these amounts represent payouts with respect to the 20162019 STI Program and the 2017 performance cash long-term incentive program ("2017 Cash LTI Program.LTI") as follows: |
| Name | | Year | | 2019 STI Program | | 2017 Cash LTI Program | | Total Non-Equity Incentive
Plan Compensation | | Javier J. Rodriguez | | 2019 | | $ | 2,791,441 | | $ | 3,953,727 | | $ | 6,745,168 | | Kent J. Thiry | | 2019 | | $ | 2,399,466 | | $ | — | | $ | 2,399,466 | | Joel Ackerman | | 2019 | | $ | 1,280,906 | | $ | — | | $ | 1,280,906 | | Michael D. Staffieri | | 2019 | | $ | — | | $ | 4,283,204 | | $ | 4,283,204 | | Kathleen A. Waters | | 2019 | | $ | 838,375 | | $ | 1,035,500 | | $ | 1,873,875 |
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 59 |
| | | | | | | | | | | | | | | | Name | | 2018 STI Program | | 2016 Cash LTI Program | | Total Non-Equity Incentive Plan Compensation | | | Kent J. Thiry | | $ | 3,303,371 |
| | $ | — |
| | $ | 3,303,371 |
| | | Javier J. Rodriguez | | $ | 1,947,978 |
| | $ | — |
| | $ | 1,947,978 |
| | | Joel Ackerman | | $ | 1,279,902 |
| | $ | — |
| | $ | 1,279,902 |
| | | Kathleen A. Waters | | $ | 646,045 |
| | $ | — |
| | $ | 646,045 |
| | | LeAnne M. Zumwalt | | $ | — |
| | $ | — |
| | $ | — |
| |
| | | 6 | Amounts includedThe amounts reported in this column are set forth by category below. Other than the use of a fractionally-owned or chartered corporate aircraft, the amounts disclosed are the actual or share of actual costs to the Company of providing these benefits. Because aWith respect to the personal use of fractionally-owned or chartered corporate aircraft, is used primarily for business purposes, we do not include in the incremental cost allocated to each executive 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 aircraftcost 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.costs, and excludes fixed costs that do not change based on usage as the fractionally-owned or chartered corporate aircraft is used primarily for business purposes. Occasionally, a spouse or other guest may accompany NEOs on corporate aircraft when the aircraft is already scheduled for business purposes and can accommodate additional passengers. In those cases, there is no aggregate incremental cost to the Company and, as a result, no amount is reflected in the 2020 Summary Compensation Table. 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. |
| Name | | Year | | Other Personal
Benefits*
($) | | Life Insurance
Premiums
($) | | Termination
Benefits**
($) | | Company Contribution
to Defined
Contribution Plan
($) | | Total All Other
Compensation
($) | | Javier J. Rodriguez | | 2020 | | $ | 402,597 | | $ | 576 | | $ | — | | $ | 3,600 | | $ | 406,773 | | Kent J. Thiry | | 2020 | | $ | 42,628 | | $ | 200 | | $ | 12,057,508 | | $ | 3,600 | | $ | 12,103,936 | | Joel Ackerman | | 2020 | | $ | — | | $ | 240 | | $ | — | | $ | 3,600 | | $ | 3,840 | | Michael D. Staffieri | | 2020 | | $ | 128,551 | | $ | 336 | | $ | — | | $ | 3,231 | | $ | 132,118 | | Kathleen A. Waters | | 2020 | | $ | — | | $ | 240 | | $ | — | | $ | 3,600 | | $ | 3,840 | | James O. Hearty | | 2020 | | $ | — | | $ | 240 | | $ | — | | $ | 3,600 | | $ | 3,840 |
| | | | | | | | | | | | | | | | | | | | | Name | | Year | | Perquisites* ($) | | Life Insurance Premiums ($) | | Company Contribution
to Defined Contribution Plan
($) | | Total All Other Compensation ($) | | Kent J. Thiry | | 2018 | | $ | 803,236 |
| | $ | 624 |
| | $ | 3,600 |
| | $ | 807,460 |
| | Javier J. Rodriguez | | 2018 | | $ | 128,400 |
| | $ | 432 |
| | $ | 3,115 |
| | $ | 131,947 |
| | Joel Ackerman | | 2018 | | $ | 178 |
| | $ | 240 |
| | $ | 3,600 |
| | $ | 4,018 |
| | Kathleen A. Waters | | 2018 | | $ | — |
| | $ | 240 |
| | $ | 3,600 |
| | $ | 3,840 |
| | LeAnne M. Zumwalt | | 2018 | | $ | — |
| | $ | 192 |
| | $ | 3,600 |
| | $ | 3,792 |
|
| | | * | Amounts for Messrs. Thiry and Rodriguez include certain personal meals and entertainment expenses, legal expenses andin this column consist of personal use of fractionally-owned or chartered corporate aircraft. For purposesaircraft and for Mr. Thiry, his amount also includes $282 for car service expenses. | | ** | Amount for Mr. Thiry, pursuant to his Executive Chairman Agreement, is comprised of calculatinghis separation pay consisting of a lump-sum payment ($11,480,057), continuation of health benefits ($40,788), and the estimated cost of Mr. Thiry's use of an administrative assistant for three years or until he obtains other full-time employment, valued at $536,663 based on current Company salary and benefit costs and assuming Mr. Thiry utilizes the administrative assistant for the entire three-year period at the same level as currently utilized. Mr. Thiry is also eligible for office space as well as IT support services, although there is no additional incremental costscost to the Company of Messrs.as Mr. Thiry is using an office at the Company's headquarters and Rodriguez's personal use of Company aircraft,receives IT support from 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. The incremental costs allocated to Messrs. Thiry and Rodriguez for personal aircraft usage in 2018 were $778,219 and $128,150, respectively.Company's IT department on occasion. |
| | | 7 | The amounts in this column are calculated by subtractingIn accordance with SEC executive compensation disclosure rules, the modification charges reported in the "Stock Awards" and "Option Awards" columns above from the "Total" column. These modification charges consist of $14.4 millionvalue associated with the implementationCEO Premium-Priced SSAR Award is presented as 2020 compensation in the 'Option Awards' column above and represents the Black-Scholes value of the Ruleentire grant on the Stockholder Approval Date although the award is intended to replace five-year's worth of 65 Retirement Policy and $0.3 million associated with the modification of Mr. Thiry's outstanding PSU award granted in 2016 to reallocate the performance criteria related to a DMG performance metric, contingent on closinggrants (through 2024). The annualized grant equivalent value of the saleaward would be approximately $13.7 million, resulting in a total compensation for the year, on an annualized basis, of DMG. The 2018approximately $18.6 million. This annualized total compensation amount reported in this columnis provided for Mr. Thiry differs from,additional context to illustrate how the Compensation Committee viewed the grant and is not intended to be a substitute for the amount reported in the "Total"'Total' column as calculated pursuant to the Summary Compensation Table rules.above. |
Table of Contents
20182020 Grants of Plan-Based Awards Table
The following table sets forth information concerning plan-based awards made to each of the NEOs under the 2011 Incentive Plan during 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | Name | Grant Date | | Threshold ($) | | 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 (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)8 | | Kent J. Thiry | — |
| 1 | $ | — |
| | $ | 1,950,000 |
| | $ | 5,850,000 |
| — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | 5/15/2018 |
| 2 | $ | — |
| | $ | — |
| | $ | — |
| 33,784 |
| | 90,090 |
| | 180,180 |
| — |
| | — |
| | — |
| | $ | 5,944,814 |
| | 5/15/2018 |
| 4 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| 90,090 |
| | — |
| | — |
| | $ | 5,972,066 |
| | 8/19/2018 |
| 5 | $ | — |
| | $ | — |
| | $ | — |
| 31,393 |
| | 73,250 |
| | 146,500 |
| — |
| | — |
| | — |
| | $ | 8,647,897 |
| | 8/19/2018 |
| 5 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| — |
| | 709,614 |
| | — |
| | $ | 5,710,778 |
| | 12/30/2018 |
| 6 | $ | — |
| | $ | — |
| | $ | — |
| 36,381 |
| | 72,761 |
| | 135,191 |
| — |
| | — |
| | — |
| | $ | 331,115 |
| | Javier J. Rodriguez | — |
| 1 | $ | — |
| | $ | 1,125,000 |
| | $ | 3,375,000 |
| — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | 5/15/2018 |
| 2 | $ | — |
| | $ | — |
| | $ | — |
| 13,232 |
| | 35,285 |
| | 70,570 |
| — |
| | — |
| | — |
| | $ | 2,328,368 |
| | 5/15/2018 |
| 4 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| 17,643 |
| | — |
| | — |
| | $ | 1,169,554 |
| | 5/15/2018 |
| 7 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| — |
| | 88,213 |
| |
| $66.29 |
| | $ | 1,428,751 |
| | Joel Ackerman | — |
| 1 | $ | — |
| | $ | 750,000 |
| | $ | 2,250,000 |
| — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | 3/28/2018 |
| 3 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | 22,601 |
| | 22,601 |
| — |
| | — |
| | — |
| | $ | 1,491,666 |
| | 5/15/2018 |
| 2 | $ | — |
| | $ | — |
| | $ | — |
| 8,447 |
| | 22,523 |
| | 45,046 |
| — |
| | — |
| | — |
| | $ | 1,486,238 |
| | 5/15/2018 |
| 4 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| 11,261 |
| | — |
| | — |
| | $ | 746,492 |
| | 5/15/2018 |
| 7 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| — |
| | 56,306 |
| |
| $66.29 |
| | $ | 911,966 |
| | Kathleen A. Waters | — |
| 1 | $ | — |
| | $ | 375,000 |
| | $ | 1,125,000 |
| — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | 3/28/2018 |
| 3 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | 33,148 |
| | 33,148 |
| — |
| | — |
| | — |
| | $ | 2,187,768 |
| | 5/15/2018 |
| 2 | $ | — |
| | $ | — |
| | $ | — |
| 5,068 |
| | 13,514 |
| | 27,028 |
| — |
| | — |
| | — |
| | $ | 891,755 |
| | 5/15/2018 |
| 4 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| 6,757 |
| | — |
| | — |
| | $ | 447,922 |
| | 5/15/2018 |
| 7 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| — |
| | 33,784 |
| |
| $66.29 |
| | $ | 547,186 |
| | LeAnne M Zumwalt | 5/15/2018 |
| 4 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| 7,508 |
| | — |
| | — |
| | $ | 497,705 |
| | 5/15/2018 |
| 7 | $ | — |
| | $ | — |
| | $ | — |
| — |
| | — |
| | — |
| — |
| | 37,538 |
| |
| $66.29 |
| | $ | 607,988 |
|
| | | | | | | Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards | | Estimated Future Payouts
Under Equity
Incentive Plan Awards | | | | | | | | | | | | Name | | Grant
Date | | Board
Approval
Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#) | | All Other
Options
Awards:
Number of
Securities
Underlying
Options (#) | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | Grant Date
Fair Value
of Stock
and
Option
Awards
($)6 | Javier J.
Rodriguez | | — | | | 1 | | $ | — | | $ | 1,800,000 | | $ | 5,400,000 | | — | | — | | — | | — | | — | | | — | | $ | — | | 1/23/2020 | | 11/4/2019 | 2 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | — | | 2,500,000 | | $ | 67.80 | | $ | 68,496,958 | | Kent J. Thiry | | — | | | 1 | | $ | — | | $ | 415,301 | | $ | 1,245,903 | | — | | — | | — | | — | | — | | | — | | $ | — | Joel
Ackerman | | — | | | 1 | | $ | — | | $ | 750,000 | | $ | 2,250,000 | | — | | — | | — | | — | | — | | | — | | $ | — | | 3/15/2020 | | | 3 | | $ | — | | $ | — | | $ | — | | 7,407 | | 19,750 | | 39,500 | | — | | — | | | — | | $ | 1,634,521 | | 3/15/2020 | | | 4 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | — | | 78,999 | | $ | 75.95 | | $ | 1,590,167 | Michael D.
Staffieri | | — | | | 1 | | $ | — | | $ | 1,050,000 | | $ | 3,150,000 | | — | | — | | — | | �� | | — | | | — | | $ | — | | 3/15/2020 | | | 3 | | $ | — | | $ | — | | $ | — | | 11,110 | | 29,625 | | 59,250 | | — | | — | | | — | | $ | 2,451,795 | | 3/15/2020 | | | 4 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | — | | 118,499 | | $ | 75.95 | | $ | 2,385,261 | Kathleen
A. Waters | | — | | | 1 | | $ | — | | $ | 500,000 | | $ | 1,500,000 | | — | | — | | — | | — | | — | | | — | | $ | — | | 3/15/2020 | | | 3 | | $ | — | | $ | — | | $ | — | | 4,938 | | 13,167 | | 26,334 | | — | | — | | | — | | $ | 1,089,697 | | 3/15/2020 | | | 5 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | 14,483 | | — | | | — | | $ | 1,099,984 | | 3/15/2020 | | | 4 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | — | | 26,333 | | $ | 75.95 | | $ | 530,056 | James O.
Hearty | | — | | | 1 | | $ | — | | $ | 300,000 | | $ | 900,000 | | — | | — | | — | | — | | — | | | — | | $ | — | | 3/15/2020 | | | 3 | | $ | — | | $ | — | | $ | — | | 1,728 | | 4,608 | | 9,216 | | — | | — | | | — | | $ | 381,364 | | 3/15/2020 | | | 5 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | 2,304 | | — | | | — | | $ | 174,989 | | 3/15/2020 | | | 4 | | $ | — | | $ | — | | $ | — | | — | | — | | — | | — | | 9,217 | | $ | 75.95 | | $ | 185,529 |
| | | 1 | Represents applicable amounts for our 20182020 STI Program under the 2011 Incentive Plan. The amount in the “Maximum” column represents the maximum amount the executiveNEO was eligible to earn under the 20182020 STI Program if all performance criteria were achieved at their highest payout level, including a modifier associated with the achievement of certain pre-determined objectives.a pre-established performance objective. The amount in the “Target” column represents the payout amountsamount the executiveNEO was eligible to earn under the 20182020 STI Program if all performance criteria were achieved at their target payout level. |
| Mr. Thiry's target and maximum amounts represent a prorated amount under the terms of his Executive Chairman Agreement as he stepped down as Executive Chairman effective June 1, 2020. | | 2 | This number represents the CEO Premium-Priced SSARs awarded under the 2011 Plan. The CEO Premium-Priced SSARs award vests 50% each on November 4, 2022 and November 4, 2023, subject to Mr. Rodriguez's continued employment through the applicable vesting date. The Board approved the award on November 4, 2019, with the award subject to stockholder approval of an amendment to the 2011 Plan necessary to permit the award. Stockholders approved such amendment to the 2011 Plan on January 23, 2020, on which date it was deemed granted under FASB ASC Topic 718. The award is intended to replace five years' worth of grants. For a description of the CEO Premium-Priced SSARs, see the subsection titled “Compensation Discussion and Analysis — CEO Premium-Priced SSAR Award” in this Proxy Statement. | | 3 | This number represents PSUs awarded under the 2011 Incentive Plan. The PSU awards vest 50% each on MayMarch 15, 20212023 and 50% on MayMarch 15, 2022,2024, subject to the NEO’s continued employment and the achievement of the underlying performance conditions. For a description of the PSUs, see the subsection titled “Compensation Discussion and Analysis—Analysis — Elements of Compensation—Compensation — Long-Term Incentive Program (LTI Program) for 2018—Equity Awards—2020 — Performance Stock Units”Units ("PSUs")” in this Proxy Statement. |
| | 34 | This number represents PSUsSSARs awarded under the 2011 Incentive Plan. The vesting of these PSU awards was contingent uponSSARs vest 50% each on March 15, 2023 and March 15, 2024, subject to the closingNEO's continued employment. For a description of the DMG transaction, with 50% vesting uponSSARs, see the closingsubsection titled “Compensation Discussion and Analysis — Elements of the DMG transaction and 50% upon the 18-month anniversary of the closing. Since the Compensation Committee could have used discretion at any time prior to the closing date to reduce amounts awarded to zero, there were no fixed threshold amounts under the PSU award agreements. Accordingly,— Long-Term Incentive Program for 2020 — Stock-settled Stock Appreciation Rights” in this table reflects a zero amount in the “Threshold” column. |
| Proxy Statement. | 45 | This number represents RSUs granted under the 2011 Incentive Plan. TheFor Ms. Waters, the RSUs vest 54% on March 15, 2022, 23% on March 15, 2023, and 23% on March 15, 2024, subject to Ms. Waters' continued employment. For Mr. Hearty, the RSUs vest 50% each on MayMarch 15, 20212023 and 50% on MayMarch 15, 2022,2024, subject to the NEO'sMr. Hearty's continued employment. For a description of the RSUs, see the subsection titled “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2018 — Equity Awards2020 — Restricted Stock Units” in this Proxy Statement. |
| | 5 | This number represents the incremental fair value with respect to Mr. Thiry's outstanding equity awards related to the implementation of the Rule of 65 Retirement Policy as of the modification date, computed in accordance with FASB ASC 718, and does not reflect a new equity grant. The Rule of 65 Retirement Policy is effective for all executive officers; however, under FASB ASC Topic 718 a modification charge only applied to Mr. Thiry. |
| | | 6 | This number represents the incremental fair value related to the modification of Mr. Thiry's outstanding PSU award granted in 2016 to, contingent on the closing of the DMG transaction, eliminate the performance criteria related to DMG and reallocate the associated units ratably to the remaining performance criteria, as of the December 30, 2018 modification date, computed in accordance with FASB ASC 718, and does not reflect a new equity grant. Mr. Thiry was the only executive granted 2016 PSUs that had a performance criterion linked to this DMG-related metric. |
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 61 |
| | 7 | This number represents SSARs awarded under the 2011 Incentive Plan. The SSARs vest 50% on May 15, 2021 and 50% on May 15, 2022, subject to the NEO’s continued employment. For a description of the SSARs, see the subsection titled “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Incentive Program (LTI Program) for 2018 — Equity Awards — Stock-settled Stock Appreciation Rights” in this Proxy Statement. |
| | 8 | The amounts for SSARs, RSUs and PSUs arerepresent the aggregate grant date fair values or the incremental fair value upon modification of each award determined pursuant to FASB ASC Topic 718 and, in the case of PSUs, are based upon the probable outcome of the applicable performance conditions on the grant date. All SSARs granted have a five-year term. See Note 1918 to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718. |
| 80 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents
20182020 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information concerning outstanding SSARs and unvested stock awards held by each of the NEOs atas of December 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | Name | Grant
Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested1 ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#) | Equity Incentive
Plan Awards:
Market or Payout Value of Unearned
Shares, Units
or Other Rights
that Have Not
Vested ($)1 | | Kent J. Thiry | 4/24/2014 | 282,339 |
|
| — |
|
|
| $69.38 |
|
| 4/24/2019 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | 89,520 |
| 2 | 89,521 |
| 2 |
| $83.82 |
|
| 6/2/2020 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/13/2016 | — |
|
| 291,044 |
| 2 |
| $75.42 |
|
| 5/13/2021 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/6/2017 | — |
|
| 418,570 |
| 3 |
| $65.48 |
|
| 6/6/2022 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | — |
|
| — |
|
| — |
|
| — |
| 2,210 |
| 5 |
| $113,727 |
|
| — |
|
| — |
| | 12/27/2016 | — |
|
| — |
|
| — |
|
| — |
| 24,119 |
| 6 |
| $1,241,164 |
|
| 23,394 |
| 7 |
| $1,203,855 |
| | 6/6/2017 | — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 31,393 |
| 8 |
| $1,615,484 |
| | 5/15/2018 | — |
| | — |
| | — |
| | — |
| 90,090 |
| 11 |
| $4,636,031 |
| | — |
| | — |
| | 5/15/2018 | — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 33,784 |
| 5 |
| $1,738,525 |
| | Javier J. Rodriguez | 4/24/2014 | 79,228 |
|
| — |
|
|
| $69.38 |
|
| 4/24/2019 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | 23,275 |
| 2 | 23,276 |
| 2 |
| $83.82 |
|
| 6/2/2020 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/13/2016 | — |
|
| 124,091 |
| 2 |
| $75.42 |
|
| 5/13/2021 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/6/2017 | — |
|
| 79,909 |
| 3 |
| $65.48 |
|
| 6/6/2022 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/15/2018 | — |
|
| 88,213 |
| 2 |
| $66.29 |
|
| 5/15/2023 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | — |
|
| — |
|
| — |
|
| — |
| 1,150 |
| 5 |
| $59,179 |
|
| — |
|
| — |
| | 12/24/2016 | — |
|
| — |
|
| — |
|
| — |
| 5,761 |
| 6 |
| $296,461 |
|
| 4,775 |
| 9 |
| $245,722 |
| | 6/6/2017 | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 5,994 |
| 8 |
| $308,451 |
| | 5/15/2018 | — |
| | — |
| | — |
| | — |
| 17,643 |
| 11 |
| $907,909 |
| | — |
| | — |
| | 5/15/2018 | — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 13,232 |
| 5 |
| $680,919 |
| | Joel Ackerman | 2/21/2017 | — |
|
| 145,159 |
| 2 |
| $68.89 |
|
| 2/21/2022 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/15/2018 | — |
| | 56,306 |
| 2 |
| $66.29 |
| | 5/15/2023 |
| — |
| | — |
| | — |
| | — |
| | 6/6/2017 | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 5,708 |
| 8 |
| $293,734 |
| | 3/28/2018 | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 22,601 |
| 12 |
| $1,163,047 |
| | 5/15/2018 | — |
| | — |
| | — |
| | — |
| 11,261 |
| 11 |
| $579,491 |
| | — |
| | — |
| | 5/15/2018 | — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 8,447 |
| 5 |
| $434,683 |
| | Kathleen A. Waters | 5/6/2016 | 14,082 |
| 4 | 14,082 |
| 4 |
| $75.70 |
|
| 5/6/2021 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/6/2017 | — |
|
| 20,929 |
| 3 |
| $65.48 |
|
| 6/6/2022 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/15/2018 | — |
|
| 33,784 |
| 2 |
| $66.29 |
|
| 5/15/2023 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/6/2016 | — |
| | — |
| | — |
| | — |
| 3,521 |
| 10 |
| $181,191 |
| | — |
| | — |
| | 6/6/2017 | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 1,570 |
| 8 |
| $80,792 |
| | 5/15/2018 | — |
| | — |
| | — |
| | — |
| 6,757 |
| 11 |
| $347,715 |
| | — |
| | — |
| | 3/28/2018 | — |
| | — |
| | — |
| | — |
| — |
|
| — |
| | 33,148 |
| 12 |
| $1,705,796 |
| | 5/15/2018 | — |
|
| — |
|
| — |
|
| — |
| — |
|
| — |
|
| 5,068 |
| 5 |
| $260,799 |
| | LeAnne M. Zumwalt | 4/24/2014 | 14,405 |
|
| — |
|
|
| $69.38 |
|
| 4/24/2019 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | 5,968 |
| 2 | 5,968 |
| 2 |
| $83.82 |
|
| 6/2/2020 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/13/2016 | — |
|
| 26,459 |
| 2 |
| $75.42 |
|
| 5/13/2021 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/6/2017 | — |
|
| 20,929 |
| 3 |
| $65.48 |
|
| 6/6/2022 |
| — |
|
| — |
|
| — |
|
| — |
| | 5/15/2018 | — |
|
| 37,538 |
| 2 |
| $66.29 |
|
| 5/15/2023 |
| — |
|
| — |
|
| — |
|
| — |
| | 6/2/2015 | — |
|
| — |
|
| — |
|
| — |
| 1,492 |
| 11 |
| $76,778 |
|
| — |
|
| — |
| | 6/6/2017 | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 1,570 |
| 8 |
| $80,792 |
| | 5/15/2018 | — |
|
| — |
|
| — |
|
| — |
| 7,508 |
| 11 |
| $386,362 |
|
| — |
|
| — |
|
2020. | | | | Option Awards | | Stock Awards | | Name | | Grant
Date | | Number
of Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price ($) | | 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
Vested1 ($) | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units, or
Other Rights
that Have Not
Vested (#) | | Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units
or Other Rights
that Have Not
Vested ($)1 | | Javier J. Rodriguez | | 5/13/2016 | | 124,091 | | | — | | | $75.42 | | 5/13/2021 | | — | | | — | | — | | | — | | 6/6/2017 | | 39,954 | 2 | | 39,955 | 2 | | $65.48 | | 6/6/2022 | | — | | | — | | — | | | — | | 5/15/2018 | | — | | | 88,213 | 3 | | $66.29 | | 5/15/2023 | | — | | | — | | — | | | — | | 1/23/2020 | | — | | | 2,500,000 | 4 | | $67.80 | | 11/4/2024 | | — | | | — | | — | | | — | | 6/6/2017 | | — | | | — | | | — | | — | | 23,974 | 8 | | $2,814,548 | | 1,997 | 9 | | $234,448 | | 5/15/2018 | | — | | | — | | | — | | — | | 17,643 | 10 | | $2,071,288 | | — | | | — | | 5/15/2018 | | — | | | — | | | — | | — | | 26,464 | 8 | | $3,106,874 | | 44,106 | 11 | | $5,178,044 | | 5/15/2019 | | — | | | — | | | — | | — | | 69,694 | 10 | | $8,182,076 | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | — | | | — | | 139,386 | 12 | | $16,363,916 | | 5/30/2019 | | — | | | — | | | — | | — | | — | | | — | | 9,957 | 13 | | $1,168,952 | | Kent J. Thiry | | 5/13/2016 | | 145,522 | | | — | | | $75.42 | | 5/13/2021 | | — | | | — | | — | | | — | | 6/6/2017 | | 313,928 | 5 | | 104,642 | 5 | | $65.48 | | 6/6/2022 | | — | | | — | | — | | | — | | 6/6/2017 | | — | | | — | | | — | | — | | — | | | — | | 10,464 | 14 | | $1,228,474 | | 5/15/2018 | | — | | | — | | | — | | — | | 45,045 | 15 | | $5,288,283 | | — | | | — | | 5/15/2018 | | — | | | — | | | — | | — | | — | | | — | | 112,612 | 16 | | $13,220,649 | | 5/15/2019 | | — | | | — | | | — | | — | | — | | | — | | 69,692 | 17 | | $8,181,841 | | Joel Ackerman | | 2/21/2017 | | 72,579 | 3 | | 72,580 | 3 | | $68.89 | | 2/21/2022 | | — | | | — | | — | | | — | | 5/15/2018 | | — | | | 56,306 | 3 | | $66.29 | | 5/15/2023 | | — | | | — | | — | | | — | | 6/20/2019 | | — | | | 110,000 | 3 | | $52.41 | | 6/20/2024 | | — | | | — | | — | | | — | | 3/15/2020 | | — | | | 78,999 | 3 | | $75.95 | | 3/15/2025 | | — | | | — | | — | | | — | | 6/6/2017 | | — | | | — | | | — | | — | | 22,832 | 8 | | $2,680,477 | | 1,902 | 9 | | $223,295 | | 5/15/2018 | | — | | | — | | | — | | — | | 11,261 | 10 | | $1,322,041 | | — | | | — | | 5/15/2018 | | — | | | — | | | — | | — | | 16,894 | 8 | | 1,983,356 | | 28,152 | 11 | | $3,305,045 | | 5/15/2019 | | — | | | — | | | — | | — | | 29,869 | 10 | | $3,506,621 | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | — | | | — | | 59,736 | 12 | | $7,013,006 | | 3/15/2020 | | — | | | — | | | — | | — | | — | | | — | | 39,500 | 12 | | $4,637,300 | | Michael D. Staffieri | | 6/6/2017 | | — | | | 37,101 | 6 | | $65.48 | | 6/6/2022 | | — | | | — | | — | | | — | | 5/15/2018 | | — | | | 243,994 | 3 | | $66.29 | | 5/15/2023 | | — | | | — | | — | | | — | | 6/20/2019 | | — | | | 200,000 | 7 | | $52.41 | | 6/20/2024 | | — | | | — | | — | | | — | | 3/15/2020 | | — | | | 118,499 | 3 | | $75.95 | | 3/15/2025 | | — | | | — | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | 79,650 | 10 | | $9,350,910 | | — | | | — | | 3/15/2020 | | — | | | — | | | — | | — | | — | | | — | | 59,250 | 12 | | $6,955,950 | | Kathleen A. Waters | | 5/6/2016 | | 28,164 | | | — | | | $75.70 | | 5/6/2021 | | — | | | — | | — | | | — | | 6/6/2017 | | 10,464 | 2 | | 10,465 | 2 | | $65.48 | | 6/6/2022 | | — | | | — | | — | | | — | | 5/15/2018 | | — | | | 33,784 | 3 | | $66.29 | | 5/15/2023 | | — | | | — | | — | | | — | | 6/20/2019 | | — | | | 80,000 | 3 | | $52.41 | | 6/20/2024 | | — | | | — | | — | | | — | | 3/15/2020 | | — | | | 26,333 | 3 | | $75.95 | | 3/15/2025 | | — | | | — | | — | | | — | | 6/6/2017 | | — | | | — | | | — | | — | | 6,280 | 8 | | $737,272 | | 523 | 9 | | $61,400 | | 5/15/2018 | | — | | | — | | | — | | — | | 6,757 | 10 | | $793,272 | | — | | | — | | 5/15/2018 | | — | | | — | | | — | | — | | 10,136 | 8 | | $1,189,966 | | 16,892 | 11 | | $1,983,121 | | 5/15/2019 | | — | | | — | | | — | | — | | 14,935 | 10 | | $1,753,369 | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | — | | | — | | 29,868 | 12 | | $3,506,503 | | 3/15/2020 | | — | | | — | | | — | | — | | 14,483 | 18 | | $1,700,304 | | — | | | — | | 3/15/2020 | | — | | | — | | | — | | — | | — | | | — | | 26,334 | 12 | | $3,091,612 | | James O. Hearty | | 5/13/2016 | | 3,308 | | | — | | | $75.42 | | 5/13/2021 | | — | | | — | | — | | | — | | 6/6/2017 | | 1,141 | 2 | | 1,142 | 2 | | $65.48 | | 6/6/2022 | | — | | | — | | — | | | — | | 5/15/2018 | | — | | | 26,276 | 3 | | $66.29 | | 5/15/2023 | | — | | | — | | — | | | — | | 6/20/2019 | | — | | | 50,000 | 7 | | $52.41 | | 6/20/2024 | | — | | | — | | — | | | — | | 3/15/2020 | | — | | | 9,217 | 3 | | $75.95 | | 3/15/2025 | | — | | | — | | — | | | — | | 6/6/2017 | | — | | | — | | | — | | — | | 229 | 19 | | $26,885 | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | 6,970 | 10 | | $818,278 | | — | | | — | | 3/15/2020 | | — | | | — | | | — | | — | | 2,304 | 10 | | $270,490 | | — | | | — | | 5/15/2019 | | — | | | — | | | — | | — | | — | | | — | | 13,938 | 12 | | $1,636,321 | | 3/15/2020 | | — | | | — | | | — | | — | | — | | | — | | 9,216 | 12 | | $1,081,958 |
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 63 |
| | | 1 | The market value of shares or units of stock that have not vested reflects the $51.46$117.40 per share closing price of our Common Stock on December 31, 2018,2020, the last trading day of the year, as reported by the NYSE. |
| | | 2 | These SSARs vest 50% on the third and fourth anniversaries of the grant date. |
| | 3 | These SSARs vest 50% each on May 15, 2020 and May 15, 2021. |
| | 43 | These SSARs vest 50% on the second and third anniversaries of the grant date. |
| | 5 | These PSUs vest 50% each on the third and fourth anniversaries of the grant date. |
| 4 | These SSARs vest 50% each on November 4, 2022 and November 4, 2023. | 65 | These PSUs vestedSSARs vest 50% on May 15, 2019 and vest 50% May 15, 2020. |
| | 7 | These PSUs vested 22%2020, 25% on May 15, 2019 and vest 78% on May 15, 2020 for Mr. Thiry, subject to achievement of the performance conditions for PSUs. The amounts listed here are the threshold number of shares awarded. |
| | 8 | These PSUs vest 12.5% on May 15,June 1, 2020 and 87.5%25% on May 15, 2021 subject to achievementin accordance with Mr. Thiry's Executive Chairman Agreement. Mr. Thiry stepped down from his role as Executive Chairman effective June 1, 2020, per his agreement at termination |
Table of Contents | he vested in 50% of the performance conditions for PSUs. The amounts listed here areunvested SSARs at the threshold numbertime of shares awarded. |
| his termination and the remaining 50% will continue to vest in accordance with the award's vesting schedule. | 96 | These PSUs vested 40%SSARs vest 100% on May 15, 2019 and vest 60% on May 15, 2020 for Mr. Rodriguez, subject to achievement of the performance conditions for PSUs. The amounts listed here are the threshold number of shares awarded. |
| 2021. | 107 | These RSUsSSARs vest 50% each on the second and thirdfourth anniversaries of the grant date. |
| | 118 | These PSUs vest 100% on May 15, 2021. | | 9 | These PSUs vest 100% on May 15, 2021. The amounts listed here reflect the shares that may be earned upon achievement of the target Relative TSR performance criteria. | | 10 | These RSUs vest 50% each on the third and fourth anniversaries of the grant date. |
| 11 | These PSUs vest 20% on May 15, 2021 and 80% on May 15, 2022, subject to the achievement of the performance conditions for the PSUs. The amounts listed here reflect the shares that may be earned upon achievement of the maximum performance criteria. | | 12 | These PSUs vestedvest 50% each on the closingthird and fourth anniversaries of the DMG transaction and will vest 50% on the 18-month anniversary of the close,grant date, subject to achievement of the performance conditions for the PSUs. The amounts listed here reflect the shares that may be earned upon achievement of the maximum performance criteria. | | 13 | These PSUs and continued employment throughvest 100% on May 15, 2022, subject to achievement of the applicable vesting date.performance conditions for the PSUs. The Compensation Committee retainedamounts listed here reflect the ability to reduce these PSU awards, including to zero,shares that may be earned upon achievement of the threshold performance criteria. | | 14 | These PSUs vest 100% on March 31, 2021 in line with Mr. Thiry's separation agreement. The amount listed here reflects the shares that may be earned at its sole discretion at any time priortarget on the Relative TSR performance criteria. | | 15 | These RSUs vest 100% on May 15, 2022 pursuant to the closingunderlying award agreement. | | 16 | These PSUs remain outstanding in accordance with the underlying award agreement and will vest, if at all, based on the achievement of the DMG transaction.performance conditions for the PSUs. The shares will be issued 50% within 60 days after May 15, 2021 and 50% within 60 days of May 15, 2022. The amounts listed here reflect the shares that may be earned upon achievement of the maximum performance criteria. | | 17 | These PSUs remain outstanding in accordance with the underlying award agreement and will vest, if at all, based on the achievement of the performance conditions for the PSUs. The shares will be issued 50% within 60 days after May 15, 2022 and 50% within 60 days of May 15, 2023. The amounts listed here reflect the shares that may be earned upon achievement of the maximum performance criteria. | | 18 | These RSUs vest 54.55% on March 15, 2022, 22.72% on March 15, 2023 and 22.73% on March 15, 2024. | | 19 | These RSUs vest 50% each on May 15, 2020 and May 15, 2021. |
| 82 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents
20182020 Option Exercises and Stock Vested Table
The following table sets forth information concerning the exercise of SSARs (which are treated as options for this table) and the vesting of stock awards held by each of the NEOs during 2018. | | | | | | | | | | | | | | | 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 | 900,000 |
| $ | 8,109,000 |
| | 6,932 |
| $ | 463,223 |
| | Javier J. Rodriguez | 280,000 |
| $ | 2,942,800 |
| | 3,699 |
| $ | 247,131 |
| | Joel Ackerman | — |
| $ | — |
| | — |
| $ | — |
| | Kathleen A. Waters | — |
| $ | — |
| | 3,520 |
| $ | 233,658 |
| | LeAnne M. Zumwalt | 5,200 |
| $ | 54,652 |
| | 3,293 |
| $ | 219,487 |
|
| | 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 | | Javier J. Rodriguez | | — | | $ | — | | 4,053 | | $ | 321,200 | | Kent J. Thiry | | 145,522 | | $ | 777,088 | | 328,116 | | $ | 34,720,727 | | Joel Ackerman | | — | | $ | — | | 12,416 | | $ | 1,392,011 | | Michael D. Staffieri | | 103,577 | | $ | 4,292,474 | | 4,093 | | $ | 324,370 | | Kathleen A. Waters | | — | | $ | — | | 16,881 | | $ | 1,936,306 | | James O. Hearty | | — | | $ | — | | 642 | | $ | 50,879 |
| | | 1 | Value realized on exercise is determined by subtracting the exercise or base price from the market price of our Common Stockcommon stock at exercise, as reported by the NYSE, 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 or PSUs 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 sponsor or maintain a defined benefit pension plan that allows participation by any employee, including the NEOs, and that provides for 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. 20182020 Nonqualified Deferred Compensation Table
| | | | | | | | | | | | | | | | | | | | | Name | Executive Contributions in Last FY ($)1,2 | | Registrant Contributions in Last FY ($) | | Aggregate Earnings in Last FY ($)3 | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($) | Kent J. Thiry | | | | | | | | | | | Deferred Compensation Plan |
| $1,162,500 |
| | — |
| |
| ($44,392 | ) | | — |
| |
| $5,899,435 |
| | Voluntary Deferral Plan | — |
| | — |
| |
| $43,909 |
| | — |
| |
| $12,614,802 |
| | Javier J. Rodriguez | | | | | | | | | | | Voluntary Deferral Plan | — |
| | — |
| |
| ($77,915 | ) | | — |
| |
| $720,022 |
| Joel Ackerman4 | | | | | | | | | | | None | — |
| | — |
| | — |
| | — |
| | — |
| Kathleen A. Waters4 | | | | | | | | | | | None | — |
| | — |
| | — |
| | — |
| | — |
| | LeAnne M. Zumwalt | | | | | | | | | | | Deferred Compensation Plan |
| $85,577 |
| | — |
| |
| ($12,828 | ) | | — |
| |
| $236,865 |
| | Voluntary Deferral Plan | — |
| | — |
| |
| ($1,513 | ) | |
| ($2,239 | ) | |
| $25,360 |
|
| Name | | Executive
Contributions
in Last FY
($)1,2 | | Registrant
Contributions
in Last FY
($) | | Aggregate
Earnings
in Last FY
($)3 | | Aggregate
Withdrawals/
Distributions
($) | | | Aggregate
Balance at
Last FYE
($) | | Javier J. Rodriguez | | | | | | | | | | | | | Voluntary Deferral Plan | | — | | — | | $189,449 | | — | | | $1,098,382 | | Kent J. Thiry | | | | | | | | | | | | | Deferred Compensation Plan | | — | | — | | $192,764 | | ($526,976 | ) | | $5,871,143 | | Voluntary Deferral Plan | | — | | — | | $37,609 | | ($390,898 | ) | | $11,364,535 | | Joel Ackerman | | | | | | | | | | | | | Deferred Compensation Plan | | — | | — | | $532,780 | | — | | | $1,767,590 | | Michael D. Staffieri4 | | | | | | | | | | | | | None | | — | | — | | — | | — | | | — | | Kathleen A. Waters | | | | | | | | | | | | | Deferred Compensation Plan | | $434,112 | | — | | $120,172 | | — | | | $922,880 | | James O. Hearty4 | | | | | | | | | | | | | None | | — | | — | | — | | — | | | — |
| | | 1 | This amount isThese amounts are reported in the “Salary” columnand "Non-Equity Incentive Plan Compensation" columns in the 20182020 Summary Compensation Table. |
| | | 2 | Mr. Thiry deferred $1,758,350$25,000 in 2017 and $1,749,1322018 into the Deferred Compensation Plan. Mr. Ackerman deferred $1,234,810 in 20162019 into the Deferred Compensation Plan. Ms. ZumwaltWaters deferred $100,000$360,229 in 2017 and $50,658 in 20162019 into the Deferred Compensation Plan. |
| | | 3 | None of the earnings in this column are included in the 20182020 Summary Compensation Table because they are not preferential or above market. |
| | | 4 | Mr. AckermanStaffieri and Ms. WatersMr. Hearty did not participate in any of the Company’s nonqualified deferred compensation plans in 20182020 or in any prior years. |
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 6583 |
Table of Contents
Voluntary Deferral Plan and Deferred Compensation Plan The 20182020 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. Under the Deferred Compensation Plan (effective for deferrals in 2015 and later years), 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 the Voluntary Deferral Plan (applicable for deferrals prior to 2015), 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. 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. 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 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 and provide for immediate distribution to a participant in the form of a lump sum cash payment to cover the unforeseeable emergency. Potential Payments Upon Termination or Change of Control General Terms and Definitions For purposes of the table below to quantify the benefits under the employment arrangement with each NEO in effect as of December 31, 2018: “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.
below:Involuntary termination for “Material Cause” for Messrs.“Cause” in the case of Mr. Rodriguez andor "Material Cause" in the case of Mr. Ackerman and Ms. Waters generally 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 policies or directives reasonably established by the Board in the case of Mr. Rodriguez or the CEO of the Company or his designee in the case of Mr. Ackerman and Ms. Waters 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 the 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 healthcare program. | 84 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents With respect to the employment agreements of Messrs.Mr. Rodriguez, and Ackerman, as noted below, a “Change of Control” under his employment agreement 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) 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) consummation of any merger or consolidation in which the beneficial owners of 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) certain changes in the majority composition of the Board during any 24-month period, (iv) consummation of any transaction in which more than 40% 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. With respect to Mr. Ackerman, a “Change of Control” under his employment agreement 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 With respect to Mr. Rodriguez's employment agreement, “Good Reason” means during the employment period: (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) a 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 to a Change in Control; (iv) any material breach by the Company of the agreement; or (v) a relocation of Mr. Rodriguez's principal place of employment by more than 35 miles. Notwithstanding the above, the occurrence of any such condition will not constitute Good Cause for Mr. Rodriguez unless the executive provides notice to the Company of the above-described events, a “Changeexistence of Control” willsuch condition not have occurred if Mr. Thiry remainslater than 30 days after the CEOinitial existence of such condition, and the Company for at least one yearshall have failed to remedy such condition within 30 days after the Changereceipt 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. such notice.With respect to Messrs. Rodriguez andMr. Ackerman and Ms. Waters, “Good Cause” generally 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; (ii) the Company materially reduces the executive’s base compensation; (iii) in the case of Mr. Ackerman and Ms. Waters, the Company requires the executive to relocate to an office more than a specified mileage away from the executive's current office; or (iv) in the case of Mr. Ackerman, a material breach by the Company of his employment agreement or the failure to have the agreement assumed by a successor. Notwithstanding the above, the occurrence of any such condition shallwill 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 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
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 67 |
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.
Severance Payments and Benefits The following tables and summary set forth the Company’s payment obligations pursuant to the terms of the employment or severance arrangements with each of our NEOs, as of December 31, 2018, under the circumstances described below, assuming that their employment was terminated on December 31, 2018.2020. For a description of the value of stock-based awards held by Messrs. Thiry, Rodriguez, Ackerman, Staffieri, and AckermanHearty and Mses.Ms. Waters and Zumwalt that are subject to accelerated vesting upon a Changetermination of Control or retirement,employment, see the subsection titled “— Accelerated Vesting of Stock-Based Awards” below. See "—Management Transition" section
Table of Contents As noted in the CD&A for information regarding“Compensation Discussion and Analysis” section of this Proxy Statement, effective June 1, 2020 , Mr. Thiry stepped down as an executive officer of the Company. In connection with Mr. Thiry’s departure, he became eligible to receive separation benefits providedconsistent with the severance benefits payable under the terms of Mr. Thiry’s July 2008 employment agreement withas a result of Mr. Thiry’s transition from the CEO to Executive Chairman role. Specifically, at the time that Mr. Rodriguez assumed the role of CEO, Mr. Thiry would have been eligible for severance benefits had he terminated his employment under the Good Reason clause of his July 2008 employment agreement. Considering the input of Compensia and the desire to retain Mr. Thiry for another year in the role of Executive Chairman, the Compensation Committee structured severance terms under the Executive Chairman Agreement withwhich would give him the same economic benefits as the benefits under the July 2008 employment agreement that he would be foregoing by accepting the Executive Chairman role. In exchange for Mr. Thiry which were entered intosigning a general release of claims in connectionfavor of the Company, Mr. Thiry has received or will receive (i) separation pay consisting of a lump-sum payment of $11,480,057, (ii) a prorated 2020 annual incentive bonus of $710,621, determined based on actual Company performance in 2020 and his performance under the strategic objectives criterion in the 2020 STI Program, (iii) continuation of health benefits for a three-year period valued at approximately $40,788, and (iv) use of services of an administrative assistant for three years or until he obtains other full-time employment, valued at approximately $536,663 based on the Company's current salary and benefits costs and assuming that Mr. Thiry utilizes such services for three years. Mr. Thiry also receives use of an office space and IT support services. However there is no additional cost associated with these items as he is currently using a Company office and Company IT support services. In addition, for Mr. Thiry, (i) all outstanding SSARs become exercisable in accordance with the announcementnormal vesting schedules set forth in the underlying award agreements, as if he had not separated from the Company (estimated value of $6,935,918, based on the 2019 management transition. | | | | | | | | | | | | | | | | | | | | | | | | | Payment of Base Salary (or multiple thereof) in effect at termination for a specified period following termination | Bonus1 | | Continued Health Benefits for a Specified Period Following Termination | Office and Secretarial Assistance | Total Value | | Kent J. Thiry | |
|
|
|
|
|
|
|
|
| | Death | | $ | — |
|
| $ | 3,303,371 |
| 2 | $ | — |
|
| $ | — |
|
| $ | 3,303,371 |
| | Disability | | $ | — |
|
| $ | 3,303,371 |
| 2 | $ | — |
|
| $ | — |
|
| $ | 3,303,371 |
| | Involuntary Termination without Cause | | $ | 9,082,730 |
| 3 | $ | 3,303,371 |
| 4 | $ | 52,213 |
| 5 | $ | 471,315 |
| 6 | $ | 12,909,629 |
| | Resignation for Good Reason | | $ | 9,082,730 |
| 3 | $ | 3,303,371 |
| 4 | $ | 52,213 |
| 5 | $ | 471,315 |
| 6 | $ | 12,909,629 |
| | Javier J. Rodriguez | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Involuntary Termination Without Material Cause | | $ | 1,350,000 |
| 7 | $ | 1,921,932 |
| 8 | $ | — |
|
| $ | — |
|
| $ | 3,271,932 |
| | Resignation for Good Cause | | $ | 1,350,000 |
| 7 | $ | 1,921,932 |
| 8 | $ | — |
|
| $ | — |
|
| $ | 3,271,932 |
| | Resignation Following a Good Cause Event after a Change of Control | | $ | 1,800,000 |
| 9 | $ | 1,921,932 |
| 8 | $ | — |
|
| $ | — |
|
| $ | 3,721,932 |
| | Joel Ackerman | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Involuntary Termination Without Material Cause | | $ | 700,000 |
| 10 | $ | 750,000 |
| 11 | $ | 35,302 |
| 12 | $ | — |
|
| $ | 1,485,302 |
| | Resignation for Good Cause | | $ | 700,000 |
| 10 | $ | 750,000 |
| 11 | $ | 35,302 |
| 12 | $ | — |
| | $ | 1,485,302 |
| | Resignation Following a Good Cause Event after a Change of Control | | $ | 1,400,000 |
| 13 | $ | 750,000 |
| 14 | $ | 35,302 |
| 12 | $ | — |
|
| $ | 2,185,302 |
| | Kathleen A. Waters | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Involuntary Termination Without Material Cause | | $ | 540,000 |
| 15 | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 540,000 |
| | Resignation for Good Cause | | $ | 540,000 |
| 16 | $ | 615,000 |
| 17 | $ | — |
|
| $ | — |
|
| $ | 1,155,000 |
| | LeAnne M. Zumwalt | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Involuntary Termination Without Material Cause | | $ | 400,000 |
| 18 | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 400,000 |
|
| | Payment of Base Salary
(or multiple thereof) for a
specified period
following termination | | Bonus1 | | Continued Health
Benefits for a Specified
Period Following
Termination | | Office and
Secretarial
Assistance | | Total Value | | Javier J. Rodriguez | | | | | | | | | | | | | | | | | | | | | Death | | $ | — | | | $ | — | 2 | | $ | — | | | $ | — | | | $ | — | | Disability | | $ | — | | | $ | — | 2 | | $ | — | | | $ | — | | | $ | — | | Involuntary Termination Without Cause | | $ | 7,139,419 | 3 | | $ | 3,282,480 | 4 | | $ | 51,612 | 5 | | $ | 218,297 | 6 | | $ | 10,691,808 | | Resignation for Good Reason | | $ | 7,139,419 | 3 | | $ | 3,282,480 | 4 | | $ | 51,612 | 5 | | $ | 218,297 | 6 | | $ | 10,691,808 | Involuntary Termination Without Cause Following a
Change in Control | | $ | 10,709,129 | 3 | | $ | 3,282,480 | 4 | | $ | 77,418 | 7 | | $ | 331,555 | 8 | | $ | 14,400,582 | | Joel Ackerman | | | | | | | | | | | | | | | | | | | | | Involuntary Termination Without Material Cause | | $ | 700,000 | 9 | | $ | 1,280,906 | 10 | | $ | 38,803 | 11 | | $ | — | | | $ | 2,019,709 | | Resignation for Good Cause | | $ | 700,000 | 9 | | $ | 1,280,906 | 10 | | $ | 38,803 | 11 | | $ | — | | | $ | 2,019,709 | Resignation Following a Good Cause Event or by the
Company Without Material Cause after a Change of
Control | | $ | 1,400,000 | 12 | | $ | 1,280,906 | 13 | | $ | 38,803 | 11 | | $ | — | | | $ | 2,719,709 | | Michael D. Staffieri | | | | | | | | | | | | | | | | | | | | | Involuntary Termination Without Material Cause | | $ | 800,000 | 9 | | $ | — | | | $ | — | | | $ | — | | | $ | 800,000 | | Resignation for Good Cause | | $ | 800,000 | 9 | | $ | 1,400,000 | 15 | | $ | — | | | $ | — | | | $ | 2,200,000 | | Resignation in connection with a Change of Control | | $ | 1,600,000 | 14 | | $ | 1,400,000 | 15 | | $ | — | | | $ | — | | | $ | 3,000,000 | | Kathleen A. Waters | | | | | | | | | | | | | | | | | | | | | Involuntary Termination Without Material Cause | | $ | 625,000 | 9 | | $ | — | | | $ | — | | | $ | — | | | $ | 625,000 | | Resignation for Good Cause | | $ | 625,000 | 9 | | $ | 838,375 | 15 | | $ | — | | | $ | — | | | $ | 1,463,375 | | James O. Hearty | | | | | | | | | | | | | | | | | | | | | Involuntary Termination Without Material Cause | | $ | 500,000 | 9 | | $ | — | | | $ | — | | | $ | — | | | $ | 500,000 |
| 86 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents
| 1 | Does not include any amounts payable to Mr. Thiry,Rodriguez, Mr. RodriguezAckerman or Ms. ZumwaltWaters pursuant to our Deferred Compensation Plan or Voluntary Deferral Plan which amounts are included in the 20182020 Nonqualified Deferred Compensation Table. SuchTable as such amounts are currently vested, but payment thereof may be accelerated in the event of death, disability or termination of employment. |
| vested. | | 2 | Mr. ThiryRodriguez (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. OnAs of December 31, 2018,2020, Mr. ThiryRodriguez had fully earned and received his bonus for 2018, so he would have received2019, the full amountfiscal year prior to the year of his annual incentive bonus as reported in the 2018 Summary Compensation Table uponassumed termination. |
| | | 3 | Mr. ThiryRodriguez will be entitled to receive a lump-sum payment equal to the product of (x) three,two ("Severance Multiple"), 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 2011 Incentive 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’sRodriguez’s employment was terminated. The amount reported in the table above reflects the product of (x) three,two, and (y) the sum of Mr. Thiry’sRodriguez’s base salary as of December 31, 2018,2020, which was $1,300,000,$1,200,000, and the average of Mr. Thiry’s 2017Rodriguez’s 2019 annual incentive bonus in the amount of $1,750,000$2,791,441 and Mr. Thiry’s 2016Rodriguez’s 2018 annual incentive bonus in the amount of $1,705,153. |
| | | | | DaVita Inc. Notice$1,947,978. In the event of Special Meeting and Proxy Statement | 69 |
| a termination without Cause within two years following a Change in Control, Mr. Rodriguez's Severance Multiple is increased to three. | | 4 | Mr. ThiryRodriguez 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. ThiryRodriguez 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 2011 Incentive Plan for the fiscal year in which the termination occurs) through and including the date of termination. OnBecause Mr. Rodriguez had served for the entire year, there would have been no pro-rata reduction upon a termination as of December 31, 2018, Mr. Thiry had fully earned2020 and this amount reflects his annual incentive bonus for 2018, so he would have received the full amount of his2020 annual incentive bonus as reported in the 20182020 Summary Compensation Table upon termination. |
| Table. | | 5 | Mr. ThiryRodriguez will continue to receive his health benefits for the three-yeartwo-year period following termination.termination, subject to earlier termination in the event Mr. Rodriguez accepts full-time employment with another employer. The amount reported in the table above is the estimated actual cost of COBRA insurance premiums for Mr. ThiryRodriguez for the two-year period following termination, based on current insurance premium costs. | | 6 | Mr. Rodriguez will be entitled to the use of an office and services of an administrative assistant for the two year period following termination or until he obtains other full-time employment. The amount above reflects the estimated costs to us of providing the continued salary for an administrative assistant's services for two years based on the Company's current salary and benefits costs and assuming that Mr. Rodriguez utilizes such services for two years. Mr. Rodriguez also receives use of an office space; however there is no additional cost associated with these items as the assumption is that he would use a Company office. | | 7 | Mr. Rodriguez will continue to receive his health benefits for the three-year period following termination. |
| termination within two years after a change in control, subject to earlier termination in the event Mr. Rodriguez accepts full-time employment with another employer. The amount reported in the table above is the estimated actual cost of COBRA insurance premiums for Mr. Rodriguez for the three-year period following termination, based on current insurance premium costs. | 68 | Mr. ThiryRodriguez 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.employment following termination within two years following after a change in control. The amountsamount above reflectreflects the estimated costs to us of providing the office and secretarialcontinued salary for an administrative assistant's services for three years based on the Company's current salary and benefits costs and assuming that Mr. Rodriguez utilizes such services for three years. |
| Mr. Rodriguez also receives use of an office space; however there is no additional cost associated with these items as the assumption is that he would use a Company office. | 79 | Mr. RodriguezThe executive 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, 2018, Mr. Rodriguez’s base salary was $900,000. |
| | 8 | 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 2017, which was $1,921,932. |
| | 9 | 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. |
| | 10 | Mr. Ackerman will be entitled to receive hisexecutive's salary for the one-year period following his termination, contingent upon his execution of a release and noncompetition agreement and pursuant to the terms of the DaVita Inc. Severance Plan for Directors and Above (the “Severance Plan”)., provided that in the case of Mr. Ackerman, Mr. Staffieri, and Ms. Waters, they are also entitled to receive the same level of benefits as provided in the Severance Plan upon a termination for "good cause" under the terms of their employment agreements. As of December 31, 2018,2020, the base salaries for the NEOs participating in the Severance Plan were as follows: Mr. Ackerman’s base salary was $700,000.Ackerman — $700,000; Mr. Staffieri — $800,000; Ms. Waters — $625,000; and Mr. Hearty — $500,000. Such payment obligation will be reduced dollar-for-dollar by the amount of any compensation received by Mr. Ackermanthe executive from another employer during the severance payment period, and Mr. Ackermanthe executive is obligated to use reasonable efforts to find employment during such period. |
| | 1110 | If Mr. Ackerman is terminated, he will be entitled to receive a lump sum payment equal to the bonus paid in the year prior to the termination, pro-ratedprorated 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. Ackerman for 2017, which was $750,000. |
| 2019. | 1211 | Mr. Ackerman will continue to receive his health benefits for the 18-month period following his termination without material cause or resignation for good cause.cause, subject to earlier termination in the event Mr. Ackerman accepts full-time employment with another employer. The amount reported in the table above is the estimated actual cost of COBRA insurance premiums for Mr. Ackerman for the 18-month period following termination. |
| termination, based on current insurance premium costs. | 1312 | Mr. Ackerman will be entitled to receive a lump sum payment equal to two times the sum of his base salary in effect as of the date of termination and the bonus paid in the year prior to termination followingupon his resignation for good cause afteror by the Company without material cause following a change in control. The amount reported in the table above reflects two times Mr. Ackerman’s base salary as of December 31, 2018,2020, which was $700,000. |
| | 1413 | Mr. Ackerman will be entitled to receive a lump sum payment equal to the bonus paid in the year prior to the termination following his resignation for good cause or by the Company without material cause following a change in control. This severance amount is reported as the bonus paid to Mr. Ackerman for 2017,2019, which was $750,000. |
| $1,280,906. | 1514 | Ms. WatersMr. Staffieri will be entitled to receive hera lump sum payment equal to two times the sum of his base salary in effect as of the date of termination upon his resignation for good cause after a change in control. The amount reported in the one-year period following her termination. Astable above reflects two times Mr. Staffieri’s base salary as of December 31, 2018, Ms. Water’s base salary2020, which was $540,000. |
| $800,000. | 1615 | Ms. Waters will be entitled to receive her salary for the one-year period following her resignation for good cause. As of December 31, 2018, Ms. Water’s base salary was $540,000. |
| | 17 | If Mr. Staffieri or Ms. Waters is terminated after April in a given year, shethe executive will be entitled to receive a lump sum payment equal to the bonus paid in the year prior to the termination, pro-ratedprorated for the number of months served in the year herthe executive's 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 Ms. Watersthe executive for 2017, which was $615,000.2019. |
| | 18 | Ms. Zumwalt is not party to an employment agreement with the Company but may be entitled to severance under the Severance Plan upon an involuntary termination of employment in accordance with the terms of the Severance Plan. Under the terms of the Severance Plan, upon such a termination and subject to her execution of a release and noncompetition agreement, Ms. Zumwalt would be entitled to 12 months of base salary continuation and, at the discretion of the Company, outplacement assistance. As of December 31, 2018, Ms. Zumwalt’s base salary was $400,000. Such payment obligation will be reduced dollar-for-dollar by the amount of any compensation received by Ms. Zumwalt from another employer during the severance payment period, and Ms. Zumwalt is obligated to use reasonable efforts to find employment during such period.87 |
Table of Contents Other Severance Payments and BenefitsThe Company’s obligation to provide continued health benefits under the circumstances set forth in the tables above is subject to earlier termination in the event that the executive accepts 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 of December 31, 2018 was as follows: $1,300,000$1,200,000 for Mr. Thiry, $900,000 for Mr. Rodriguez,Rodriguez; $500,000 for Mr. Ackerman,Ackerman; $700,000 for Mr. Staffieri; $500,000 for Ms. Waters,Waters; and $400,000$500,000 for Ms. Zumwalt. We haveMr. Hearty. The amounts are equal to one times the base salary of the NEO at the time of benefits elections, subject to certain caps.The Company does not providedprovide for tax gross-ups in any employment agreements or amended employment agreements entered into after July 2008. Whileagreements. Mr. Thiry's employment agreement previously contained a tax gross-up provision for tax obligations possibly imposed by Sections 280G or 4999 of the Internal Revenue Code ("Code"), effective August 20, 2018,
his agreement was amended to remove such provision. Mr. Thiry's amendedRodriguez's employment agreement provides that in the event that payments to Mr. ThiryRodriguez would be subject to the excise tax imposed by Section 4999 of the Code, then the payments would be either (i) reduced so that no portion of the payments would be subject to such excise tax, or (ii) paid in full, whichever produces the better net after-tax position to Mr. Thiry.
the executive.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 existing 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 generally also include, among other things, 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. Accelerated Vesting of Stock-Based Awards For grants and awards of SSARs, PSUs 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 SSAR, PSU or RSU awards shall automatically vest and become immediately exercisable in their entirety, with 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 performance metrics in which the performance period has not completed, are converted to the relativea Relative TSR metric. The number of shares issuable are then determined based on the Company’s relativeRelative 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. 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, 2018.2020.| Name | | Value of SSARs1 | | Value of Stock Awards2 | | Javier J. Rodriguez | | $ | 130,583,030 | | $ | 44,474,642 | | Joel Ackerman | | $ | 16,822,064 | | $ | 21,138,809 | | Michael D. Staffieri | | $ | 32,306,601 | | $ | 13,592,337 | | Kathleen A. Waters | | $ | 8,560,746 | | $ | 12,599,368 | | James O. Hearty | | $ | 5,033,804 | | $ | 3,394,621 |
| | | | | | | | | Name | Value of SSARs1 | Value of Stock Awards2 | | Kent J. Thiry | See footnote 3 |
| See footnote 3 |
| | Javier J. Rodriguez | $ | — |
| $ | 2,691,564 |
| | Joel Ackerman | $ | — |
| $ | 1,855,853 |
| | Kathleen A. Waters | $ | — |
| $ | 1,158,931 |
| | LeAnne M. Zumwalt | See footnote 3 |
| See footnote 3 |
|
| | | 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, 2018,2020, which was $51.46$117.40 per share, as reported by the NYSE. Because the base prices of the outstanding SSARs were below the closing price of a share of our Common Stock on December 31, 2018, no value is reported in this column for the outstanding SSARs. |
| | | 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, 2018,2020, which was $51.46$117.40 per share, as reported by the NYSE. For PSUs, performance through December 31, 20182020 was used to determine the shares that would vest upon a Change of Control. Per the award agreements, all PSUsPSU performance metrics in which the performance period has not completed, convert to a relativeRelative TSR performance metric upon a Change of Control. |
| 88 | | 3 | Mr. Thiry and Ms. Zumwalt satisfied the requirements for Rule of 65 Retirement Policy treatment as of December 31, 2018, and as such, in the event of their termination from the Company, they would receive the benefits set forth below under the section "Retirement". |
| | | | | DaVita Inc. Notice of Special2021 Annual Meeting and Proxy Statement | 71 |
RuleDeath and Disability Certain of 65 Retirement Policy For grants and awards ofour SSARs, RSUs and/and PSUs provide for accelerated vesting upon death or disability. These SSARs, RSUs and PSUs to our NEOs, the Rulevest 100% upon death or disability, with PSUs vesting at their target number of 65 Retirement Policy provides that an executive officer who has achieved a minimum age of 55 and a minimum of five years of
continuous service with the Company receive certain benefits with respect to outstanding equity awards upon a qualifying retirement if the sum of age plus
years of service is greater than or equal to 65. In the event of a qualifying retirement under the Rule of 65 Retirement Policy (i) SSARs will become exercisable in accordance with the normal vesting schedules set forth in the underlying award agreements, as if the eligible officer had not separated from service, and
remain exercisable until the normal expiration dates set forth in the underlying award agreements, (ii) RSUs will become fully vested and will be settled within 60 days following such qualifying retirement, and (iii) PSUs will remain eligible to vest, as if the eligible officer had not separated from service, based on actual performance during the applicable performance period, with any unvested PSUs to be settled within 60 days following the expiration of the applicable performance period. To comply with Section 409A of the Code, we structured the Rule of 65 Retirement Policy so that outstanding RSUs will be settled within 60 days of a qualifying retirement rather than in accordance with the normal vesting schedules set forth in the underlying award agreements.
shares. 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, 2018.2020.| Name | | Value of SSARs1 | | Value of Stock Awards2 | | Javier J. Rodriguez | | $ | 128,508,566 | | $ | 28,806,672 | | Joel Ackerman | | $ | 13,301,208 | | $ | 14,289,693 | | Michael D. Staffieri | | $ | 30,380,317 | | $ | 12,828,885 | | Kathleen A. Waters | | $ | 8,017,403 | | $ | 9,727,529 | | James O. Hearty | | $ | 4,974,511 | | $ | 2,447,908 |
| | | | | | | | | Name | Value of SSARs1 | Value of Stock Awards2 | | Kent J. Thiry | $ | — |
| $ | 20,165,578 |
| | Javier J. Rodriguez | $ | — |
| $ | — |
| | Joel Ackerman | $ | — |
| $ | — |
| | Kathleen A. Waters | $ | — |
| $ | — |
| | LeAnne M. Zumwalt | $ | — |
| $ | 774,627 |
|
| | | 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, 2018,2020 for the relevant awards, which was $51.46$117.40 per share, as reported by the NYSE. Because the base prices of the outstanding SSARs were below the closing price of a share of our Common Stock on December 31, 2018, no value is reported in this column for the outstanding SSARs. |
| | | 2 | Values are based on the aggregate number of shares underlying PSUs (at target) and RSUs for the relevant awards, multiplied by the closing sale price of our Common Stock on December 31, 2018,2020, which was $51.46$117.40 per share, as reported by the NYSE. For PSUs, the expected payout as of December 31, 2018 was used to determine the shares. |
Definitions Under Stock-Based Award Agreements
For purposes of the stock-based award agreements and the table above: Aabove, a “Change of Control” generally 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.
“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.
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 73 |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following disclosure about the relationship of the annual total compensation of Mr. Thiry,Rodriguez, our CEO during 2018,Chief Executive Officer, to the annual total compensation of our teammates. For 2018,2020, based on the methodology described below: The median of the annual total compensation of all of our teammates, other than Mr. Thiry, was $60,889.
Mr. Thiry’s annual total compensation was $32,031,175, including the impact of certain one-time accounting modification charges that impacted Mr. Thiry's reported 2018 compensation.
Based on this information, the ratio of the annual total compensation of Mr. Thiry to the median of the annual total compensation of all teammates is estimated to be 526 to 1.
As further described below, excluding the impact of certain one-time accounting modification charges that impacted Mr. Thiry's reported 2018 compensation, as disclosed pursuant to SEC rules, the above ratio would be approximately 285 to 1.
| – | The median of the annual total compensation of all of our teammates, other than Mr. Rodriguez, was $64,620. | | – | As discussed below, in determining Mr. Rodriguez's annual total compensation for purposes of this calculation, SEC disclosure rules require us to include the entire grant date fair value amount of the CEO Premium-Priced SSAR Award, even though the award is intended to replace five years of grants. In addition, because we have included the value of non-discriminatory benefits in the calculation of the median teammate’s annual total compensation, Mr. Rodriguez’s annual total compensation, as reported in the 2020 Summary Compensation Table, has been adjusted to also include the value of non-discriminatory benefits. As a result of the foregoing, Mr. Rodriguez’s annual total compensation was $73,456,962 for purposes of this calculation. | | – | SEC CEO Pay Ratio: Based on the information above, the ratio of the annual total compensation of Mr. Rodriguez to the median of the annual total compensation of all teammates is estimated to be 1,137 to 1. | | – | Alternative Pay Ratio: The Company has also calculated an alternative pay ratio using an annualized figure for Mr. Rodriguez’s CEO Premium-Priced SSAR Award rather than the entire grant date fair value amount.1 When calculated in this manner, Mr. Rodriguez’s adjusted 2020 compensation, including the value of non-discriminatory benefits that he received, is $18,659,396, and the alternative pay ratio of the annual total compensation of Mr. Rodriguez to the median of the annual total compensation of all teammates is estimated to be 289 to 1. |
We believe this pay ratiothe SEC CEO Pay Ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratioSEC CEO Pay Ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. In addition, given the leverage of our executive compensation program towards performance-based elements we expect that our pay ratio disclosure will fluctuate year-to-year based on the Company’s performance against the pre-established performance goals as well as variability in the value of non-discriminatory benefits.Identification of Median Teammate We had previously selected DecemberOctober 31, 2017,2019, as the date on which to determineidentify our median teammate (the "2017for 2019 (such date, the "2019 determination date"). The median employee used for purposes of disclosing our 2017 pay ratio had a change in employment circumstance that we believe makes it no longer appropriate to use such employee as the median employee for pay ratio purposes as we believe using such employee would not accurately reflect our median pay and would reduce the comparability of the pay ratio disclosure year-over-year. As permitted under the SEC executive compensation disclosure rules, we are electing to use another employee, whose 2017 compensation was substantially similar to the original median employee’s 2017 compensation based on the same compensation measure used to select the original median employee. Since the 20172019 determination date and through December 31, 2018,2020, there have been no changes in the Company’s teammate population or teammate compensation arrangements that we believe would significantly impact the pay ratio disclosure.disclosure and, accordingly, our pay ratio has been calculated utilizing the same median employee from the 2019 determination date. ____________________
1 Under the alternative pay ratio calculation, we annualize Mr. Rodriguez's CEO Premium-Priced SSAR Award by (i) deducting the grant date fair value of the CEO Premium-Priced SSAR Award from the 2020 total compensation reported in the 2020 Summary Compensation Table and (ii) instead including as 2020 compensation one-fifth of the grant date fair value of the CEO Premium-Priced SSAR Award to reflect the intended five-year term of the award. | 90 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents Our teammate population on the 20172019 determination date consisted of 74,549 individuals. | | | | | Total U.S. Teammates | 69,413 |
| | Total non-U.S. Teammates | 5,136 |
| (no exclusions) | Total Global Workforce | 74,549 |
| |
SEC rules permit us to exclude64,411 individuals, of which 56,751 were in the U.S. and 7,660 were outside the U.S. We excluded from the pay ratio calculation certain teammates based in non-US jurisdictions provided thatas permitted by SEC rules.2 As a result, we may not exclude more than 5% of our total teammates. Relying on this rule, we excludedused a total workforce of 2,22261,927 teammates for the median teammate calculation, of which 56,751 were in the following jurisdictions in 2017:
| | | | Poland | 985 |
| Portugal | 419 |
| Colombia | 818 |
| | | Total | 2,222 |
|
The table below gives information onU.S. and 5,176 were outside the total number of teammates used for identifying the median teammate.
| | | | | Total U.S. Teammates | 69,413 |
| | Total non-U.S. Teammates | 2,914 |
| (excluding 2,222 teammates) | Total Workforce for Median Calculation | 72,327 |
| |
U.S.For purposes of identifying the median teammate from our teammate population base, we used the same methodology as we did last year and considered taxable earnings,gross income, including pre-tax contributions to the Company's 401(k) and health and welfare plans, as compiled from our payroll and benefits records. We selected this measure as it captures the principal forms of compensation delivered to all of our teammates and this information is readily available with respect to our teammates. In addition, we measured compensation for purposes of determining the median teammate using the 12-month period ending on the 20172019 determination date. Compensation paid in foreign currencies was converted to U.S. dollars based on a weighted average exchange rate for the relevant period. In determining the annual total compensation of the median teammate, such teammate’s compensation was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, as required pursuant to the SEC executive compensation disclosure rules, provided that we also, as permitted by those rules, included the value of certain non-discriminatory benefits. Variability in the value of these non-discriminatory benefits year-over-year may drive similar variability in the annual total compensation of the median teammate. Calculating CEO Compensation
In determining Mr. Thiry’s compensation for purposes____________________
2 Relying on this rule, which permits such exclusions so long as we do not exclude more than 5% of calculating the CEO Pay Ratio,our total teammates, we adjusted the compensation reportedexcluded a total of 2,484 teammates in the 2018 Summary Compensation Table to reflect the value of the non-discriminatory benefits that he received. This adjustment resultedfollowing jurisdictions in total annual compensation of $32,031,175 for the CEO used for purposes of the pay ratio calculation, as opposed to the amount shown in the 2018 Summary Compensation 2019: Poland (986); Portugal (468); Colombia (999); Netherlands (3); and United Kingdom (28).
Table of $32,017,501, which in turn resulted in a CEO Pay Ratio of approximately 526 to 1. As further described in the Compensation Discussion and Analysis and the 2018 Summary Compensation Table, Mr. Thiry's reported compensation for 2018 reflects the impact of one-time accounting modification charges resulting from the implementation of the Rule of 65 Retirement Policy and adjustments to the 2016 PSUs to reallocate the performance criteria related to a DMG performance metric to the other criteria used in the 2016 PSU grant, contingent upon the closing of the pending DMG transaction. These modification charges do not represent newly granted awards but rather adjustments to existing equity awards granted to Mr. Thiry in prior years. Excluding the one-time accounting charges related to these modifications, Mr. Thiry's total annual compensation for 2018 is $17,327,711. Further adjusting this compensation figure to reflect the value of non-discriminatory benefits that he received would result in total annual compensation of $17,341,385, and an adjusted pay ratio of approximately 285 to 1. We believe excluding these one-time accounting modification charges from the CEO's total annual compensation for purposes of calculating the pay ratio results in a more meaningful comparison of ongoing CEO compensation to the median of the annual total compensation of all teammates, particularly when viewed over a period of time. Given the leverage of our executive compensation program towards performance-based elements we expect that our pay ratio disclosure will fluctuate year-to-year based on the Company’s performance against the pre-established performance goals as well as variability in the value of non-discriminatory benefits for our median teammate.
Contents | | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 75 |
| | | | Compensation of Directors | |
The following table sets forth information concerning the compensation of our non-employee directors during 2018.2020. Mr. Rodriguez serves, and Mr. Thiry, also servesfor a portion of 2020, served, as a membermembers of the Board. As an executive officerofficers of the Company, however, Mr. Rodriguez does not, and Mr. Thiry doesdid not, receive any additional compensation for his services as a membermembers of the Board. 20182020 DIRECTOR COMPENSATION TABLE | | | | | | | | | | | | | | | | | | | Name | Fees Earned ($)1 | Stock Awards ($)2 | SSAR Awards ($)3, 4 | | All Other Compensation ($)5 | Total ($) | | Pamela M. Arway |
| $229,000 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $418,089 |
| | Charles G. Berg |
| $100,978 |
|
| $95,042 |
|
| $94,047 |
| |
| $82,928 |
|
| $372,995 |
| Carol Anthony (“John”) Davidson6 |
| $66,453 |
|
| $15,562 |
|
| $241,478 |
| 7 |
| $— |
|
| $323,493 |
| | Barbara J. Desoer |
| $195,500 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $384,589 |
| | Pascal Desroches |
| $157,639 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $346,728 |
| | Paul J. Diaz |
| $150,250 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $339,339 |
| | Peter T. Grauer |
| $169,375 |
|
| $138,757 |
|
| $137,363 |
| |
| $— |
|
| $445,495 |
| | John M. Nehra |
| $155,000 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $344,089 |
| | Dr. William L. Roper |
| $177,750 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $366,839 |
| | Phyllis R. Yale |
| $139,500 |
|
| $95,042 |
|
| $94,047 |
| |
| $— |
|
| $328,589 |
|
| | | | | | | | All Other | | | | | Fees Earned | | Stock Awards | | SSAR Awards | | Compensation | | Total | | Name | | ($)1 | | ($)2 | | ($)3, 4 | | ($) | | ($) | | Pamela M. Arway | | $266,676 | | $189,971 | | $— | | $— | | $456,647 | | Charles G. Berg | | $112,500 | | $189,971 | | $— | | $— | | $302,471 | | Barbara J. Desoer | | $205,000 | | $189,971 | | $— | | $— | | $394,971 | | Pascal Desroches5 | | $171,495 | | $205,481 | | $— | | $— | | $376,976 | | Paul J. Diaz | | $147,747 | | $189,971 | | $— | | $— | | $337,718 | | Peter T. Grauer5 | | $71,484 | | $166,618 | | $152,752 | | $— | | $390,854 | | Shawn M. Guertin6 | | $35,788 | | $32,060 | | $— | | $— | | $67,848 | | John M. Nehra | | $122,500 | | $189,971 | | $— | | $— | | $312,471 | | Paula A. Price7 | | $36,522 | | $39,245 | | $— | | $— | | $75,767 | | Dr. William L. Roper5 | | $58,324 | | $116,766 | | $104,583 | | $— | | $279,673 | | Phyllis R. Yale | | $136,923 | | $189,971 | | $— | | $— | | $326,894 |
| | 11. | Consists of the amounts described below under the subsection “—Annual Retainers,” “—Meeting Fees,” and “—Expense Reimbursement and Per Diem Compensation.” With respect to Ms. Arway, includes the prorated portions of the $175,000 cash retainer for service as Independent Chair and the $50,000 cash retainer for service as Chair of the Compensation Committee, respectively, in the amounts of $101,923 and $22,253, respectively. With respect to Ms. Desoer, includes the prorated portions of the $50,000 cash retainers for service as Chair of the Compliance and Quality Committee and Chair of the Compensation Committee, in the amounts of $22,253 and $27,747, respectively. With respect to Mr. Desroches, includes the prorated portion of the $50,000 cash retainer for service as Chair of the Audit Committee in the amount of $47,690. With respect to Mr. Diaz, includes the prorated portion of the $50,000 cash retainer for service as Chair of the Compliance and Quality Committee in the amount of $27,747. With respect to Mr. Grauer, includes the prorated portion of the $37,500 cash portionretainer for service as lead independent director.Lead Independent Director in the amount of $15,659. With respect to Mr. Guertin, includes the prorated portion of the $50,000 cash retainer for service as Chair of the Audit Committee in the amount of $2,310. With respect to Ms. Yale, includes a portion of the $35,000 annual cash retainer for service as the Chair of the Nominating and Governance Committee, effective June 11, 2020, in the amount of $19,423 paid pursuant to the 2020 Non-Employee Director Compensation Policy, as discussed below. With respect to Ms. Arway and Ms. Desoer, includes $10,000 and $30,000, respectively, in per diem compensation paid pursuant to the $50,000 cash portionCompany’s Non-Employee Director Compensation Policy for service as chair of the Compensation Committee and Compliance Committee, respectively. With respect to Mr. Davidson and Mr. Desroches, includes their prorated portions of the $50,000 cash portion for service as chair of the Audit Committee,additional time spent in the amounts of $8,194 and $41,806, 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. |
| 2020 on Board matters. | 22. | The amounts shownreported in this column reflect the aggregate grant date fair value of all direct stock issuance awards ("DSI") granted to our non-employee directors during 20182020 as estimated by the Company in accordance with FASB ASC Topic 718. This includes four quarterly grants under the 2020 Non-Employee Director Compensation Policy granted on March 15, 2020; May 15, 2020; August 15, 2020; and November 15, 2020. With respect to Mr. Grauer, this amount also includes two quarterly grants and one prorated quarterly grant for the $43,750 equity portion denominated in DSIsLead Independent Director under the 2020 Non-Employee Director Compensation Policy granted on March 15, 2020; May 15, 2020; and June 1, 2020, respectively. Mr. Grauer and Mr. Roper each received prorated quarterly grant amounts on their last day of Board service, June 11, 2020 and Mr. Guertin and Ms. Price received prorated quarterly grants on November 15, 2020 for service as lead independent director.the quarters each joined the Board. See Note 1918 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20182020 for a discussion of the relevant assumptions used in calculating the grant date fair value pursuant to FASB ASC Topic 718. |
| | 3 | The amounts shown in this column reflect the aggregate grant date fair value of all SSAR awards granted to our directors during 2018 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 Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of the relevant assumptions used in calculating grant date fair value pursuant to FASB ASC Topic 718. |
| | 43. | As of December 31, 2018,2020, each activenon-employee director had the following number of SSARs outstanding: Ms. Arway, 29,434; Mr. Berg, 25,857;15,781; Ms. Desoer, 23,174; Mr. Desroches, 16,989; Mr. Diaz, 29,434; Mr. Grauer, 42,991;19,358; Mr. Nehra, 29,434; Dr. Roper, 29,434;19,358; and Ms. Yale, 18,922. |
| No SSAR awards were granted to non-employee directors during 2020. | 54. | The amount included here for Mr. Berg relates to personal use of fractionally-owned or chartered corporate aircraft for a fixed number of hours, as approved by our Board of Directors. This amount is calculated for Mr. Berg in the same manner as for our executives. See Footnote 6 to the 2018 Summary Compensation Table under the heading, "Executive Compensation—2018 Summary Compensation Table" for additional detail on the calculation of this amount. |
| | 6 | Mr. Davidson retired from the Board on March 1, 2018. |
| | 7 | This amount representsThese amounts represent the incremental fair value under FASB ASC Topic 718 associated with the modification of Mr. Davidson'sGrauer's and Mr. Roper's outstanding vested SSAR awards in connection with his resignationto extend the post-termination exercise period from 90 days to the original expiration date of the SSAR awards. | | 5. | Messrs. Grauer and Roper stepped down from the Board. |
| Board at the 2020 Annual Meeting of Stockholders and Mr. Desroches stepped down from the Board, effective December 15, 2020. | | 6. | | Mr. Guertin was appointed to the Board, effective September 15, 2020. | 767. | Ms. Price was appointed to the Board, effective August 10, 2020. |
| 92 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents | Compensation of Directors | |
Director Compensation Policy Our non-employee director compensation program, which is embodied in our Non-Employee Director Compensation Policynon-employee director compensation policy (the “Director Compensation Policy”), is designed to attract and retain highly-qualified directors and to align the interests of our directors with the long-term interests of our stockholders. The Compensation Committee is responsible for recommending to the Board the compensation of our non-employee directors. As part of this process, the Compensation Committee reviews the compensation program for our non-employee directors no less than annually and considers input from its independent compensation consultant, Compensia, regarding general market practices on director compensation as well as comparative market data for our comparator peer group, which is the same peer group used for purposes of evaluating the competitiveness of our executive compensation program. The Compensation Committee also considers feedback received on the structure of our director compensation program through engagement with our stockholders. As partIn consideration of its annual review in 2018, the Compensationcontemplated Board and Committee resolved to set a fixed grant date of May 15 of each year forchanges at the annual equity grant to non-employee directors as further described below. In February 2019,time, the Compensation CommitteeBoard approved a further modificationcertain changes to the Director Compensation Policy to changeeffective May 1, 2020 (the "2020 Director Compensation Policy," and the annual equity grant under the program from SSARs with a one year vesting period to an equivalent valueversion of Direct Stock Issuances ("DSIs") granted in four installments at fixed dates spread throughout the year. These modifications to the Director Compensation Policy were effectivethat was in May 2019, and are set forth in further detail below. effect before the 2020 Director Compensation Policy, the “Prior Director Compensation Policy”).The following describes the compensation paid to our non-employee directors for service as a director during 20182020 under the Director Compensation Policy as set forth in the table above. Directors who are current employees or officers do not receive compensation for service on the Board or any committee of the Board. Annual Grant.Under the Director Compensation Policy, in effect in 2018, each of our non-employee directors received an annual grant of SSARs, granted on May 15, 2018, with the number of SSARs determined by dividing $95,000 by 20% of the closing market price of our Common Stock on the grant date. The SSARs vested 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 the subsection titled “Executive Compensation—Potential Payments Upon Termination or Change of Control—Definitions Under Stock-Based Award Agreements”), and expiring five years after the date of grant. Each of our non-employee directors was alsois entitled to receive DSIs in 2018 to be granted quarterly on the last day of each fiscal quarter. The number of DSIs to be granted quarterly was determined by dividing $23,750 by the closing market price of our CommonDirect Stock on the last trading day of each fiscal quarter. The DSIs are 100% vested upon issuance.
Effective May 15, 2019, our non-employee directors no longer receive an annual grant of SSARs. Instead, our non-employee directors receive an equivalent value of DSIs. The DSIs areIssuances ("DSIs") granted in four equal installments on March 15, May 15, August 15 and November 15 and March 15,(each, a "Grant Date"), in an amount determined by dividing $47,500 by the closing market price of our Common Stock on the applicable grant date,Grant Date, or if the grant dateGrant Date does not fall on a trading day, then the last trading day prior to the grant date.Grant Date. The DSIs shall be prorated, as applicable, including for new directors, based on the number of days of service on the Board. The final quarterly grant of DSIs under the prior Director Compensation Policy occurred in March 2019.
Additional Annual Grant to Lead Independent Director.Effective March 2018,Under the lead independent directorPrior Director Compensation Policy, the Lead Independent Director was also entitled to receive DSIs granted in four equal installments on a Grant Date, in an additional annual grant of SSARs, which was made on May 15, 2018, with the number of SSARsamount determined by dividing $43,750 by 20% of the closing market price of our Common Stock on the grant date. The SSARs vested 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 the subsection titled "Executive Compensation — Potential Payments Upon Termination or Change of Control — Definitions Under Stock Based Award Agreements"), and expiring five years after the date of grant. The lead independent director was also entitled to receive additional DSIs granted quarterly on the last day of each fiscal quarter. The number of DSIs to be granted quarterly was determined by dividing $10,938$21,875 by the closing market price of our Common Stock on the applicable Grant Date, or if the Grant Date does not fall on a trading day, then on the last trading day prior to the Grant Date. The amount of each fiscalDSIs granted to the Lead Independent Director was to be prorated, as applicable, based on the number of days of service as Lead Independent Director during the applicable calendar quarter. The DSIs are 100% vested upon issuance. If the lead independent directorLead Independent Director also servesserved as a chair of any committee of the Board, the lead independent director willLead Independent Director would 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.
| | | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 77 |
| | | Compensation of Directors | |
Effective on May 15, 2019, our lead independent director no longer receives an additional annual grant of SSARs. Instead, our lead independent director receives an equivalent value of DSIs. The DSIs are granted in four equal installments on May 15, August 15, November 15 and March 15, in an amount determined by dividing $21,875 by the closing market price of our Common Stock on the applicable grant date, or if the grant date does not fall on a trading day, then on the last trading day prior to the grant date. The amount of DSIs granted to our lead independent director shall be prorated, as applicable, based on the days of service on the Board. The final quarterly grant of DSIs to our lead independent director under the prior Director Compensation Policy occurred in March 2019.
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. The chair of the Nominating and Governance Committee does not receive an additional retainer.
Proration of Quarterly Retainer — Upon Appointment. The quarterly retainer due to a director elected during a quarter is prorated based on the datedays of service on the Board during the applicable calendar quarter.Lead Independent Director Retainer. Pursuant to the Prior Director Compensation Policy, the Lead Independent Director received an additional retainer of $37,500 in cash per year, paid quarterly in arrears. The quarterly retainer due to the Lead Independent Director during a quarter was prorated based on the days of service as Lead Independent Director during the applicable calendar quarter. Independent Chair Retainer. Effective June 1, 2020, under the 2020 Director Compensation Policy, a director serving as the independent Chair of the Board ("Independent Chair") receives an additional retainer of $175,000 in cash per year, paid quarterly in arrears. The quarterly retainer due to the Independent Chair is to be prorated based on the number of days of service as Independent Chair during the applicable calendar quarter.
Table of Contents If the Independent Chair also serves as a chair of any committee of the Board, the Independent Chair will also be entitled to receive the additional retainer for serving as the chair of any such director’s appointment.committee, in addition to the retainer he or she is entitled to receive as the Independent Chair. Committee Chairs Retainer. ProrationUnder the Director Compensation Policy, the chairs of Quarterly Retainer — Upon Termination.the Audit, Compensation and Compliance and Quality Committees receive an additional retainer of $50,000 in cash per year, paid quarterly in arrears. Under the Prior Director Compensation Policy, the chair of the Nominating and Governance Committee did not receive an additional retainer. Effective June 11, 2020, under the 2020 Director Compensation Policy, the chair of the Nominating and Governance Committee receives an additional retainer of $35,000 in cash per year, paid quarterly in arrears. The quarterly retainer due to a director terminating serviceelected or appointed to a Committee during a quarter is prorated based on the datedays of such director’s termination.service as chair of a committee during the applicable calendar quarter.
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 who are committee members or whose participation was requested by the Compensation Committee Chairchair of a committee 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,Lead Independent Director or Independent Chair, 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 boardBoard duties, including director training, meeting with Company management or external auditors, interviewing director candidates or other activities deemed necessary by the chairman ofLead Independent Director or Independent Chair, the Board, the lead independent directorCompensation Committee or the entire Board. If time expended is less than the full unit of time for which a payment rate has been set, the payment shall be made on a pro rata basis.
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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 2018,2020, 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. Comp
Certain Relationships and Related
Person Transactions |
We or one of our subsidiaries may occasionally enter into transactions with certain “related persons.” Related persons include our executive officers, directors, nominees for directors, more than 5% beneficial owners of our Common Stock and immediate family members of these persons. We refer to any transaction, arrangement or relationship or any series of similar transactions, arrangements of relationships, in which: (i) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year; (ii) the Company or any of its consolidated subsidiaries is or will be a participant; and (iii) a related person has a direct or indirect material interest as “related person transactions.” Each related person transaction must be approved or ratified in accordance with the Company’s written Related Person Transaction Policy by our Audit Committee or, if our Audit Committee determines that the approval or ratification of such related person transaction should be considered by all disinterested members of the Board, by the vote of a majority of such disinterested members. When determining whether to approve or ratify a related person transaction, the Audit Committee or the disinterested members of the Board shall consider all relevant information available concerning the related person transaction, including, without limitation, the following: | ● | the size of the transaction and the amount payable to a related person; | | ● | | the nature of the interest of the related person in the transaction; | | ● | DaVita Inc.whether the transaction may involve a conflict of interest; | | ● | whether the transaction was undertaken in the ordinary course of business of the Company; | | ● | whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties; and | | ● | any other information regarding the transaction or related person that would be material to investors in light of the circumstances of the transaction. |
There were no related person transactions from January 1, 2020 through the date of this Proxy Statement required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Table of Contents The Audit Committee of the Board of Directors (the "Audit Committee") is responsible for providing independent, objective oversight of the Company’s accounting functions and internal controls. The Audit Committee is composed of three directors, each of whom is independent as defined by New York Stock Exchange listing standards. The Audit Committee operates under a written charter approved by the Board of Directors. The Audit Committee is directly responsible for the appointment and compensation of the Company’s independent registered public accounting firm, KPMG LLP ("KPMG"), as well as monitoring the independence, qualifications and performance of KPMG and the scope and effectiveness of the Company’s internal audit function. In addition, the Audit Committee has considered whether the provision of non-audit services to the Company by KPMG is compatible with maintaining KPMG’s independence. Management is responsible for internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB") and an audit of the effectiveness of internal controls over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. The Audit Committee has met and held discussions with the Company’s internal auditors and KPMG, with and without management present, to discuss the scope of their audit plans, results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee engaged KPMG to conduct the independent audit for the year ended December 31, 2020. The Audit Committee reviewed and discussed with management the Company's audited consolidated financial statements, as of and for the year ended December 31, 2020. The Audit Committee also discussed with KPMG the matters required to be reviewed and discussed by applicable requirements of the PCAOB and the U.S. Securities and Exchange Commission. In addition, the Audit Committee received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding KPMG's communications with the Audit Committee concerning independence, and has discussed with KPMG their independence. Based upon the Audit Committee’s reviews and discussions, referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the U.S. Securities and Exchange Commission. THE AUDIT COMMITTEE Shawn N. Guertin (Chair)
John M. Nehra
Paula A. Price | 96 | | Notice of Special2021 Annual Meeting and Proxy Statement |
Table of Contents 79Stockholder Proposals for 2022 Annual Meeting |
Stockholder Proposals for 2020Annual Meeting
If you wish to present a proposal for action at the 2020 annual meeting of stockholders2022 Annual Meeting and wish to have it included in the proxy statement and form of proxy that management will prepare, you must notify us no later than December 31, 201924, 2021 in the form required under the rules and regulations promulgated by the SEC. Otherwise, your proposal will not be included in management’s proxy materials. Our Bylaws include provisions permitting, subject to certain terms and conditions, stockholders or groups of stockholders who have continuously owned at least 3% of the outstanding shares of the Company’s Common Stock for at least three consecutive years to use management’s proxy materials to nominate a number of director candidates not to exceed the greater of two or 20% of the number of directors then in office, subject to reduction in certain circumstances. If you wish to nominate a director for election at the 2020 annual meeting of stockholders2022 Annual Meeting and wish to have the nominee included in the proxy statement and form of proxy that management will prepare, you must notify us no later than the close of business December 31, 2019,24, 2021, and no earlier than the close of business December 1, 2019.November 24, 2021. However, if we hold our 2020 annual meeting of stockholders2022 Annual Meeting more than 30 days before or more than 70 days after the one-year anniversary of the date that the Company first mailed this Proxy Statement, you must notify us: (i) not earlier than the close of business on the 150th day prior to the 2020 annual meeting2022 Annual Meeting and (ii) not later than the close of business on the later of the 120th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of the 2020 annual meeting2022 Annual Meeting was first made. Otherwise, your nominee will not be included in management’s proxy materials. If you wish to present a proposal for action at the 2020 annual meeting of stockholders,2022 Annual Meeting, even though it will not be included in management’s proxy materials, or if you wish to nominate a director for election at the 2020 annual meeting of stockholders2022 Annual Meeting outside of the proxy access provisions of our Bylaws, our Bylaws require that you must notify us no later than the close of business March 19, 2020,12, 2022, and no earlier than the close of business February 17, 2020.10, 2022. However, if we hold our 20202022 Annual Meeting of Stockholders more than 30 days before or more than 70 days after the one-year anniversary of our 20192021 Annual Meeting, of Stockholders, you must notify us: (i) not earlier than the close of business on the 120th day prior to the 20202022 Annual Meeting of Stockholders, and (ii) not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of the 2020 annual meeting2022 Annual Meeting was first made. We advise you to review our Bylaws, which contain these and other requirements with respect to advance notice of stockholder proposals and director nominations, including certain information that must be included concerning the stockholder and each proposal or nominee. Our Bylaws are available under the Corporate Governance section of our website, located at http://www.davita.com/about/corporate-governance.
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The Board does not know of any other matters to be presented at the SpecialAnnual Meeting but, if other matters aredo properly broughtcome before the meeting, it is intended that the persons named as proxies in the proxy card will vote on them in accordance with their best judgment. A copy of our 2020 Annual Report to Stockholders accompanies this Proxy Statement. The 2020 Annual Report to Stockholders includes our audited financial statements for the year ended December 31, 2020. Our Annual Report on Form 10-K includes these financial statements, as well as other supplementary financial information and certain schedules. The Annual Report on Form 10-K is not part of our proxy soliciting material. Copies of the Annual Report on Form 10-K, without exhibits, can be obtained without charge by contacting Investor Relations at the following address: Attn: Investor Relations, DaVita Inc., 2000 16th Street, Denver, Colorado 80202, 1-888-484-7505 or through our website, located at www.davita.com. By order of the Board of Directors,  Samantha A. Caldwell Corporate SecretaryApril 23, 2021 | 98 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents RECONCILIATION OF NON-GAAP MEASURES Note on Non-GAAP Financial Measures As used in this Proxy Statement, the term “adjusted” refers to non-GAAP measures as follows, each as reconciled to its most comparable GAAP measure as presented in this Annex A. For income measures, the term “adjusted” refers to operating performance measures that exclude certain items such as impairment charges, (gain) loss on ownership changes, restructuring charges, accruals for legal matters and debt prepayment and refinancing charges. Adjusted operating income margin is adjusted operating income divided by consolidated revenues. These non-GAAP or “adjusted” measures are presented because management believes these measures are useful adjuncts to GAAP results. However, these non-GAAP measures should not be considered alternatives to the corresponding measures determined under GAAP. Specifically, management uses adjusted operating income, adjusted diluted net income per share attributable to DaVita Inc. and adjusted diluted net income from continuing operations per share attributable to DaVita Inc. to compare and evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe these non-GAAP measures also are useful to investors and analysts in evaluating our performance over time and relative to competitors, as well as in analyzing the underlying trends in our business. Furthermore, we believe these presentations enhance a user's understanding of our normal consolidated operating results by excluding certain items which we do not believe are indicative of our ordinary results of operations. As a result, adjusting for these amounts allows for comparison to our normalized prior period results. Finally, free cash flow from continuing operations represents net cash provided by operating activities from continuing operations less distributions to noncontrolling interests and all capital expenditures (including development capital expenditures, routine maintenance and information technology); plus contributions from noncontrolling interests and proceeds from the sale of self-developed properties. Management uses this measure to assess our ability to fund acquisitions, repurchase shares and meet our debt service obligations and we believe this measure is equally useful to investors and analysts as an adjunct to cash flows from operating activities from continuing operations and other measures under GAAP. It is important to bear in mind that these non-GAAP "adjusted" measures are not measures of financial performance or liquidity under GAAP and should not be considered in isolation from, nor as substitutes for, their most comparable GAAP measures. Adjusted operating income: | | Year ended
December 31, 2020 | | | (dollars in millions) | | Operating income | | $ | 1,695 | | Operating charges: | | | | | Loss on changes in ownership interests, net | | | 16 | | General and administrative: | | | | | Accruals for legal matters | | | 35 | | Adjusted operating income | | $ | 1,746 |
Table of Contents | | Year ended
December 31, 2019 | | | (dollars in millions) | | Operating income | | $ | 1,643 | | Operating charges: | | | | | Goodwill impairment charges | | | 125 | | Adjusted operating income | | $ | 1,768 |
Adjusted net income, adjusted net income from continuing operations, adjusted diluted net income per share attributable to DaVita Inc. and adjusted diluted net income from continuing operations per share attributable to DaVita Inc.: | | Year ended
December 31, 2020 | | | (Per share) | | Net income from continuing operations attributable to DaVita Inc. | | $ | 6.39 | | | Operating charges: | | | | | | Loss on changes in ownership interests, net | | | 0.13 | | | General and administrative: | | | | | | Accruals for legal matters | | | 0.29 | | | Debt prepayment, refinancing and redemption charges | | | 0.73 | | | Related income tax | | | (0.27 | ) | | Adjusted net income from continuing operations attributable to | | | | | | DaVita Inc. | | $ | 7.26 | | | Net loss from discontinued operations, net of tax | | | (0.08 | ) | | Adjusted net income attributable to DaVita Inc. | | $ | 7.18 | |
Numbers may not sum or recalculate due to the presentation of rounded numbers. Free cash flow from continuing operations: | | Year ended
December 31, 2020 | | | (dollars in millions) | | Net cash provided by continuing operating activities | | $ | 1,979 | | | Less: Distributions to noncontrolling interests | | | (253 | ) | | Plus: Contributions from noncontrolling interests | | | 43 | | | Cash provided by continuing operating activities attributable to | | | | | | DaVita Inc. | | | 1,769 | | | Less: Expenditures for routine maintenance and information | | | | | | technology | | | (399 | ) | | Less: Expenditures for development | | | (275 | ) | | Plus: Proceeds from sale of self-developed properties | | | 93 | | | Free cash flow from continuing operations | | $ | 1,188 | |
| 100 | | Notice of 2021 Annual Meeting and Proxy Statement |
Table of Contents  DAVITA INC.
2000 16TH STREET
DENVER, CO 80202 VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on (i) June 7, 2021, for shares held through the DaVita Retirement Savings Plan or (ii) June 9, 2021 for any other shares. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/DVA2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on (i) June 7, 2021, for shares held through the DaVita Retirement Savings Plan or (ii) June 9, 2021 for any other shares. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. December __, 2019
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | | | | D48316-P54274-Z79621 | | | DaVita Inc. Notice of Special Meeting and Proxy Statement | 81 |
DaVita Inc.
Stock Appreciation Rights Agreement under the
DaVita HealthCare Partners Inc. 2011 Incentive Award Plan
and Long-Term Incentive Program
This Stock Appreciation Rights Agreement (this “Agreement”) is dated as of the Grant Date indicated below by and between DaVita Inc., a Delaware corporation (the “Company”) and the Grantee pursuant to the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan, as amended and restated (the “Plan”).
Primary Terms
| | | Grantee: | Javier J. Rodriguez | Address: | * redacted personal information * | Grant Date: | 11/4/2019 | Base Shares: | 2,500,000 | Base Price per Share: | $67.80 | Vesting Schedule: | 50% vesting on 11/4/2022
50% vesting on 11/4/2023
| Expiration Date: | 11/4/2024 | Plan Name: | 2011 Incentive Award Plan | Plan ID #: | 2011 |
This Agreement includes this cover page and the following Exhibits, which are expressly incorporated by reference in their entirety herein:
Exhibit A - General Terms and Conditions
Exhibit B - Events Causing Full Vesting of Awards
Grantee hereby expressly acknowledges and agrees that he or she is an employee at will and may be terminated by the Company or its applicable Affiliate at any time, with or without cause. By accepting this Award, Grantee hereby acknowledges he or she has a copy of the Plan, and accepts and agrees to the terms and provisions of this Agreement and the Plan. Capitalized terms that are used but not defined in this Agreement shall have the meanings set forth in the Plan.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Agreement effective as of the Grant Date.
| KEEP THIS PORTION FOR YOUR RECORDS | | | | | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DAVITA INC. | The Board of Directors recommends you vote FOR all director nominees named in the Proxy Statement in Proposal 1: | DaVita Inc. | | 1. | | Election of Directors | | | Nominees: | | For | | Against | | Abstain | | | 1a. | | Pamela M. Arway | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1b. | | Charles G. Berg | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1c. | | Barbara J. Desoer | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1d. | | Paul J. Diaz | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1e. | | Shawn M. Guertin | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1f. | | John M. Nehra | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1g. | | Paula A. Price | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1h. | | Javier J. Rodriguez | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | 1i. | | Phyllis R. Yale | | ☐ | | ☐ | | ☐ | |
| | | | | | | | | | | | | | | | /s/ Cynthia Baxter | | /s/ Javier J. Rodriguez | Cynthia Baxter | | Javier J. Rodriguez | Interim Chief People Officer | | Chief Executive Officer | | | | | | | | | The Board of Directors recommends you vote FOR Proposals 2 and 3. | | For | | Against | | Abstain | | | | | | | | | 2. | | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2021. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | 3. | | To approve, on an advisory basis, the compensation of our named executive officers. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | The Board of Directors recommends you vote AGAINST Proposal 4. | | | | | | | | | | | | | | | 4. | | Stockholder proposal regarding political contributions disclosure, if properly presented at the meeting. | | ☐ | | ☐ | | ☐ | | | | | | | | | | NOTE: Such other business as may properly be brought before the meeting or any adjournment or postponement thereof by the presiding person of the Annual Meeting. | | | | | | |
| Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | |
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DaVita Inc.
Stock Appreciation Rights Agreement
Exhibit A - General Terms and Conditions
For valuable consideration,Important Notice Regarding the receiptAvailability of which is acknowledged, the parties hereto agree as follows:
1. Grant of Stock Appreciation Rights Award
The Company hereby grants to Grantee an award of stock appreciation rights (“Award”) covering 2,500,000 shares (“Base Shares”) of Common Stock, pursuant to which the Grantee shall be eligible to receive a number of shares (“Gain Shares”) of Common Stock with an aggregate value equal to the difference between the Fair Market Value of one share of Common Stock on the exercise date and the base price of $67.80 per share (“Base Price”) subject to Grantee’s fulfillment of the vesting and other conditions set forth in this Agreement.
This Award is subject to, and contingent upon, stockholder approval of an amendment to the Plan (the “Amendment”) to provide an exception to the per person limit set forth in Section 3.3 of the Plan with respect to this Award at the first meeting of the Company’s stockholders at which the Amendment is considered and which shall be held within twelve (12) months of the Grant Date. If such approval is not obtained, this Award shall be forfeited in its entirety for no consideration.
2. Term of Stock Appreciation Rights Award
(a) This Award shall be effectiveProxy Materials for the period (“Term”) from the Grant Date shown above throughVirtual Annual Meeting:
November 4, 2024 (“Expiration Date”).
(b) In the case of the termination of Grantee’s employment with the Company or any of its subsidiaries or affiliates for any reason, whether voluntary or involuntary (“Severance”), the date upon which the Award shall terminate shall be determined based on the following:
(i) If Grantee dies while employed by the Company or during the three (3) month period immediately subsequent to his or her Severance, the Award shall terminate one (1) year from the date of the Severance.
(ii) If Grantee was disabled (within the meaning of Section 22(e)(3) of the Code)The Annual Report, Notice and Proxy Statement are available at the time of his or her Severance, the Award shall terminate one (1) year from the date of the Severance.
www.proxyvote.com.(iii) If the Award accelerates in full or in part pursuant to Sections 3(c) or 3(d) of this Agreement, the Award shall terminate one (1) year from the date of the Severance.
(iv) In all other cases, the Award shall terminate three (3) months from the date of the Severance.
(v) Notwithstanding the foregoing, the Award shall terminate no later than the Expiration Date, regardless of whether or not Grantee remains in the employ of the Company.
(c) DAVITA INC.
PROXY
If GranteeThis Proxy is transferred between the Company and a subsidiary thereof, or vice versa, or between subsidiaries, Severance shall not be deemed to have occurred.
3. Exercisability
(a) The Base Shares subject to this Award shall become exercisable (“vest”) on the dates indicated under the Vesting Schedule such that this Award shall be fully exercisable on the last date listed on the table, provided, however, that such vesting shall cease at the time of Grantee’s Severance; provided, further, that, a pro-
rata portion of the Award shall vest immediately upon the Grantee’s Severance due to death or disability (within the meaning of Section 22(e)(3) of the Code). The specific provisions regarding circumstances in which vesting would occur upon a Severance event are set forth in Exhibit B.
(b) These installments shall be cumulative, so that this Award may be exercised as to any or all of the Base Shares covered by an installment at any time or times after the installment becomes vested and until this Award terminates.
(c) Notwithstanding the foregoing, upon certain qualifying Severances, a pro-rata portion of the Award shall vest upon such Severance in accordance with Exhibit B attached hereto.
(d)Notwithstanding the foregoing, in the event of a Change of Control, as such term is defined in Exhibit B attached hereto, the entire Award may vest immediately. The specific provisions regarding circumstances in which full vesting would occur upon a Change in Control are set forth in Exhibit B.
(e) Except as otherwise provided for herein, Grantee’s Severance shall not accelerate the number of Base Shares with respect to which an Award may be exercised.
(f) If vested Base Shares remain unexercised at the close of business on the day prior to the Expiration Date (or the preceding trading day if the Expiration Date is not a trading day), and if the Award has an in-money value of One Hundred Dollars ($100.00) or more (computed as the number of vested but unexercised Base Shares remaining under the Award multiplied by the excess of the closing price of the Common Stock on that day prior to the Expiration Date over the Award’s Base Price per Share) (the “Minimum Exercise Spread”), this Award will be automatically exercised in full on the Expiration Date with respect to all shares exercisable, with the required withholding taxes to be paid in accordance with Section 5(b). If the Minimum Exercise Spread is not satisfied, the Company will not automatically exercise any portion of the Award and the unexercised portion of the Award will expire at the close of business on the Expiration Date.
This procedure to automatically exercise an Award on the Expiration Date is provided as a protection against inadvertent expiration of an Award, including during a period when the Award might not otherwise be exercisable. Because any exercise of an Award is the Grantee’s responsibility, the Grantee hereby waives any claims he or she might have against the Company or any of its employees or agents if an automatic exercise of an Award does not occur for any reason and the Award expires. For avoidance of doubt, Grantee may exercise any exercisable portion of the Award prior to the time that an automatic exercise might occur pursuant to this provision, but the Company is not obligated to automatically exercise any portion of this Award at or after Grantee’s termination for Cause, as such term is defined in Exhibit B attached hereto.
4. Method of Exercising
This Award may be automatically exercised pursuant to Section 3(f), or by Grantee upon delivery of the following documents to the Company at its principal executive offices, or as otherwise required in accordance with a broker-assisted cashless exercise program:
(a) Written notice, in the form of a completed exercise election form, specifying the number of Base Shares with respect to which the Award is being exercised;
(b) Such agreements or undertakings that are required by the Committee pursuant to the Plan; and
(c) Provision for the payment of any taxes (including withholding taxes), which may be required by the Company, as described in Section 5.
5. Taxes
(a) Grantee is ultimately liable and responsible for all taxes under all applicable federal, state, local or other laws or regulations (the “Required Tax Payments”) owed in connection with the Award, regardless of any action the Company or any of its subsidiaries or affiliates takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor any of its Affiliates makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant, vesting or exercise of the Award or the subsequent sale of the Gain Shares issuable pursuant to the Award. The Company and its subsidiaries and affiliates do not commit and are under no obligation to structure the Award to reduce or eliminate Grantee’s tax liability.
(b) As a condition precedent to the delivery to the Grantee of any Gain Shares upon exercise of the Award, the Grantee shall satisfy the Required Tax Payments by the Company withholding from the Gain Shares otherwise to be delivered to the Grantee pursuant to the Award a whole number of Shares having a Fair Market Value, determined as of the date the obligation to withhold or pay taxes first arises in connection with the Award (the “ Tax Date ”), equal to the Required Tax Payments, with the number of Shares withheld rounded up to the nearest whole Share. Notwithstanding the foregoing, the Company (or, in the case of a Grantee subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Committee) may, in its sole discretion, establish alternative methods for the Grantee to satisfy the Required Tax Payments, which may include, without limitation, a cash payment, proceeds from the sale of the Gain Shares otherwise issuable to Grantee, or delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole Shares, in each case, having an aggregate value, determined as of the Tax Date, equal to the amount necessary to satisfy the Required Tax Payments.
6. Settlement of Award; Post-Vesting Holding Period
(a)Upon exercise of the Award, in whole or in part, the Company shall in its sole discretion: (i) provide for the registration in book-entry form for Grantee’s benefit of the Gain Shares or (ii) deliver to Grantee a stock certificate representing the Gain Shares, in each case, subject to the restrictions set forth in Section 6(b) and rounded down to the nearest whole number, and which may be reduced by any Gain Shares required to be withheld or soldsolicited on behalf of Grantee to satisfy tax withholding requirements (the “After-Tax Gain Shares”).
(b)The After-Tax Gain Shares shall be subject to a holding period after the Grantee’s exercise of the underlying Base Shares ending on the earlier to occur of (i) the five-year anniversary of the Grant Date, (ii) a Change of Control, and (iii) the date of Grantee’s Severance due to death or Disability (such period, the “Holding Period”). During the Holding Period, the After-Tax Gain Shares
may not be offered, sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) by the Grantee or be subject to execution, attachment or similar process other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such After-Tax Shares shall be null and void. If the After-Tax Gain Shares are held by a custodian in book entry form, the restrictions on the After-Tax Gain Shares shall be duly noted, until the expiration of the Holding Period. The Grantee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the After-Tax Gain Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCK APPRECIATION RIGHTS AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND DAVITA INC. A COPY OF SUCH AGREEMENT IS ON FILE IN THE OFFICES OF, AND WILL BE MADE AVAILABLE FOR A PROPER PURPOSE BY, THE CORPORATE SECRETARY OF DAVITA INC.
7. Clawback Provision
Notwithstanding any other provision in this Agreement to the contrary, Grantee shall be subject to the written policies of the Company’s Board of Directors as well as laws and regulations applicable to Company executives, including without limitation any Board policy relating to recoupment or “clawback” of compensation arising from exercise of this Award, and rules adopted pursuant to the Dodd-Frank Act, and any other Board policy, law or regulation relating to recoupment or “clawback” of compensation that may exist from time to time during Grantee’s employment by the Company and thereafter. Without limiting the generality of the foregoing, Grantee and this Award shall be subject to the Company’s Incentive Compensation Clawback Policy approved by the Company’s Board of Directors on December 5, 2014 as the same may be amended from time to time, including certain provisions thereof that would allow the Company to recover any value conferred upon Grantee by this Award and/or cancel all or a part of this Award in the event of any “significant misconduct “ (as defined in such policy) by Grantee or a subordinate employee of Grantee, if Grantee is at the level of Senior Vice President or above in the Company’s domestic dialysis business, or in a role that provides support to the Company’s domestic dialysis business. The provisions of this Section 7 are in addition to and not in lieu of any other remedies available to the Company in the event Grantee violates the Policies (as defined herein below), or any laws or regulations.
8. Assignments
(a) Subject to Section 8(b) below, this Award shall be exercisable only by Grantee during Grantee’s lifetime. In the event of Grantee’s death while still employed by the Company or during the three (3) month period immediately subsequent to his or her Severance, this Award may be exercised by any of Grantee’s executor, heirs or administrator to whom this Award may have been assigned or transferred.
(b) The rights of Grantee under this Award may not be assigned or transferred except by will or by the laws of descent and distribution.
9. No Rights as a Stockholder
Grantee shall have no rights as a stockholder of any Base Shares or Gain Shares unless and until the Gain Shares are issued to Grantee upon the exercise of the Award.
10. Interpretation of Award
(a) This Award is granted under the provisions of the Plan and shall be interpreted in a manner consistent with it.
(b) Any provision in this Award inconsistent with the Plan shall be superseded and governed by the Plan.
(c) For all purposes under this Award, employment by the Company shall include employment by the Company or any subsidiary thereof.
11. Other Restrictions on Transfer of Shares
Grantee acknowledges that any Gain Shares issued upon exercise of this Award may, in addition to the restrictions set forth in Section 6, be subject to such transfer restrictions that prohibit any transfer, pledge, sale or disposition of the Gain Shares as the Company may deem necessary to comply with all applicable state and federal securities laws and regulations.
12. Amendments
This Award may be amended at any time with the consent of the Company and Grantee.
13. Non-Competition/Non-Solicitation/Non-Disclosure
(a) Non-Competition. Grantee acknowledges and recognizes the highly competitive nature of the business of the Company and accordingly agrees that while Grantee is an employee of the Company and for the one-year period following termination of such relationship for any reason (whether voluntary or involuntary) (the “Restricted Period”), Grantee shall not, as an employee, independent contractor, consultant, or in any other form, prepare to provide or provide any of the same or similar services that Grantee performed during his/her employment with or service to the Company for any other individual, partnership, limited liability company, corporation, independent practice association, management services organization, or any other entity (collectively, “Person”) that competes in any way with the area of business of the Company, or any of its subsidiaries or affiliates, in which Grantee worked and/or performed services. For purposes of the above, preparing to provide any of the same or similar services includes, but is not limited to, planning with any Person on how best to compete with the Company or any of its subsidiaries or affiliates, or discussing the Company’s, or any of its subsidiaries’ or affiliates’ business plans or strategies with any Person.
Grantee further agrees that during the Restricted Period, Grantee shall not own, manage, control, operate, invest in, acquire an interest in, or otherwise engage in, act for, or act on behalf of any Person (other than the Company and its subsidiaries and affiliates) engaged in any activity that Grantee was responsible for during Grantee’s employment with or engagement by the Company where such activity is similar to or competitive with the activities carried on by the Company or any of its subsidiaries or affiliates.
Grantee acknowledges that during the Restricted Period, Grantee may be exposed to confidential information and/or trade secrets relating to business areas of the Company or any of its subsidiaries or affiliates that are different from and in addition to the areas in which Grantee primarily works for the Company (the “Additional Protected Areas of Business”). As a result, Grantee agrees he/she shall not own, manage, control, operate, invest in, acquire an interest in, or otherwise act for, act on behalf, or provide the same or similar services to, any Person that engages in the Additional Protected Areas of Business.
Grantee acknowledges and agrees that the geographical limitations and duration of this covenant not to compete are reasonable.
To the extent that the provisions of this Section 13(a) conflict with any other agreement signed by Grantee relating to non-competition, the provisions that are most protective of the Company’s, and any of its subsidiaries’ or affiliates’, interests shall govern.
(b) Non-Solicitation.Grantee agrees that during the term of his/her employment and/or service to the Company or any of its subsidiaries or affiliates and for the one-year period following the termination of his/her employment and/or service for any reason (whether voluntary or involuntary), Grantee shall not (i) solicit any of the Company’s, or any of its subsidiaries’ or affiliates’, employees to work for any other individual, partnership, limited liability company, corporation, independent practice association, management service organization, or any other entity (collectively, “Person”); (ii) hire any of the Company’s, or any of its subsidiaries’ or affiliates’, employees to work (as an employee or an independent contractor) for any Person; (iii) take any action that may reasonably result in any of the Company’s, or any of its subsidiaries’ or affiliates’, employees going to work (as an employee or an independent contractor) for any Person; (iv) induce any patient or customer of the Company, or any of its subsidiaries or affiliates, either individually or collectively, to patronize any competing business; (v) request or advise any patient, customer, or supplier of the Company, or any of its subsidiaries or affiliates, to withdraw, curtail, or cancel such person’s business with the Company, or any of its subsidiaries or affiliates; (vi) enter into any contract the purpose or result of which would benefit Grantee if any patient or customer of the Company, or any of its subsidiaries or affiliates, were to withdraw, curtail, or cancel such person’s business with the Company, or any of its subsidiaries or affiliates; (vii) solicit, induce, or encourage any physician (or former physician) affiliated with the Company, or any of its subsidiaries or affiliates, or induce or encourage any other person under contract with the Company, or any of its subsidiaries or affiliates, to curtail or terminate such person’s affiliation or contractual
relationship with the Company, or any of its subsidiaries or affiliates; or (viii) disclose to any Person the names or addresses of any patient or customer of the Company, or any of its subsidiaries or affiliates.
(c) Non-Disclosure.In addition, Grantee agrees not to disclose or use for his or her own benefit or purposes or for the benefit or purposes of any Person other than the Company and any of its subsidiaries or affiliates, any trade secrets, information, data, or other confidential information relating to customers, development, programs, costs, marketing, trading, investment, sales activities, promotion, credit and financial data, financing methods, plans, or the business and affairs of the Company or any of its subsidiaries or affiliates (“Information”); provided, however, the foregoing shall not apply to (i) Information which is not unique to the Company or any of its subsidiaries or affiliates; (ii) Information which is generally known to the industry or the public other than as a result of Grantee’s breach of this covenant; or (iii) disclosure that is required by any applicable law, rule or regulation. If Grantee receives such a request to produce Information in his or her possession, Grantee shall provide the Company reasonable advance notice, in writing, prior to producing said Information, so as to give the Company reasonable time to object to Grantee producing said Information. Grantee also agrees that Grantee will not become employed by or enter into service with any Person other than the Company and any of its subsidiaries or affiliates in which Grantee will be obligated to disclose or use any Information, or where such disclosure would be inevitable because of the nature of the position. Grantee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (1) is made (a) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Disclosures to attorneys, made under seal, or pursuant to court order are also protected in certain circumstances under 18 U.S.C. § 1833.
(d) Nothing in this Agreement (including with respect to Confidential Information, Trade Secrets, and other obligations) is intended to be or will be construed to prevent, impede, or interfere with Grantee’s right to respond accurately and fully to any question, inquiry, or request for information regarding Grantee’s employment with the Company when required by legal process by a Federal, State or other legal authority, or from initiating communications directly with, or responding to any inquiry from, or providing truthful testimony and information to, any Federal, State, or other regulatory authority in the course of an investigation or proceeding authorized by law and carried out by such agency. Grantee is not required to contact the Company regarding the subject matter of any such communications before Grantee engages in such communications. In addition, nothing in this Agreement is intended to restrict Grantee’s legally protected right to discuss wages, hours or other working conditions with co-workers or in any way limit Grantee’s rights under the National Labor Relations Act or any whistleblower act.
(e) If, at any time within (a) the Term, or (b) one (1) year after Severance, whichever is the latest, Grantee (i) breaches the non-competition provision of Section 13(a); (ii) breaches the non-solicitation provision of Section 13(b), (ii) breaches the non-disclosure provision of Section 13(c); (iii) is convicted of a felony; (iv) has been adjudicated by a court of competent jurisdiction of having committed an act of fraud or dishonesty resulting or intending to result directly or indirectly in personal enrichment at the expense of the Company or any of its subsidiaries or affiliates; or (v) is excluded from participating in any federal health care program, then (1) this Award shall terminate effective on the date on which Grantee enters into such activity and (2) the Company may seek temporary, preliminary, and permanent injunctive relief to prevent any actual or threatened breach or continuation of any breach of this Agreement without the necessity of proving actual damages or posting a bond or other security (which Grantee hereby agrees to) and/or an order requiring Grantee to repay the Company any gain realized by Grantee from exercising all or a portion of this Award. In the event of any conflict between the language of this Section 13(e), on the one hand, and the language of Section 7 of this Award or of the Company’s Incentive Compensation Clawback Policy as the same may be amended from time to time, on the other hand, the language of Section 7 of this Award and of the Company’s Incentive Compensation Clawback Policy shall be controlling. The provisions of this Section 13(e) are in addition to and not in lieu of any other remedies available to the Company in the event Grantee violates the Policies (as defined herein below), or any laws or regulations.
(f)Notwithstanding the foregoing and any other language in this Agreement, this Agreement does not supersede or preclude the enforceability of any restrictive covenant provision contained in any prior agreement entered into by Grantee. Further, no prior restrictive covenant supersedes or precludes the enforceability of any provision contained in this Agreement.
14. Compliance
It is understood and agreed upon that at all times Grantee will act in full compliance with the Company’s Code of Conduct, Policies and Procedures, JV Compliance Handbook, MDA Compliance Handbook, Gift Policy and the credentialing process (collectively, the “Policies”).
Grantee may not improperly use something of value to attempt to induce or actually induce, either directly or indirectly, a patient to switch to, or continue to receive, treatment at a Company facility center in violation of the Policies. Inducement may include paying a patient, providing gifts, or otherwise providing something of value to a patient to switch to, or continue to receive treatment at a Company facility center. Grantee also may not attempt to induce or actually induce a referral source with something of value to obtain referrals in violation of the Policies.
If at any time Grantee has questions or concerns about the provisions in this Section 14, or suspects any improper conduct related to this initiative, Grantee should immediately contact his or her supervisor or Team Quest. Grantee also may anonymously and confidentially call the Company’s Compliance Hotline at 888-458-5848.
15. Compliance with Law
No shares of Common Stock shall be issued and delivered for a Gain Share unless and until all applicable registration requirements of the Securities Act of 1933, as amended, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law.
If any provision of this Agreement is determined to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted by applicable law, and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law. Furthermore, if any provision of this Agreement is determined to be illegal under any applicable law, such provision shall be null and void to the extent necessary to comply with applicable law, but the other provisions of this Agreement shall remain in full force and effect.
16. Electronic Delivery and Execution.
You will not be able to initiate any stock transactions related to this Award until you have accepted the terms of this Agreement. The Company may, in its sole discretion, decide to deliver any documents related to this Award or future awards made under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through any online or electronic system established and maintained by the Company or another third party designated by the Company.
DaVita Inc.
Stock Appreciation Rights Agreement
Exhibit B - Events Causing Accelerated Vesting of Award
For purposes of this Exhibit, the following terms shall have the respective meanings set forth below:
“Cause” shall mean: (1) a material breach by Grantee of his duties and responsibilities which, if applicable, do not differ in any material respect from the duties and responsibilities of Grantee during the ninety (90) days 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 Grantee’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 Grantee of, or a plea of nolo contendere by Grantee to, a felony or other crime involving fraud or dishonesty; or (4) a material breach by Grantee of a material provision of the Company’s Code of Conduct, as may be amended from time to time, which results in material harm to the Company.
“Change of Control” shall mean:
(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 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; or
(iv) any transaction in which more than 50% of the Company’s assets are sold;
provided, however, that no transaction contemplated by clauses (i) through (iv) above shall constitute a Change of Control if both (x) the person acting as the Chief Executive Officer of the Company for the six months prior to such transaction becomes the Chief Executive Officer or the Executive Chairman of the Board of Directors of DAVITA INC.
The undersigned hereby appoints Javier J. Rodriguez, Kathleen A. Waters and Samantha A. Caldwell, or any of them, the entity that has acquired controltrue and lawful attorneys and proxies of the Company as a resultundersigned, with full power of such transaction (the “Acquiror”) immediately after such transaction and remains the Chief Executive Officer or Executive Chairman of the Board of Directors for not less than two years following the transaction and (y) a majority of the Acquiror’s board of directors immediately after such transaction consists of persons who were directors of the Company immediately priorsubstitution to such transaction. “Disability” shall mean that the Grantee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
“Good Reason” shall have the meaning assigned to such term in the Employment Agreement; provided, however, in the event of a Severance on or within two years following a Change of Control, “Good Reason” shall also mean the Grantee ceases to serve as Chief Executive Officer of a publicly-traded Company; provided, further, in order for Grantee to experience a Severance due to Good Reason, Grantee must follow
and comply with the “Good Reason” notice and timing requirements set forth in the Employment Agreement with respect to a “Good Reason” termination.
“Qualifying Separation” shall mean Grantee’s Severance by (i) the Company other than for “Cause” or (ii) by Grantee for “Good Reason,” in each case, prior to a Change of Control or on or following the two-year anniversary of a Change of Control.
Qualifying Separation, Death or Disability Vesting
The Award shall vest on a pro-rata basis as of the Grantee’s Severance due to (i) a Qualifying Separation, (ii) death, or (iii) Disability. The pro-rata portion of the Award that vests pursuant to the prior sentence shall be determined separately for each vesting installment, with the three-year anniversary of the Grant Date referred to as the “First Vesting Date” and the four-year anniversary of the Grant Date referred to as the “Second Vesting Date”. The pro-rata portion of the Award shall be calculated as the sum of the following:
The number of Base Shares determined by multiplying the Base Shares scheduled to vest on the First Vesting Date by a fraction, the numerator of which is the number of days from the Grant Date through the date of Grantee’s Severance, and the denominator of which is the number of days between the Grant Date and the First Vesting Date; notwithstanding the preceding calculation, no additional Base Shares attributable to the First Vesting Date shall vest in the case of a Severance after the First Vesting Date; and
The number of Base Shares determined by multiplying the Base Shares scheduled to vest on the Second Vesting Date by a fraction, the numerator of which is the number of days from the Grant Date through the date of Grantee’s Severance, and the denominator of which is the number of days between the Grant Date and the Second Vesting Date; notwithstanding the preceding calculation, no additional Base Shares attributable to the Second Vesting Date shall vest in the case of a Severance after the Second Vesting Date.
Change of Control Vesting
In the event of a “Change of Control”, the Award shall vest and become exercisable in its entirety upon the earlier of the following two events: (i) immediately prior to the effective date of a Change of Control if the “Acquiror” fails to assume, convert or replace the Award or (ii) as of the date of Grantee’s Severance by (x) the Company or the Acquiror other than for “Cause” or (y) by Grantee for “Good Reason,” in each case, within two-years following the Change of Control.
DAVITA HEALTHCARE PARTNERS INC.
2011 INCENTIVE AWARD PLAN
(As amendedandrestated effective upon stockholder approval on June 17, 2014)
ARTICLE 1
PURPOSE
The purpose of the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan (as it may be amended or restated from time to time, the “Plan”) is to promote the success and enhance the value of DaVita HealthCare Partners Inc. (the “Company”) by linking the individual interests of the members of the Board, Employees and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operations is largely dependent. The Plan constitutes an amendment and restatement of the DaVita Inc. 2002 Equity Compensation Plan, as amended (the “2002 Plan”).
ARTICLE 2
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1“Administrator” shall mean the entity that conducts the general administration of the Plan as provided in Article 13. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 13.6, or as to which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2“Affiliate” shall mean (a) any Subsidiary; and (b) any domestic eligible entity that is disregarded, under Treasury Regulation Section 301.7701-3, as an entity separate from either (i) the Company or (ii) any Subsidiary.
2.3“Applicable Accounting Standards” shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.
2.4“Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Deferred Stock Unit award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, “Awards”).
2.5“Award Agreement” shall mean any written notice, agreement, terms and conditions, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan.
2.6“Award Limit” shall mean with respect to Awards that shall be payable in Shares or in cash, as the case may be, the respective limit set forth in Section 3.3.
2.7“Board” shall mean the Board of Directors of the Company.
2.8“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder.
2.9“Committee” shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 13.1.
2.10“Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
2.11“Company” shall have the meaning set forth in Article 1.
2.12“Consultant” shall mean any consultant or adviser engaged to provide services to the Company or any Affiliate that qualifies as a consultant under the applicable rules of the Securities and Exchange Commission for registration ofvote all shares on a Form S-8 Registration Statement.
2.13 “Covered Employee” shall mean any Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.
2.14“Deferred Stock” shall mean a right to receive Shares awarded under Section 11.5.
2.15“Deferred Stock Unit” shall mean a right to receive Shares awarded under Section 11.4.
2.16“Director” shall mean a member of the Board, as constituted from time to time.
2.17“Director Compensation Policy” shall have the meaning set forth in Section 4.6.
2.18 “Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 11.2.
2.19“DRO” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.20“Effective Date” shall mean the date the Plan is approved by the Company’s stockholders.
2.21“Eligible Individual” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Committee.
2.22“Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code and the Treasury Regulations thereunder) of the Company or of any Affiliate.
2.23“Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of shares of Common Stock (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock, underlying outstanding Awards.
2.24“Exchange Act” shall mean the Securities Exchange Act$0.001 par value per share, of 1934, as amended from time to time.
2.25“Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:
(a)If the Common Stock is listed on any (i) established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market)DAVITA INC., (ii) national market system or (iii) automated quotation system on which the Shares are listed, quotedundersigned is entitled to vote at the Virtual Annual Meeting of the Stockholders of DAVITA INC., to be held at 10:00 a.m., Mountain Time, on Thursday, June 10, 2021, via live audio webcast at www.virtualshareholdermeeting.com/DVA2021, and any and all adjournments or traded, its Fair Market Value shall bepostponements thereof by the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Sharepresiding person of the Annual Meeting, on the date in question, the closing sales price for a Shareproposals set forth on the last preceding date for which such quotation exists, as reported in reverse side of this Proxy.The Wall Street Journal or such other source as the Administrator deems reliable;
(b)If the Common StockUnless a contrary direction is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(c)If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.
2.26“Full Value Award” shall mean any Award other than (i) an Option, (ii) a Stock Appreciation Right or (iii) any other Award for which the Holder does not pay the grant-date Fair Market Value of the Common Stock subject to such Award (whether directly or by forgoing a right to receive a payment of cash or Shares from the Company or any Affiliate).
2.27“Greater Than 10% Stockholder” shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation thereof (as defined in Section 424(e) of the Code).
2.28“Holder” shall mean a person who has been granted an Award.
2.29“Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.
2.30“Non-Employee Director” shall mean a Director of the Company who is not an Employee.
2.31“Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.
2.32“Option” shall mean a right to purchase Shares at a specified exercise or base price, granted under Article 6. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.
2.33“Option Term” shall have the meaning set forth in Section 6.4.
2.34“Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.35“Performance Award” shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid in cash, Shares, Awards or a combination, awarded under Section 11.1.
2.36“Performance-Based Compensation” shall mean any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.
2.37“Performance Criteria” shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
(a)The Performance Criteria that shall be used to establish Performance Goals are limited to the following: (i) net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation and (D) amortization); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders’ equity; (x) total stockholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs; (xiv) funds from operations; (xv) expenses; (xvi) working capital; (xvii) earnings per share; (xviii) adjusted earnings per share; (xix) price per Share; (xx) regulatory body approval for commercialization of a product; (xxi) implementation or completion of critical projects; (xxii) market share; (xxiii) economic value; (xxix) non-acquired growth; (xxx) new market entries; (xxxi) acquisition targets; (xxxii) treatment growth; (xxxiii) patient growth; (xxxiv) center growth; (xxxv) clinical outcomes (including mortality rates) and processes; (xxxvi) physician recruitment; (xxxvii) physician retention; (xxxviii) physician relations; (xix) employee turnover; (xl) employee relations; (xli) patient retention and satisfaction; (xlii) improvements
in reimbursement economics; (xliii) commercial payor relationships and contract related targets; (xliv) public policy efforts and investigation; and (xlv) legal proceedings and litigation outcomes, any of which may be measured either (A) on an absolute or per share basis or (B) in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices, as may be applicable. Such business criteria may, in the discretion of the Committee, be applied to the Participant, the Company as a whole, or any designated subsidiary, business unit or relevant geography of the Company.
(b)The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.
2.38“Performance Goals” shall mean, for a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a Subsidiary, division, business unit, or an individual. The achievement of each Performance Goal shall be determined, to the extent applicable, with reference to Applicable Accounting Standards.
2.39“Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goalsindicated, this Proxy will be measured for the purpose of determining a Holder’s right to,voted FOR all nominees listed in Proposal 1 and the payment of, an Award.
2.40“Performance Stock Unit” shall mean a Performance Award awarded under Section 11.1 which is denominatedFOR Proposals 2 and 3, and AGAINST Proposal 4. If specific instructions are indicated, this Proxy will be voted in units of value including dollar value of shares of Common Stock.accordance therewith.
2.41“Permitted Transferee” shall mean, with respect to a Holder, any “family member” of the Holder, as defined under the instructions to use the Form S-8 Registration Statement under the Securities Act, after taking into account any state, federal, local or foreign taxIn their discretion, Javier J. Rodriguez, Kathleen A. Waters and securities laws applicable to transferable Awards. 2.42“Plan” shall have the meaning set forth in Article 1.
2.43“Program” shall mean any program adopted by the Administrator pursuant to the Plan containing the terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.
2.44“Restricted Stock” shall mean Common Stock awarded under Article 10 that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.
2.45“Restricted Stock Units” shall mean the right to receive Shares awarded under Article 9.
2.46“Securities Act” shall mean the Securities Act of 1933, as amended.
2.47“Shares” shall mean shares of Common Stock.
2.48“Stock Appreciation Right” shall mean a stock appreciation right granted under Article 8.
2.49“Stock Appreciation Right Term” shall have the meaning set forth in Section 8.4.
2.50“Stock Payment” shall mean (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of a bonus, deferred compensation or other arrangement, awarded under Section 11.3.
2.51“Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.52“Substitute Award” shall mean an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.53“Termination of Service” shall mean:
(a)As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or an Affiliate is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Affiliate.
(b)As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
(c)As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Affiliate is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Terminations of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service; provided, however, that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of the Program, the Award Agreement or otherwise, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. For purposes of the Plan, a Holder’s employee-employer relationship or consultancy
relations shall be deemed to be terminated in the event that the Affiliate employing or contracting with such Holder ceases to remain an Affiliate following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1.Number of Shares.
(a)Subject to Section 14.2 and Section 3.1(b), the number of Shares authorized for issuance under the Plan is 47,178,338. Shares available for issuance under the Plan shall be reduced by 3.5 Shares for each Share delivered in settlement of any Full Value Award. Further, subject to Section 14.2, the number of Shares authorized for grant as Incentive Stock Options shall be no more than seven million five hundred thousand (7,500,000).
(b)If any Shares subject to an Award granted under the Plan that is not a Full Value Award are forfeited or expire or such Award is settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future grants of Awards under the Plan. To the extent that a Full Value Award granted under the Plan is forfeited or expires or such Full Value Award is settled for cash (in whole or in part), the Shares available under the Plan shall be increased by 3.5 Shares subject to such Full Value Award that is forfeited, expired or settled in cash. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 3.1(a) and will not be available for future grants of Awards: (i) Shares tendered by a Holder or withheld by the Company in payment of the exercise or base price of an Option; (ii) Shares tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to an Award; and (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof. Any Shares repurchased by the Company under Section 10.4 at the same price paid by the Holder so that such Shares are returned to the Company will again be available for Awards. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
(c)Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.
3.2.Stock Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized but unissued Common Stock, Common Stock in treasury or Common Stock purchased on the open market in management’s sole discretion in compliance with the Plan and applicable law.
3.3.Limitation on Number of Award Shares and Dollar Amounts. Notwithstanding any provision in the Plan to the contrary, and subject to Section 14.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any consecutive twelve (12) month period (measured from the date of any grant) shall be two million two hundred fifty thousand (2,250,000) and the maximum aggregate amount of cash that may be paid in cash to any one person during any consecutive twelve (12) month period (measured from the date of any payment) with respect to one or more Awards payable in cash shall be ten million dollars ($10,000,000).
3.4.Full Value Award Vesting Limitations. Except as may be determined by the Administrator in the event of a consummation of a change of control of the Company, or the Holder’s death, disability or retirement, notwithstanding any other provision of the Plan to the contrary, a Full Value Award shall not become fully vested earlier than three years from the grant date (two years in the case of Employees who are not executives of the Company (holding the title of vice president or an equivalent title and above), or, in the case of vesting based upon the attainment of performance-based objectives, over a period of not less than one year); provided, however, that notwithstanding the foregoing, Full Value Awards (a) that do not exceed in the aggregate 5% of the Shares available pursuant to Section 3.1(a) shall not be subject to such minimum vesting provisions and (b) the Company may grant a Full Value Award to Employees newly hired by the CompanySamantha A. Caldwell, or any of its Subsidiaries without respectthem, are authorized to vote upon such minimum vesting provisions.
ARTICLE 4
GRANTING OF AWARDS
4.1Participation. The Administratorother matters as may from timeproperly come before the meeting. All Proxies to time, select from among all Eligible Individuals, those to whom an Award shall be grantedvote at said meeting or any adjournment or postponement thereof heretofore given by the undersigned are hereby revoked.
Continued and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. Except as provided in Section 4.6 regarding the grant of Awards pursuant to the Director Compensation Policy, no Eligible Individual shall have any right to be granted an Award pursuant to the Plan. 4.2Award Agreement. Each Award shall be evidenced by an Award Agreement that sets forth the terms, conditions and limitations for such Award, which may include the term of the Award, the provisions applicable in the event of the Holder’s Termination of Service, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. Award Agreements evidencing Awards intended to qualify as Performance-Based Compensation shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.
4.3Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.4At-Will Employment; Voluntary Participation. Nothing in the Plan or in any Program or Award Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Affiliate, or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly
provided otherwise in a written agreement between the Holder and the Company or any Affiliate. Participation by each Holder in the Plan shall be voluntary and nothing in the Plan shall be construed as mandating that any Eligible Individual shall participate in the Plan.
4.5Foreign Holders. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in countries other than the United States in which the Company and its Affiliates operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any foreign securities exchange, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Affiliates shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Code, the Exchange Act, the Securities Act, any other securities law or governing statute, the rules of the securities exchange or automated quotation systemsigned on which the Shares are listed, quoted or traded or any other applicable law. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof.reverse side
4.6Non-Employee Director Awards. The Administrator may, in its discretion, provide that Awards granted to Non-Employee Directors shall be granted pursuant to a written non-discretionary formula established by the Administrator or a broader body of the Board under the Non-Management Director Compensation Philosophy and Plan, or such successor plan or policy (the “Director Compensation Policy”), subject to the limitations of the Plan. The Director Compensation Policy shall set forth the type of Award(s) to be granted to Non-Employee Directors, the number of Shares to be subject to Non-Employee Director Awards, the conditions on which such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Administrator shall determine in its discretion. The Director Compensation Policy may be modified by the Administrator from time to time in its discretion.
4.7Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
ARTICLE 5
PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION
5.1Purpose. The Committee, in its sole discretion, may determine at the time an Award is granted or at any time thereafter whether such Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant such an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 5 shall control over any contrary provision contained in the Plan. The Administrator may in its
sole discretion grant Awards to other Eligible Individuals that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 5 and that are not intended to qualify as Performance-Based Compensation. Unless otherwise specified by the Administrator at the time of grant, the Performance Criteria with respect to an Award intended to be Performance-Based Compensation payable to a Covered Employee shall be determined on the basis of Applicable Accounting Standards, if applicable.
5.2Applicability. The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such Individual in any subsequent Performance Period and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period.
5.3Types of Awards. Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to an Eligible Individual intended to qualify as Performance-Based Compensation, including, without limitation, Restricted Stock that has restrictions which lapse upon the attainment of specified Performance Goals, Restricted Stock Units that vest and become payable upon the attainment of specified Performance Goals and any Performance Awards described in Article 11 that vest or become exercisable or payable upon the attainment of one or more specified Performance Goals.
5.4Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted to one or more Eligible Individuals which is intended to qualify as Performance-Based Compensation, no later than 90 days following the commencement of any Performance Period or any designated fiscal period or period of service (or such earlier time as may be required under Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Eligible Individuals, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including the assessment of individual or corporate performance for the Performance Period.
5.5Payment of Performance-Based Awards. Unless otherwise provided in the applicable Program or Award Agreement and only to the extent otherwise permitted by Section 162(m)(4)(C) of the Code, as to an Award that is intended to qualify as Performance-Based Compensation, the Holder must be employed by the Company or an Affiliate throughout the Performance Period. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Holder shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such period are achieved.
5.6Additional Limitations. Notwithstanding any other provision of the Plan and except as otherwise determined by the Administrator, any Award which is granted to an Eligible Individual and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code or any regulations or rulings issued thereunder that are requirements for qualification as Performance-Based Compensation, and the Plan, the Program and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.
ARTICLE 6
AWARD OF OPTIONS
6.1Grant of Options. The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which shall not be inconsistent with the Plan.
6.2Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) of the Company. No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate Fair Market Value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any subsidiary or parent corporation thereof (each as defined in Section 424(f) and (e) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted.
6.3Option Exercise or Base Price. The exercise or base price per Share subject to each Option shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
6.4Option Term. The term of each Option (the “Option Term”) shall be set by the Administrator in its sole discretion; provided, however, that the Option Term shall not be more than a maximum of five (5) years from the date the Option is granted (and, five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder). The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Options, which time period may not extend beyond the maximum Option Term. To the extent permitted by Section 409A or Section 422 of the Code and regulations and rulings thereunder and after due consideration to the possible tax, securities, and accounting consequences, the Administrator may extend the Option Term of any outstanding Option, and may extend the time period during which vested Options may be exercised, in connection with any Termination of Service of the Holder, and may amend any other term or condition of such Option relating to such a Termination of Service, which extensions may not exceed the maximum Option Term as described above.
6.5Option Vesting.
(a)The period during which the right to exercise, in whole or in part, an Option vests in the Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria, or any other criteria selected by the Administrator.
(b)No portion of an Option which is unexercisable at a Holder’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Program, the Award Agreement or by action of the Administrator following the grant of the Option.
6.6Substitute Awards. Notwithstanding the foregoing provisions of this Article 6 to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant; provided that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise or base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise or base price of such shares.
6.7Substitution of Stock Appreciation Rights. The Administrator may provide in the applicable Program or the Award Agreement evidencing the grant of an Option that the Administrator, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided that such Stock Appreciation Right shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable, and shall also have the same exercise or base price, vesting schedule and remaining Option Term as the substituted Option.
ARTICLE 7
EXERCISE OF OPTIONS
7.1Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of shares.
7.2Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, the stock plan administrator of the Company or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a)A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall include appropriately authorized instruction by the Holder or other person then entitled to exercise the Option or such portion of the Option;
(b)Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations, the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded or any other applicable law. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(c)In the event that the Option shall be exercised pursuant to Section 12.3 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option, as determined in the sole discretion of the Administrator; and
(d)Full payment of the exercise or base price and applicable withholding taxes to the stock plan administrator of the Company for the shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Section 12.1 and 12.2.
7.3Notification Regarding Disposition. The Holder shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such shares to such Holder.
ARTICLE 8
AWARD OF STOCK APPRECIATION RIGHTS
8.1Grant of Stock Appreciation Rights.
(a)The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.
(b)A Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (e.g., the number of Shares of which are the “base shares”), to the extent then exercisable pursuant to its terms, and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise or base price per share (“base price”) of the Stock Appreciation Right from the fair market value at the time of exercise of the Stock Appreciation Right (e.g., in the event such Stock Appreciation Right is settled in Shares, the Shares obtained are the “gain shares”), determined according to such method as the Administrator may establish in its discretion, by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in (c) below, the exercise or base price per Share subject to each Stock Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.
(c)Notwithstanding the foregoing provisions of Section 8.1(b) to the contrary, in the case of an Stock Appreciation Right that is a Substitute Award, the price per share of the shares subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant; provided that the excess of: (i) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (ii) the aggregate exercise or base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise or base price of such shares.
8.2Stock Appreciation Right Vesting.
(a)The period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Holder shall be set by the Administrator and the Administrator may determine that a Stock Appreciation Right may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Affiliate, or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which a Stock Appreciation Right vests.
(b)No portion of a Stock Appreciation Right which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the applicable Program or Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right.
8.3Manner of Exercise. All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the stock plan administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a)A written or electronic notice complying with the applicable rules established by the Administrator or by the Company and not objected to by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall include appropriately authorized instruction by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b)Such representations and documents as the Administrator, in its sole discretion, or Company management deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance; and
(c)In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 8.3 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right.
8.4Stock Appreciation Right Term. The term of each Stock Appreciation Right (the “Stock Appreciation Right Term”) shall be set by the Administrator in its sole discretion; provided, however, that the term shall not be more than a maximum of five (5) years from the date the Stock Appreciation Right is granted. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Stock Appreciation Rights, which time period may not extend beyond the maximum Stock Appreciation Right Term. To the extent permitted by Section 409A of the Code and regulations and rulings thereunder, and after due consideration to the possible tax, securities, and accounting consequences, the Administrator may extend the Stock Appreciation Right Term of any outstanding Stock Appreciation Right, and may extend the time period during which vested Stock Appreciation Rights may be exercised, in connection with any Termination of Service of the Holder, and may amend any other term or condition of such Stock Appreciation Right relating to such a Termination of Service, which extensions may not exceed the maximum Stock Appreciation Right Term as described above.
8.5Payment. Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this Article 8 shall be in cash, Shares (based on its fair market value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.
8.6Substitution of Options. The Administrator may provide in the applicable Program or the Award Agreement evidencing the grant of a Stock Appreciation Right that the Administrator, in its sole discretion, shall have the right to substitute an Option for such Stock Appreciation Right at any time prior to or upon exercise of such Stock Appreciation Right; provided that such Option shall be exercisable with respect to the same number of Shares for which such substituted Stock Appreciation Right would have been exercisable, and shall also have the same exercise or base price, vesting schedule and remaining Stock Appreciation Right Term as the substituted Stock Appreciation Right.
ARTICLE 9
AWARD OF RESTRICTED STOCK UNITS
9.1Grant of Restricted Stock Units. The Administrator is authorized to grant Awards of Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.
9.2Term. Except as otherwise provided herein, the term of a Restricted Stock Unit award shall be set by the Administrator in its sole discretion.
9.3Purchase Price. The Administrator shall specify the purchase price, if any, to be paid by the Holder to the Company with respect to any Restricted Stock Unit award, with cash, services or any other consideration that the Administrator shall determine acceptable, subject to any requirements of applicable law; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by applicable law.
9.4Vesting of Restricted Stock Units. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without limitation, vesting based upon the Holder’s duration of service to the Company or any Affiliate, one or more Performance Criteria, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or over any period or periods, as determined by the Administrator, subject to Section 3.4.
9.5Maturity and Payment. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Holder (if permitted by the applicable Award Agreement); provided that, except as otherwise determined by the Administrator, set forth in any applicable Award Agreement, and subject to compliance with Section 409A of the Code, in no event shall the maturity date relating to each Restricted Stock Unit occur following the later of (a) the 15th day of the third month following the end of calendar year in which the Restricted Stock Unit vests; or (b) the 15th day of the third month following the end of the Company’s fiscal year in which the Restricted Stock Unit vests. On the maturity date, the Company shall, subject to Section 12.4(e), transfer to the Holder one unrestricted, fully transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited, or in the sole discretion of the Administrator, an amount in cash equal to the fair market value of such shares on the maturity date or a combination of cash and Common Stock as determined by the Administrator.
9.6Payment upon Termination of Service. An Award of Restricted Stock Units shall only be payable while the Holder is an Employee, a Consultant or a member of the Board, as applicable; provided, however, that the Administrator, in its sole and absolute discretion may provide (in an Award Agreement or otherwise) that a Restricted Stock Unit award may be paid subsequent to a Termination of Service in certain events, including a change of control, the Holder’s death, retirement or disability or any other specified Termination of Service.
9.7No Rights as a Stockholder. Unless otherwise determined by the Administrator, a Holder who is awarded Restricted Stock Units shall possess no incidents of ownership with respect to the Shares represented by such Restricted Stock Units, unless and until the same are transferred to the Holder pursuant to the terms of this Plan and the Award Agreement.
9.8Dividend Equivalents. Subject to Section 11.2, the Administrator may, in its sole discretion, provide that Dividend Equivalents shall be earned by a Holder of Restricted Stock Units based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date an Award of Restricted Stock Units is granted to a Holder and the maturity date of such Award.
ARTICLE 10
AWARD OF RESTRICTED STOCK
10.1Grant of Restricted Stock.
(a)The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions
shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.
(b)The Administrator shall establish the purchase price, if any, to be paid by the Holder to the Company with respect to any Restricted Stock award, with cash, services or any other consideration that the Administrator shall determine acceptable, subject to any requirements of applicable law, and form of payment for Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by applicable law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.
10.2Rights as Stockholders. Subject to Section 10.4, upon issuance of Restricted Stock, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in the applicable Program or in each individual Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that, in the sole discretion of the Administrator, any extraordinary distributions with respect to the Shares shall be subject to the restrictions set forth in Section 10.3. In addition, with respect to a share of Restricted Stock with performance-based vesting, dividends which are paid prior to vesting shall only be paid out to the Holder to the extent that the performance-based vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
10.3Restrictions. All shares of Restricted Stock (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of the applicable Program or in each individual Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Holder’s duration of employment, directorship or consultancy with the Company, the Performance Criteria, Company performance, individual performance or other criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the Program or the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.
10.4Repurchase or Forfeiture of Restricted Stock. Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, if no price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Holder’s rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Company shall have the right to repurchase from the Holder the unvested Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Holder for such Restricted Stock or such other amount as may be specified in the Program or the Award Agreement. Notwithstanding the foregoing, except as otherwise provided by Section 3.4, the Administrator in its sole discretion may provide that in the event of certain events, including a change of control, the Holder’s death, retirement or disability or any other specified Termination of Service or any other event, the Holder’s rights in unvested Restricted Stock shall not lapse, such Restricted Stock shall vest and, if applicable, the Company shall not have a right of repurchase.
10.5Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock must include an
appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. The Company may, in it sole discretion, (a) retain physical possession of any stock certificate evidencing shares of Restricted Stock until the restrictions thereon shall have lapsed and/or (b) require that the stock certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Holder deliver a stock power, endorsed in blank, relating to such Restricted Stock.
10.6Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
ARTICLE 11
AWARD OF PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK
PAYMENTS, DEFERRED STOCK, DEFERRED STOCK UNITS
11.1Performance Awards.
(a)The Administrator is authorized to grant Performance Awards, including Awards of Performance Stock Units, to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation. The value of Performance Awards, including Performance Stock Units, may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Performance Awards, including Performance Stock Unit awards may be paid in cash, Shares, Awards or a combination of cash, Shares and/or Awards, as determined by the Administrator.
(b)Without limiting Section 11.1(a), the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Holder which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article 5.
11.2Dividend Equivalents.
(a)Dividend Equivalents may be granted by the Administrator based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date an Award is granted to a Holder and the date such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Administrator. In addition, Dividend Equivalents with respect to an Award with performance-based vesting that are based on dividends paid prior to the vesting of such Award shall only be paid out to the Holder to the extent that the performance-based vesting conditions are subsequently satisfied and the Award vests.
(b)Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights.
11.3Stock Payments. The Administrator is authorized to make Stock Payments to any Eligible Individual. The number or value of shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company or any Affiliate, determined by the Administrator. Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by
the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
11.4Deferred Stock Units. The Administrator is authorized to grant Deferred Stock Units to any Eligible Individual. The number of Deferred Stock Units shall be determined by the Administrator and may (but is not required to) be based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator. Each Deferred Stock Unit shall entitle the Holder thereof to receive one Share on the date the Deferred Stock Unit becomes vested or upon a specified settlement date thereafter (which settlement date may (but is not required to) be the date of the Holder’s Termination of Service). Shares underlying a Deferred Stock Unit award which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until on or following the date that those conditions and criteria have been satisfied. Unless otherwise provided by the Administrator, a Holder of Deferred Stock Units shall have no rights as a Company stockholder with respect to such Deferred Stock Units until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the Shares underlying the Award have been issued to the Holder.
11.5Deferred Stock. The Administrator is authorized to grant Deferred Stock to any Eligible Individual. The number of shares of Deferred Stock shall be determined by the Administrator and may (but is not required to) be based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator. Shares underlying a Deferred Stock award which is subject to a vesting schedule or other conditions or criteria set by the Administrator will be issued on the vesting date(s) or date(s) that those conditions and criteria have been satisfied, as applicable. Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the Shares underlying the Award have been issued to the Holder.
11.6Term. The term of a Performance Award, Dividend Equivalent award, Stock Payment award, Deferred Stock award and/or Deferred Stock Unit award shall be set by the Administrator in its sole discretion.
11.7Purchase Price. The Administrator may establish the purchase price, if any, of a Performance Award, shares distributed as a Stock Payment award, shares of Deferred Stock award or shares distributed pursuant to a Deferred Stock Unit award, to be paid by the Holder to the Company with respect to any such award, with cash, services or any other consideration that the Administrator shall determine acceptable, subject to any requirements of applicable law; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by applicable law.
11.8Termination of Service. A Performance Award, Stock Payment award, Dividend Equivalent award, Deferred Stock award and/or Deferred Stock Unit award is distributable only while the Holder is an Employee, Director or Consultant, as applicable. The Administrator, however, in its sole discretion may provide that the Performance Award, Dividend Equivalent award, Stock Payment award, Deferred Stock award and/or Deferred Stock Unit award may be distributed subsequent to a Termination of Service in certain events, including a change of control, the Holder’s death, retirement or disability or any other specified Termination of Service.
ARTICLE 12
ADDITIONAL TERMS OF AWARDS
12.1Payment. The Administrator shall determine the methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise or base price of an Award, Shares issuable pursuant to the exercise of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a fair market value at the time of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Holders. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
12.2Tax Withholding. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder’s FICA, employment tax or other social security contribution obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan. The Administrator may in its sole discretion and in satisfaction of the foregoing requirement allow a Holder to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the surrender of Shares). The number of Shares which may be so withheld or surrendered shall be limited to the number of shares which have a fair market value at the time of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates or such other withholding rates for federal, state, local and foreign income tax and payroll/employment tax purposes that are applicable to such taxable income and that have been determined by the Administrator to avoid adverse accounting consequences. The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code and applicable foreign tax regulations, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of shares to pay the Option or Stock Appreciation Right exercise or base price or any tax withholding obligation.
12.3Transferability of Awards.
(a)Except as otherwise provided in Section 12.3(b):
(i)No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed;
(ii)No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and
(iii)During the lifetime of the Holder, only the Holder may exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Holder’s will or under the then applicable laws of descent and distribution.
(b)Notwithstanding Section 12.3(a), the Administrator, in its sole discretion, may determine to permit a Holder to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); (iii) any transfer of a Non-Qualified Stock Option to a Permitted Transferee shall be without consideration, except as required by applicable law and (iv) the Holder and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer.
(c)Notwithstanding Section 12.3(a), a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to receive any distribution with respect to any Award upon the Holder’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder, except to the extent the Plan, the Program and the Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married and resides in a community property state, a designation of a person other than the Holder’s spouse as his or her beneficiary with respect to more than 50% of the Holder’s interest in the Award shall not be effective without the prior written or electronic consent of the Holder’s spouse. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holder’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time; provided that the change or revocation is filed with the Administrator prior to the Holder’s death.
12.4Conditions to Issuance of Shares.
(a)Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Holder make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.
(b)All Share certificates delivered pursuant to the Plan and all shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to
comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.
(c)The Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.
(d)No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding down.
(e)Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any applicable law, rule or regulation, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
12.5Forfeiture, Recoupment and Clawback Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in an Award Agreement or otherwise, or to require a Holder to agree by separate written or electronic instrument, that:
(a)(i) Any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (y) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (z) the Holder incurs a Termination of Service for “cause” (as such term is defined in the sole discretion of the Administrator, or as set forth in a written agreement relating to such Award between the Company and the Holder); and
(b)All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the written policies of the Board, Administrator or any recoupment or clawback policies implemented by the Company, including, without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such recoupment or clawback policies and/or in the applicable Award Agreement.
12.6Prohibition on Repricing. Subject to Section 14.2, the Administrator shall not, without the approval of the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. Subject to Section 14.2, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
ARTICLE 13
ADMINISTRATION
13.1Administrator. The Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and, unless otherwise determined by the Board, shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as both a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded; provided that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 13.1 or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board. Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and, with respect to such Awards, the terms “Administrator” and “Committee” as used in the Plan shall be deemed to refer to the Board and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 13.6.
13.2Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan, the Program and the Award Agreement, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Program or Award Agreement; provided that the rights or obligations of the Holder of the Award that is the subject of any such Program or Award Agreement are not affected adversely by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 14.10. Any such grant or award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b‑3 under the Exchange Act or any successor rule, or Section 162(m) of the Code, or any regulations or rules issued thereunder, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.
13.3Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
13.4Authority of Administrator. Subject to the Company’s Bylaws, the Committee’s Charter and any specific designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:
(a)Designate Eligible Individuals to receive Awards;
(b)Determine the type or types of Awards to be granted to each Eligible Individual;
(c)Determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(d)Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise or base price, grant price, or purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e)Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise or base price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be identical for each Holder;
(g)Decide all other matters that must be determined in connection with an Award;
(h)Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i)Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement;
(j)Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan; and
(k)Accelerate wholly or partially the vesting or lapse of restrictions of any Award or portion thereof at any time after the grant of an Award, subject to whatever terms and conditions it selects and Section 3.4.
13.5Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Program, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
13.6Delegation of Authority. To the extent permitted by applicable law or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to Article 13; provided,however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided, further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code and applicable securities laws or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 13.6 shall serve in such capacity at the pleasure of the Board and the Committee.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1Amendment, Suspension or Termination of the Plan. Except as otherwise provided in this Section 14.1, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 14.2, (a) increase the limits imposed in Section 3.1 on the maximum number of shares which may be issued under the Plan, or (b) reduce the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan or take any action prohibited under Section 12.6, or (c) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares. Except as provided in Section 14.10, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and in no event may any Award be granted under the Plan after the tenth (10th) anniversary of the Effective Date.
14.2Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.
(a)In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s Common Stock or the share price of the Company’s Common Stock other than an Equity Restructuring, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, adjustments of the Award Limit, and adjustments of the manner in which shares subject to Full Value Awards will be counted); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) the number and kind of Shares (or other securities or property) for which automatic grants are subsequently to be made to new and continuing Non-Employee Directors pursuant to Section 4.6; (iv) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (v) the grant or exercise or base price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code.
(b)In the event of any transaction or event described in Section 14.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i)To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Holder’s rights
(and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 14.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Holder’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested;
(ii)To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii)To make adjustments in the number and type of shares of the Company’s stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise or base price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv)To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Program or Award Agreement; and
(v)To provide that the Award cannot vest, be exercised or become payable after such event.
(c)In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 14.2(a) and 14.2(b):
(i)The number and type of securities subject to each outstanding Award and the exercise or base price or grant price thereof, if applicable, shall be equitably adjusted; and/or
(ii)The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, adjustments of the Award Limit, and adjustments of the manner in which shares subject to Full Value Awards will be counted). The adjustments provided under this Section 14.2(c) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company.
(d)The Administrator may, in its sole discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.
(e)With respect to Awards which are granted to Covered Employees and are intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 14.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Administrator determines that the Award should not so qualify. No adjustment or action described in this Section 14.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(f)The existence of the Plan, the Program, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(g)No action shall be taken under this Section 14.2 which shall cause an Award to fail to comply with Section 409A of the Code or the Treasury Regulations thereunder, to the extent applicable to such Award.
(h)In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.
14.3Approval of Plan by Stockholders. The Plan will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan. If such approval has not been obtained at the end of said twelve (12) month period, the 2002 Plan shall continue according to its terms as in effect immediately prior to the adoption of this amendment and restatement of the 2002 Plan.
14.4No Stockholders Rights. Except as otherwise provided herein, a Holder shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Holder becomes the record owner of such Shares.
14.5Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.
14.6Effect of Plan upon Other Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Affiliate, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
14.7Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including but not limited to state, federal and foreign securities law and margin requirements), the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
14.8Titles and Headings, References to Sections of the Code or Exchange Act. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.
14.9Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.
14.10Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section.
14.11No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly.
14.12Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Affiliate.
14.13Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
14.14Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
14.15Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates.
Approved by stockholders: June 17, 2014
Amendment No. 1 to the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan
WHEREAS, DaVita Inc. (the “Company”) previously adopted the DaVita HealthCare Partners Inc. 2011 Incentive Award Plan, as amended and restated prior to the date hereof (the “Plan”);
WHEREAS, pursuant to Section 14.1 of the Plan, the Plan may be amended at any time or from time to time by the Board of Directors of the Company (the “Board”); and
WHEREAS, the Board believes it is in the best interests of the Company and its stockholders to amend the Plan (the “Amendment”), effective as of the date hereof and contingent upon stockholder approval of this Amendment by the Company’s stockholders at the first meeting of the Company’s stockholders at which this Amendment is considered and which must occur within twelve (12) months following the date hereof, to provide for an exception to the limitations on the maximum aggregate number of “Shares” (as such term is defined in the Plan) that may be granted and the maximum aggregate amount of cash that may be payable, in each case, to any one person during any twelve (12) month period with respect to a premium-priced stock appreciation right to be granted to the Chief Executive Officer of the Company on the date hereof.
NOW, THEREFORE, BE IT RESOLVED, that, effective as of the date on which this Amendment is adopted by the Board and contingent upon stockholder approval of this Amendment by the Company’s stockholders at the first meeting of the Company’s stockholders at which this Amendment is considered and which must occur within twelve (12) months following the date hereof, Section 3.3 of the Plan is amended in its entirety to read as follows:
3.3 Limitation on Number of Award Shares and Dollar Amounts. Notwithstanding any provision in the Plan to the contrary, and subject to Section 14.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any consecutive twelve (12) month period (measured from the date of any grant) shall be two million two hundred fifty thousand (2,250,000) and the maximum aggregate amount of cash that may be paid in cash to any one person during any consecutive twelve (12) month period (measured from the date of any payment) with respect to one or more Awards payable in cash shall be ten million dollars ($10,000,000); provided, however, that the Award to be granted to the Chief Executive Officer of the Company on the effective date of Amendment No. 1 to the Plan, either alone or in combination with other Awards granted prior to the effective date of Amendment No. 1 to the Plan and which were granted during the relevant twelve (12) month period, shall not be subject to the foregoing limit.
As amended by this Amendment, the Plan is in all respects ratified and confirmed, and as so amended by this Amendment, the Plan shall be read, taken and construed as one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized agent as of November 4, 2019.
| | | | | DAVITA INC. | | By: | /s/ Kathleen A. Waters | | Name: | Kathleen A. Waters | | Title: | Chief Legal Officer |
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