Exhibit 4.1
DAVITA INC. 2002 EQUITY COMPENSATION PLAN
1. Purpose. The purpose of the DaVita Inc. 2002 Equity Compensation Plan
("Plan") is to promote the interests of DaVita Inc. ("Company") and its
stockholders by enabling the Company to offer an opportunity to acquire an
equity interest in the Company so as to better attract, retain, and reward
Employees, directors, and independent contractors and, accordingly, to
strengthen the mutuality of interests between those persons and the Company's
stockholders by providing those persons with a proprietary interest in pursuing
the Company's long-term growth and financial success. Awards under the Plan
will be made solely in the form of the issuance of Options; the Plan does not
authorize the issuance of restricted stock.
2. Definitions. For purposes of this Plan, the following terms shall have
the meanings set forth below.
(a)"Board" or "Board of Directors" means the Board of Directors of
DaVita Inc.
(b)"Code" means the Internal Revenue Code of 1986. Reference to any
specific section of the Code shall also be deemed to be a reference
to any successor provision.
(c)"Committee" means the administrative committee of this Plan that is
provided for in Section 3 of this Plan.
(d)"Common Stock" means the common stock of the Company or any security
issued in substitution, exchange, or in lieu thereof.
(e)"Company" means DaVita Inc., a Delaware corporation, or any successor
corporation. Except where the context indicates otherwise, the term
"Company" shall include its Parent and Subsidiaries, if any.
(f)"Disabled" means permanent and total disability, as defined in Code
Section 22(e)(3).
(g)"Effective Date" of this Plan shall be the date of the 2002 annual
meeting of the stockholders of DaVita Inc.
(h)"Employee" means a worker whose earnings the Company reports on a
Form W-2.
(i)"Exchange Act" means the Securities Exchange Act of 1934.
(j)"Fair Market Value" of Common Stock for any day shall be the last
reported sale price on that day regular way, or if no such reported
sale takes place on that day, the average of the last reported bid
and ask prices on that day regular way, in either case on the
principal national securities exchange on which the Common Stock is
admitted to trading or listed.
(i) If the national securities exchange is closed on such date,
the "Fair Market Value" shall be determined as of the last
preceding day on which the Common Stock was traded or for
which bid and ask prices are available.
(ii) In the case of an Incentive Stock Option, "Fair Market Value"
shall be determined without reference to any restriction other
than one that, by its terms, will never lapse.
(k)"Incentive Stock Option" means an option to purchase Common Stock
that is intended to be an incentive stock option under Code Section
422.
(l)"Insider" means a person who is subject to Section 16 of the Exchange
Act.
(m)"Non-Qualified Stock Option" means any option to purchase Common
Stock that is not an Incentive Stock Option.
(n)"Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(o)"Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company)
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owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain, as determined in accordance with the
rules of Code Section 424(e).
(p)"Participant" means a person who has received an Option.
(q)"Plan" means this DaVita Inc. 2002 Equity Compensation Plan.
(r)"Predecessor Plans" shall mean the DaVita Inc. 1994 Equity
Compensation Plan, 1995 Equity Compensation Plan, 1997 Equity
Compensation Plan, and 1999 Equity Compensation Plan.
(s)"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission.
(t)"Section 162(m)" means Code Section 162(m), which imposes a million
dollar ($1,000,000) compensation deduction limitation on amounts paid
to certain senior executives.
(u)"Severance" means, with respect to a Participant, the termination of
the Participant's provision of services to the Company as an
Employee, director, or independent contractor, whether by reason of
death, disability, or any other reason.
(i) For purposes of determining the exercisability of an Incentive
Stock Option, a Participant who is on a leave of absence that
exceeds ninety (90) days will be considered to have incurred a
Severance on the ninety-first (91st) day of the leave of
absence, unless the Participant's rights to reemployment are
guaranteed by statute or contract.
(ii) If a Participant switches from Employee to independent
contractor status, that event is not treated as a Severance
for purposes of exercising a Non-Qualified Stock Option.
However, such a switch will result in an Option losing its
status as an Incentive Stock Option after ninety (90) days has
elapsed since the switch. Thereafter, the Option (if it is
exercisable at all) will be treated as a Non-Qualified Stock
Option.
(iii) A Participant will not be considered to have incurred a
Severance because of a transfer between the Company,
Subsidiary, or Parent.
(v)"Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each
of the corporations (other than the last corporation in the unbroken
chain) owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in the chain, as determined in accordance with the rules
of Code Section 424(f).
(w)"Substitute Option" means an option granted to an optionee who had
performed services for an entity that was acquired by another company
in substitution of a stock option previously granted to that
individual or entity by the acquired entity.
(x)"Ten Percent Stockholder" means any person who owns (after taking
into account the constructive ownership rules of Code Section 424(d))
more than ten percent (10%) of the combined voting power of all
classes of stock of DaVita Inc. or of any of its Parents or
Subsidiaries.
3. Administration.
(a)Except as provided below, this Plan shall be administered by the
Compensation Committee of the Board.
(b)If a grant to an Insider is intended be an exempt purchase under
Section 16, the Committee must be composed exclusively of
"Non-Employee Directors," as that term is defined in Rule 16b-3.
Similarly, if the income recognized with respect to an Option is
intended to be exempt from Code Section 162(m), the Committee must be
composed exclusively of "Outside Directors," as that term is defined
in Code Section 162(m).
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(c)The Committee is authorized to interpret this Plan and to adopt rules
and procedures relating to the administration of this Plan, including
those relating to sub-plans established for the purpose of qualifying
for preferred tax or other treatment under foreign laws. All actions
of the Committee in connection with the interpretation and
administration of this Plan shall be binding upon all parties. No
member of the Committee shall incur any liability for any actions
taken or inactions done in good faith.
(d)Subject to the limitations of Sections 9 and 14 of this Plan, the
Committee is expressly authorized to make such modifications to this
Plan and to Options granted under this Plan as are necessary to
effectuate the intent of this Plan as a result of any changes in the
tax, accounting, or securities laws treatment of Participants or of
the Plan.
(e)The Board of Directors may, by a resolution adopted by the Board,
delegate to one or more officers of the Company the power to issue
Options, provided:
(i) The enabling resolution specifies the total number of shares
that may be subject to such Options;
(ii) The officer may not issue Options to himself or herself;
(iii) The Board of Directors fixes the exercise price; and
(iv) The Board of Directors retains the authority to grant options
to persons who are not Employees (i.e., independent
contractors).
4. Duration of Plan.
(a)This Plan shall be effective as of the Effective Date, provided this
Plan is approved by the holders of a majority of the Company's shares
of Common Stock at the 2002 annual meeting of the Company's
stockholders, in accordance with the provisions of Code Section 422.
The approval by the stockholders must relate to:
(i) The class of Employees who are eligible to receive Incentive
Stock Options; and
(ii) The maximum number of shares of Common Stock that may be
issued under the Plan, except as adjusted pursuant to Section
12 of this Plan.
If either of those items is changed, the approval of the
stockholders must again be obtained within twelve (12) months
after the adoption of the amendment by the Board of Directors.
(b)In the event that this Plan is not so approved at the 2002
stockholders' meeting, this Plan shall terminate and any Options
previously awarded under this Plan shall be void.
(c)The ability to grant Incentive Stock Options shall terminate on
February 8, 2012, which is the tenth anniversary of the date on which
the Board of Directors adopted the Plan. The preceding sentence shall
not apply if there is stockholder approval of an amendment to the
Plan prior to such date. The effect of obtaining stockholder approval
shall be to extend the term of the Incentive Stock Option feature of
the Plan for another ten (10) years from the date on which the Board
of Directors approved the amendment.
5. Number of Shares.
(a)The following rules shall govern the size of grants under this Plan.
(i) The maximum number of shares of Common Stock which may be
issued pursuant to this Plan shall be eight million, five
hundred thousand (8,500,000) shares. This amount shall be
increased by the residual shares remaining in the Predecessor
Plans, regardless of whether those shares (A) were available
for transfer to this Plan upon the Effective Date or (B)
subsequently become available (e.g., by reason of forfeiture
of a grant).
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(ii) The maximum number of shares that may be issued to a single
Participant in any consecutive twenty-four (24) month period
is one million five hundred thousand (1,500,000). For purposes
of determining the maximum number of shares that may be issued
to a single Participant, (A) shares subject to a terminated
Option shall be considered to remain outstanding and (B) the
repricing of an Option shall be treated as the issuance of a
new Option.
(iii) The maximum number of shares that may be issued pursuant to
Incentive Stock Options is five million (5,000,000) shares.
The preceding numbers may be adjusted as set forth in Section 12 of
this Plan.
(b)Upon the expiration or termination of an Option (for any reason)
which shall not have been exercised in full, the shares of Common
Stock remaining unissued under the Option shall again become
available for use under the Plan.
(c)In the event a Participant pays part or all of the exercise price of
an Option by surrendering shares of Common Stock that the Participant
had previously acquired, only the number of shares issuable to the
Participant in excess of the number that was surrendered shall be
taken into account for purposes of determining the maximum number of
shares that may be issued under the Plan, both as to that Participant
and in the aggregate (to all Participants). Similarly, shares that
are not issued to a Participant, but rather, are used to satisfy the
income tax withholding obligations upon the exercise of an Option are
not taken into account for purposes of determining the maximum number
of shares that may be issued under the Plan.
(d)To the extent permitted by applicable law and the rules of any stock
exchange or quotation system on which the Company's stock is traded
or listed, the Corporation can replenish the number of shares
available under the Plan through repurchases of its existing shares,
provided that the purchases are effected solely by the use of:
(i) The cash proceeds received by the Company upon the exercise of
Options issued under the Plan or a Predecessor Plan; and
(ii) The actual tax savings achieved by the Company relating to the
exercise of Options under the Plan and the Predecessor Plans;
provided that those exercises occur after the Effective Date.
6. Eligibility.
(a)Persons eligible to receive grants under this Plan shall consist of
(i) Employees, (ii) members of the Board of Directors, and (iii)
other persons providing services to the Company (i.e., independent
contractors), other than persons only providing services in
connection with a capital raising transaction. However, Incentive
Stock Options may only be awarded to Employees.
(b)In the event that the Company acquires another entity, the Committee
may authorize the issuance of Substitute Options upon such terms and
conditions as the Committee shall determine, which may be different
from the terms contained in this Plan, taking into account the
limitations of Code Section 424(a) in the case of a Substitute Option
that is intended to be an Incentive Stock Option.
(c)In the event that the Committee grants an Option to a person who is
not currently an Employee of or an independent contractor to the
Company, such Option shall not become effective until such individual
commences performing services to the Company and it must satisfy the
pricing limitations (set forth in Section 7 of this Plan) at that
time.
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(d)After taking into consideration the tax, securities, and accounting
consequences of doing so, the Committee may grant Non-Qualified Stock
Options to individuals who are performing services (whether as
employees or as independent contractors) to entities that are related
to or affiliated with the Company but that do not qualify as Parents
or Subsidiaries.
7. Form of Options. Options shall be awarded under this Plan in such
amounts, at such times, to such persons, on such terms and in such form as the
Committee may approve, which shall not be inconsistent with the provisions of
this Plan, but which need not be identical from grant to grant.
(a)The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option, and shall not be less than
the Fair Market Value of the Common Stock on the date of grant.
However, the exercise price of an Incentive Stock Option issued to a
Ten Percent Stockholder shall be no less than one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date of
the grant. However, the preceding two sentences shall not apply in
the case of Substitute Options issued under this Plan.
(b)An Option shall be exercisable at such time or times and be subject
to such terms and conditions as may be set forth in its provisions.
However, no Option shall be exercisable prior to the Effective Date.
(c)Except in the case of Substitute Options, the aggregate Fair Market
Value (determined as of the date of grant) of the number of shares of
Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar
year shall not exceed one hundred thousand dollars ($100,000). To the
extent that a Participant's Options exceed that limit, they will be
treated as Non-Qualified Stock Options, with the first Options that
were awarded to the Participant to be treated as Incentive Stock
Options.
(d)Except as provided in Section 10 or in the case of Substitute
Options, the term of an Option shall not exceed five (5) years from
the date of grant.
8. Exercise of Options.
(a)Options shall only be exercisable for whole numbers of shares.
(b)Options are exercised by payment of the full amount of the purchase
price to the Company as follows:
(i) The payment shall be in cash or such other form or forms of
consideration as the Committee shall deem acceptable, such as
the surrender (either actually or constructively by means of
attestation) of outstanding shares of Common Stock owned by
the Participant for the minimum period of time necessary to
avoid adverse accounting treatment (if applicable).
(ii) After giving due consideration to the consequences under Rule
16b-3 and under the Code, the Committee may also authorize the
exercise of Options by the delivery to the Company (or its
designated agent) of an executed written notice of exercise
form together with irrevocable instructions to a broker-dealer
to sell or margin a sufficient portion of the shares of Common
Stock and to deliver the sale or margin loan proceeds directly
to the Company to pay all or a portion of the exercise price
of the Option and/or any tax withholding obligations.
For purposes of determining the amount of income that is
recognized by a Participant pursuant to a "same-day sale"
transaction described in Subparagraph (ii) above, the Fair Market
Value of the Common Stock shall be the price at which the Common
Stock was sold.
(c)Except as otherwise provided in the terms of the Option, the
Participant may exercise the Option following his or her Severance
only to the extent that the Option could have been
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exercised on the date of the Severance, so that no events that
occur following Severance will increase the vested portion of the
Option.
(d)The Committee may provide for the acceleration of the vesting of
Options upon a change of control or similar circumstances, under such
conditions as may be set forth in the Options.
9. Modification of Grants.
(a)After due consideration to the possible tax, securities, and
accounting consequences, the Committee may modify an existing Option,
including by:
(i) Accelerating the right to exercise it; or
(ii) Extending or renewing it.
(b)No modification may be made to an Option that would impair the rights
of the Participant holding the Option without the Participant's
consent. Furthermore, in no event will the exercise price of any
outstanding Option be reduced or repriced, including any repricing
effected by issuing replacement stock options for outstanding stock
options that have an exercise price greater than the Fair Market
Value of the Common Stock, without first obtaining stockholder
approval.
(c)In the event that the Board amends the terms of an Option so that it
no longer qualifies as an Incentive Stock Option, the limitations
imposed upon the Option under the Code and the Plan solely by virtue
of its (formerly) qualifying as an Incentive Stock Option shall no
longer apply, to the extent specified in the amendment.
(d)Whether a modification of an existing Incentive Stock Option will be
treated as the issuance of a new Incentive Stock Option will be
determined in accordance with the rules of Code Section 424(h).
(e)Whether a modification of an existing Option previously awarded to an
Insider will be treated as a new Option for purposes of Section 16 of
the Exchange Act will be determined in accordance with Rule 16b-3.
10. Termination of Options.
(a)Except to the extent provided otherwise in the terms of the Option,
each Option shall terminate on the earliest of the following dates:
(i) The date that is one (1) year from the date of the Severance
of the Participant, if the Severance occurred because of the
Participant's Disability.
(ii) The date that is one (1) year from the date of the Severance
of the Participant, if the Severance occurred because of the
Participant's death.
(iii) In the case of any Severance other than one described in
Subparagraphs (i) or (ii) above, the date that is three (3)
months from the date of the Participant's Severance.
(b)Except in the case of a Severance caused by death or Disability, in
no event shall an Option be exercisable more than five (5) years
after the date on which it was granted.
(c)The nonvested portion of the Option shall terminate immediately upon
Severance, and the vested portion at the time the balance of the
Option terminates, as determined pursuant to the above rules.
11. Non-Transferability of Grants. During the lifetime of the Participant,
Options are exercisable only by the Participant. Options are not assignable or
transferable except by will or the laws of descent and distribution.
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12. Adjustments.
(a)In the event of any change in the capitalization of the Company
affecting its Common Stock (e.g., a stock split, reverse stock split,
stock dividend, recapitalization, combination, reclassification, or
other similar transaction), the Committee shall make such adjustments
as it may deem appropriate with respect to:
(i) The number, kind, and exercise price of shares covered by each
outstanding Option; and
(ii) The maximum number and/or kind of shares that may be awarded
under this Plan, including the limitations contained in
Section 5(a) of this Plan.
(b)The Committee may also make such adjustments in the event of a
spin-off or other distribution of Company assets to stockholders
(other than normal cash dividends).
13. Notice of Disqualifying Disposition. A Participant must notify the
Company within fifteen (15) days if the Participant disposes of stock acquired
pursuant to the exercise of an Incentive Stock Option issued under the Plan or
a Predecessor Plan prior to the expiration of the holding periods required to
qualify for long-term capital gains treatment on the disposition.
14. Amendments and Termination. Subject to the limitations of Section 4 of
this Plan, the Board may at any time amend or terminate this Plan. However, no
such amendment may adversely affect the rights of any Participant with respect
to any outstanding Option without the Participant's consent. The Plan may not
be amended other than by a written document executed by the Company.
Furthermore, no Participant may rely upon any statement (oral or written) that
is inconsistent with the terms of the Plan.
15. Tax Withholding.
(a)The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the
operation of this Plan.
(b)To the extent authorized by the Committee, Participants may (i)
surrender previously acquired shares of Common Stock or (ii) have
shares withheld in satisfaction of the tax withholding obligations.
To the extent necessary to avoid adverse accounting treatment, the
number of shares that may be withheld for this purpose shall not
exceed the minimum number needed to satisfy the applicable income and
employment tax withholding rules. Similarly, the shares surrendered
must have been owned by the Participant for the minimum period of
time necessary to avoid adverse accounting treatment (if applicable).
(c)If Common Stock is used to satisfy the Company's tax withholding
obligations, the stock shall be valued at its Fair Market Value when
the tax withholding is required to be made.
16. No Additional Rights.
(a)Neither the adoption of this Plan nor the awarding of any Option
shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under
applicable law; or
(ii) Confer upon any Participant the right to continue performing
services for the Company (whether as an Employee or as an
independent contractor), nor shall it interfere in any way
with the right of the Company to terminate the services of any
Participant at any time, with or without cause, subject to the
terms of any applicable employment or consulting agreement
between the Participant and the Company.
(b)No Participant shall have any rights as a stockholder with respect to
any shares awarded to the Participant under this Plan until the date
a certificate for such shares has been issued to the Participant.
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17. Securities Law Restrictions.
(a)No shares of Common Stock shall be issued under this Plan unless the
Committee shall be satisfied that the issuance will be in compliance
with applicable federal and state securities laws and the
requirements of any stock exchange or other securities market on
which the Company's securities may then be traded. Similarly, a
Participant will not be permitted to exercise an Option if such
exercise would violate the Company's internal policies.
(b)The Committee may require certain investment (or other)
representations and undertakings by the person exercising an Option
if necessary to comply with applicable law.
(c)Certificates for shares of Common Stock delivered under this Plan may
be subject to such restrictions as the Committee may deem advisable.
The Committee may cause a legend to be placed on the certificates to
refer to those restrictions.
(d)The inability of the Company to obtain registration, qualification,
or other necessary authorization, or the unavailability of an
exemption from any registration or qualification obligation deemed by
the Company's counsel to be necessary for the lawful issuance and
sale of any shares of its Common Stock under this Plan shall:
(i) Suspend the Company's obligation to permit the exercise of any
Option or to issue any shares under this Plan; and
(ii) Relieve the Company of any liability in respect of the
nonissuance or sale of the shares as to which the requisite
authority or exemption shall not have been obtained.
18. Indemnification.
(a)To the maximum extent permitted by law, the Company shall indemnify
each member of the Committee and of the Board, as well as any other
Employee of the Company with duties under the Plan, against expenses
and liabilities (including any amount paid in settlement) reasonably
incurred by the individual in connection with any claims against the
individual by reason of the performance of the individual's duties
under this Plan, unless the losses are due to the individual's gross
negligence or lack of good faith.
(b)The Company will have the right to select counsel and to control the
prosecution or defense of the suit.
(c)In the event that more than one person who is entitled to
indemnification is subject to the same claim, all such persons shall
be represented by a single counsel, unless such counsel advises the
Company in writing that he or she cannot represent all such persons
under the applicable rules of professional responsibility.
(d)The Company will not be required to indemnify any person for any
amount incurred through any settlement unless the Company consents in
writing to the settlement.
19. Governing Law. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to its conflicts of laws provisions.
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