DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

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Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to Section 240.14a-12

JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY

 

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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LOGO

JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY

Registered in Ireland – No. 399192

Fifth Floor, Waterloo Exchange

Waterloo Road

Dublin 4, Ireland

NOTICE OF 2019 ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 1, 2019

Dear Shareholder:

You are cordially invited to attend the 2019 annual general meeting of shareholders (the “annual meeting”) of Jazz Pharmaceuticals plc, a public limited company formed under the laws of Ireland (the “company”). The annual meeting will be held on Thursday, August 1, 2019, at 10:30 a.m. local time at our corporate headquarters located at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland, for the following purposes:

 

1.

To elect by separate resolutions each of the four nominees for director named in the accompanying proxy statement (the “proxy statement”) to hold office until the 2022 annual meeting of shareholders (Proposal 1).

 

2.

To ratify, on a non-binding advisory basis, the appointment of KPMG, Dublin, or KPMG, as the independent auditors of the company for the fiscal year ending December 31, 2019 and to authorize, in a binding vote, the board of directors, acting through the audit committee, to determine the independent auditors’ remuneration (Proposal 2).

 

3.

To approve, on a non-binding advisory basis, the compensation of the company’s named executive officers, or NEOs, as disclosed in the accompanying proxy statement (Proposal 3).

 

4.

To conduct any other business properly brought before the annual meeting.

Proposals 1, 2 and 3 are ordinary resolutions, requiring the affirmative vote of a majority of the votes cast (in person or by proxy) at the annual meeting.

In addition to the above proposals, the annual meeting will also receive and consider the company’s Irish statutory financial statements for the fiscal year ended December 31, 2018 and the reports of the directors and auditors thereon. There is no requirement under Irish law that the Irish statutory financial statements be approved by the shareholders, and no such approval will be sought at the annual meeting. Under the company’s Amended and Restated Constitution, or our constitution, and the Irish Companies Act 2014, or the 2014 Act, Proposals 1 and 2 are deemed to be ordinary business, and Proposal 3 is deemed to be special business. The annual meeting will also include a review of the company’s affairs.

The record date for the annual meeting is June 5, 2019. Only shareholders of record at the close of business on that date may vote at the annual meeting or any adjournment or postponement thereof.

 


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A shareholder entitled to attend and vote at the annual meeting is entitled to appoint one or more proxies to attend, speak and vote instead of him or her at the annual meeting, using the proxy card provided (or the form of proxy contained in section 184 of the 2014 Act) or using an electronic proxy card by telephone or via the internet in the manner described in this proxy statement. A proxy need not be a shareholder of record.

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the annual meeting of shareholders to be held on August 1, 2019, at 10:30 a.m. local time at our corporate headquarters located at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

 

The proxy statement and our annual report are available at

https://materials.proxyvote.com/G50871.

 

 

By order of the board of directors,

/s/ Aislinn Doody

Aislinn Doody

Company Secretary

Dublin, Ireland

June 14, 2019

 

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please vote as soon as possible. You may vote your shares over the telephone or via the internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by completing, signing, dating and mailing your proxy card or voting instruction card in the envelope provided. Proxy cards must be received by July 31, 2019. Electronic proxy cards submitted via the internet or by telephone must be received by 11:59 p.m., U.S. Eastern Time, on July 31, 2019. It may not be possible to count proxy cards received after the relevant time towards voting. Proxy cards received will be forwarded to the company’s registered office electronically before commencement of the annual meeting to comply with Irish law. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if the record holder of your ordinary shares is a broker, bank or other agent, and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 


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PROXY OVERVIEW

    1  

GENERAL

    9  

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

    10  

CORPORATE GOVERNANCE AND BOARD MATTERS

    15  

Overview

    15  

Independence of the Board of Directors

    15  

Board Leadership Structure and Risk Oversight

    15  

Meetings of the Board of Directors

    16  

Director Commitments

    16  

Information About Board Committees

    17  

Audit Committee

    18  

Report of the Audit Committee of the Board of Directors

    19  

Compensation Committee

    19  

Compensation Committee Processes and Procedures

    20  

Compensation Committee Interlocks and Insider Participation

    21  

Compensation Consultant Fees

    21  

Compensation Committee Report

    21  

Nominating and Corporate Governance Committee

    21  

Other Corporate Governance Matters

    23  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    24  

EXECUTIVE OFFICERS

    27  

EXECUTIVE COMPENSATION

    29  

Compensation Discussion and Analysis

    29  

Summary of Compensation

    54  

Grants of Plan-Based Awards

    55  

Description of Compensation Arrangements

    56  

Outstanding Equity Awards at Fiscal Year-End

    60  

Option Exercises and Stock Vested

    61  

Potential Payments upon Termination or Change in Control

    62  

Pay Ratio Disclosure

    65  

DIRECTOR COMPENSATION

    66  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    70  

PROPOSAL 1 ELECTION OF DIRECTORS

    71  

PROPOSAL 2 RATIFY, ON A NON-BINDING ADVISORY BASIS, THE APPOINTMENT OF INDEPENDENT AUDITORS AND AUTHORIZE, IN A BINDING VOTE, THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO DETERMINE THE INDEPENDENT AUDITORS’ REMUNERATION

    77  

 


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(continued)

Independent Registered Public Accounting Firm Fees and Services

    77  

Pre-Approval Policies and Procedures

    78  

Independence

    78  

PROPOSAL 3 NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

    79  

OTHER MATTERS

    81  

Presentation of Irish Statutory Financial Statements

    81  

Registered and Principal Executive Offices

    81  

Shareholder Proposals and Director Nominations for the 2020 Annual Meeting

    81  

Householding of Proxy Materials

    81  

Annual Report on Form 10-K

    82  

Special Note Regarding Forward-Looking Statements

    82  

General

    82  

 


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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

PROXY OVERVIEW

This overview highlights certain information contained elsewhere in this proxy statement and does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. For more complete information regarding our business and 2018 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2018 that we filed with the Securities and Exchange Commission, or SEC, on February 26, 2019, which we refer to throughout this proxy statement as the 2018 Annual Report on Form 10-K.

In this proxy statement, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the company,” “we,” “us” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries, except when the context makes clear that the time period being referenced is prior to January 18, 2012, in which case such terms are references to Jazz Pharmaceuticals, Inc. and its consolidated subsidiaries. See “General—Basis of Presentation” on page 9 below.

Meeting and Voting Information

Time and Date:

10:30 a.m., local time on Thursday, August 1, 2019

Place:

Our corporate headquarters

Fifth Floor, Waterloo Exchange

Waterloo Road

Dublin 4, Ireland

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please vote as soon as possible. Please see “Questions and Answers About These Proxy Materials and Voting—How Do I Vote?” beginning on page 11 below.

Business Overview

Jazz Pharmaceuticals plc is a global biopharmaceutical company dedicated to developing life-changing medicines for people with limited or no options.

As a leader in sleep medicine and with a growing hematology/oncology portfolio, we have a diverse portfolio of products and product candidates in development, with a focus in the areas of sleep and hematology/oncology. Our lead marketed products are:

 

 

Xyrem® (sodium oxybate) oral solution, the only product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the United States for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in adult and pediatric patients with narcolepsy;

 

 

Erwinaze® (asparaginase Erwinia chrysanthemi), a treatment approved in the United States and in certain markets in Europe (where it is marketed as Erwinase®) for patients with acute lymphoblastic leukemia who have developed hypersensitivity to E. coli-derived asparaginase;

 

 

Defitelio® (defibrotide sodium), a product approved in the United States for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe (where it is marketed as Defitelio® (defibrotide)) for the treatment of severe VOD in adults and children undergoing HSCT therapy; and

 

 

Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the United States and in Europe (where it is marketed as Vyxeos® 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia or acute myeloid leukemia with myelodysplasia-related changes.

In March 2019, the FDA approved our new drug application, or NDA, for Sunosi (solriamfetol) as a treatment to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea, and we expect the product will be commercially available in the U.S. in July 2019. We are also seeking approval for solriamfetol in Europe and submitted a marketing authorization application to the European Medicines Agency in the fourth quarter of 2018.

 

JAZZ PHARMACEUTICALS  |  Proxy Statement    1


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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

In March 2019, we announced positive top-line results from our Phase 3 study evaluating the efficacy and safety of JZP-258, an oxybate product candidate that contains 92% less sodium than Xyrem, for the treatment of cataplexy and EDS in adult patients with narcolepsy. We expect to submit an NDA for approval of this product by as early as the end of 2019.

Our strategy to create shareholder value is focused on:

 

 

Strong financial execution through growth in sales of our current lead marketed products;

 

 

Building a diversified product portfolio and development pipeline through a combination of our internal research and development efforts and obtaining rights to clinically meaningful and differentiated on- or near-market products and early- to late-stage product candidates through acquisitions, collaborations, licensing arrangements, partnerships and venture investments; and

 

 

Maximizing the value of our products and product candidates by continuing to implement our comprehensive global development plans, including through generating additional clinical data and seeking regulatory approval for new indications.

In 2018, in support of our strategy, we continued to expand and advance our research and development pipeline in our sleep and hematology/oncology therapeutic areas, both by conducting activities internally and by leveraging partnerships with third parties.

Corporate Governance, Human Capital and Social Highlights

Director Nominees and Continuing Directors

The following table provides summary information about each director nominee and continuing director as of June 1, 2019. See pages 15 to 17 and 71 to 76 for more information.

 

           
 Name    Age             Principal Position   Independent     Other Current    
Public    
Boards    
 

 2019 Director Nominees

           

 

 Paul L. Berns

  

 

 

 

52

 

 

  

 

 

 

2010

 

(1) 

 

 

Venture Partner, ARCH and Executive Chair, BlackThorn Therapeutics

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Patrick G. Enright

  

 

 

 

57

 

 

  

 

 

 

2009

 

(1) 

 

 

Managing Director, Longitude Capital

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Seamus Mulligan

  

 

 

 

58

 

 

  

 

 

 

2012

 

 

 

 

Director, Emergent BioSolutions, Inc.

 

 

 

 

Yes

 

 

 

 

 

 

1    

 

 

 Norbert G. Riedel, Ph.D.

 

  

 

 

 

61

 

 

  

 

 

 

2013

 

 

 

 

Chief Executive Officer and President, Aptinyx, Inc.

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Continuing Directors

           

 

 Bruce C. Cozadd

  

 

 

 

55

 

 

  

 

 

 

2003

 

(1) 

 

 

Chairman and Chief Executive Officer, Jazz Pharmaceuticals plc

 

 

 

 

No

 

 

 

 

 

 

0    

 

 

 Peter Gray

  

 

 

 

64

 

 

  

 

 

 

2013

 

 

 

 

Chairman, UDG Healthcare plc

 

 

 

 

Yes

 

 

 

 

 

 

1    

 

 

 Heather Ann McSharry

  

 

 

 

57

 

 

  

 

 

 

2013

 

 

 

 

Director, CRH plc and Greencore Group plc

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Kenneth W. O’Keefe

  

 

 

 

52

 

 

  

 

 

 

2004

 

 

 

 

Managing Director, Beecken Petty O’Keefe & Company

 

 

 

 

Yes

 

 

 

 

 

 

0    

 

 

 Anne O’Riordan

  

 

 

 

51

 

 

  

 

 

 

2019

 

 

 

 

Group Director of Digital, Jardines Matheson Limited

 

 

 

 

Yes

 

 

 

 

 

 

0    

 

 

 Elmar Schnee

  

 

 

 

60

 

 

  

 

 

 

2014

 

 

 

 

Chairman, Calliditas Therapeutics AB and Santhera Pharmaceuticals Holding AG

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Catherine A. Sohn, Pharm.D.

  

 

 

 

66

 

 

  

 

 

 

2012

 

 

 

 

Chairperson, BioEclipse Therapeutics, Inc., and Director, Rubius Therapeutics and Landec Corporation

 

 

 

 

Yes

 

 

 

 

 

 

2    

 

 

 Rick E Winningham

  

 

 

 

59

 

 

  

 

 

 

2010

 

(1) 

 

 

Chairman and Chief Executive Officer, Theravance Biopharma, Inc.

 

 

 

 

Yes

 

 

 

 

 

 

1    

 

 

(1)

Includes service on the board of directors of Jazz Pharmaceuticals, Inc., our predecessor.

 

2    JAZZ PHARMACEUTICALS  |  Proxy Statement


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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Director Dashboards

We examine the experience and expertise of our board as a whole to ensure alignment between the abilities and contributions of our board and our strategic priorities and long-range plan, emphasizing, among other things, expertise in global and U.S. sales and marketing, in product development, in financial management and in corporate development transactions. All of our directors exhibit high integrity, collegiality, innovative thinking, sound business judgment and a knowledge of corporate governance requirements and practices. The charts below show key skills and experience our directors bring to our boardroom:

 

LOGO

Our board is substantially independent and has a mix of relatively newer and longer-tenured directors. The charts below show board makeup by various characteristics:

 

LOGO

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Corporate Governance Strengths

We are committed to exercising good corporate governance practices. We believe that good governance promotes the long-term interests of our shareholders and strengthens board and management accountability. The highlights of our corporate governance practices include the following:

 

 

 

•  11 out of 12 of our directors are independent

 

•  Regular executive sessions of independent directors

 

•  Audit, compensation and nominating and corporate governance committees are comprised solely of independent directors

 

•  Diverse board in terms of tenure, residency, gender, sexual orientation, experience and skills

 

•  Annual board self-evaluation

 

•  Risk oversight by the full board and committees

 

•  Board and committees may engage outside advisors independently of management

 

•  Independent compensation consultant reporting directly to the compensation committee

 

 

  

 

 

•  Director participation in continuing education and related reimbursement policy

 

•  Lead Independent Director with clearly delineated duties

 

•  Corporate Governance Guidelines

 

•  Majority voting for elections of directors for a three-year term

 

•  Share ownership guidelines for directors and executive officers, which increased in May 2018

 

•  Anti-hedging/pledging policy

 

•  Code of Conduct

 

•  Annual advisory approval of executive compensation

 

•  Shareholder ability to call extraordinary meetings(1)

 

(1)

Irish law provides that shareholders holding 10% or more of the total voting rights may at any time request that the directors call an extraordinary general meeting (i.e., special meeting). If the directors do not proceed to convene a meeting within a specified period, those shareholders (or any of them representing more than half of the total voting rights of all of them) may themselves convene a meeting within a specified period. For more information, see “Corporate Governance and Board Matters—Other Corporate Governance Matters—Shareholder Ability to Call Extraordinary Meetings.”

Human Capital Management

We are committed to creating a company where the work culture reflects our core values of integrity, collaboration, passion, innovation and pursuit of excellence. Our strong patient focus is something our employees believe in and pursue every day, and we are committed to acting responsibly, safely and with transparency in our interactions with patients, healthcare providers and other stakeholders in the healthcare system.

We strive to create a workplace culture that supports a diverse, multi-cultural workforce, treats individuals fairly, and provides an inclusive environment where all employees are empowered to contribute and succeed. Differences in race, age, gender, sexual orientation, gender identity and thinking style enhance our work environment and allow us to better understand the patients we serve—which is at the core of everything we do.

Created and led by our employees, our Employee Diversity and Inclusion program is designed to empower employees to guide and support our strategy and programs related to hiring diverse talent and using education and communication to continue fostering an inclusive environment. We also have a Diversity and Inclusion Delegation, a committee of employees focused on helping to embed diversity and inclusion into all we do.

Each year, we conduct an employee feedback survey designed to help us measure overall employee engagement. The feedback employees provide during the survey helps us measure our performance in delivering a positive work experience for employees both at local team levels and across the organization and provides important insight into the areas where we need to focus in the year ahead. Our compensation committee maintains oversight of matters related to human capital management and in that capacity reviews the results of the employee feedback survey. For more information, see the section entitled “Corporate Governance and Board Matters—Board Leadership Structure and Risk Oversight” on page 15. In 2018, our participation rate in the employee feedback survey was approximately 90%.

 

4    JAZZ PHARMACEUTICALS  |  Proxy Statement


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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Corporate Responsibility Highlights

Patient Assistance

We recognize that many patients today face financial obstacles that keep them from accessing important medications. We are committed to improving patient care through unique patient and physician programs and ongoing collaboration with patients, physicians and advocacy groups.

Disease Education

As part of our efforts to improve patients’ lives, we provide disease-focused resources that support healthcare providers, patients and caregivers along their journey by helping to increase the understanding of disease risk factors, signs and symptoms, diagnosis and other support services.

Corporate Giving

We view our global corporate giving as an opportunity for us to help improve patients’ lives by filling unmet needs, demonstrating our commitment to the communities we serve, and making an impact through meaningful support to organizations, initiatives, and causes that reflect our mission, values and strategic focus.

Medical Education

As part of our ongoing efforts to improve patient outcomes, we support medical education through our grant-making program. We are particularly interested in supporting requests from the therapeutic areas of hematology/oncology and sleep and fund a variety of activities, including medical education meetings, conferences and symposia, enduring medical education activities, medical center grand rounds lectures, fellowships, and similar educational activities.

Transfers of Value to Healthcare Professionals and Healthcare Organizations

In line with local transparency reporting requirements, we disclose on national portals and, in countries that do not have their own national portals, our company website our interactions with healthcare professionals and healthcare organizations.

Environment, Health and Safety

We seek to operate our manufacturing facilities in an environmentally responsible way to protect our people, our business, our environment and the local communities in which we operate. In light of the potential impact of our business on the environment, we have adopted a number of internal environmental policies and management systems to manage our operations in compliance with applicable laws, directives and regulations on environmental protection and in support of environmental sustainability and local biodiversity. Our environmental policies and management systems include procedures for assessing compliance with applicable environmental laws and regulations and reporting incidents of non-compliance to applicable governmental authorities. For example, the environmental policy governing our manufacturing facility in Athlone, Ireland requires us to minimize resource use (e.g., energy and water) and waste generation, optimize the use of raw materials, and undertake continuous improvement in environmental performance, with an emphasis on pollution prevention.

Shareholder Engagement

A priority for our board of directors is soliciting and listening to the views of our shareholders on a variety of topics, including our business and growth strategy, corporate governance practices and executive compensation matters. Discussions with our investors have been productive and informative, and have provided valuable feedback to our board of directors to help ensure that our board’s decisions align with shareholder objectives. The graphic under the section entitled “Executive Compensation—Compensation Discussion and Analysis—How We Determine Executive Compensation—2018 Advisory Vote on Executive Compensation and Shareholder Engagement” on page 36 below describes our typical shareholder outreach and engagement cycle.

 

JAZZ PHARMACEUTICALS  |  Proxy Statement    5


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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Summary of Shareholder Voting Matters and Board Recommendations

For the reasons set forth below and in the rest of this proxy statement, our board of directors recommends that you vote your shares “FOR” each of the nominees named below for director to hold office until the 2022 annual meeting of shareholders and “FOR” both of the other proposals.

 

 
Proposal 1 — Election of Directors

 

 

The board of directors recommends a vote “FOR” each of the named nominees.

 

Vote required to elect each nominee to hold office until the 2022 annual meeting of shareholders: Affirmative vote of a majority of the votes cast on his election.

 

For more information, see Proposal 1 starting on page 71.

 

    

We are asking our shareholders to vote, by separate resolutions, on the election of each of Paul L. Berns, Patrick G. Enright, Seamus Mulligan and Norbert G. Riedel to hold office until the 2022 annual meeting of shareholders. Detailed information about each nominee’s background and experience can be found beginning on page 72.

 

Each of the nominees for director was nominated for election by the board of directors upon the recommendation of our nominating and corporate governance committee. Our board of directors believes that each nominee has the specific experience, qualifications, attributes and skills to serve as a member of the board of directors and has demonstrated the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of directors. See “Corporate Governance and Board Matters—Director Commitments” beginning on page 16 for more information

 

 

 
Proposal 2 — Ratify, on a Non-Binding Advisory Basis, the Appointment of Independent Auditors and Authorize, in a Binding Vote, the Board of Directors, Acting Through the Audit Committee, to Determine the Independent Auditors’ Remuneration

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see Proposal 2 starting on page 77.

    

Under Irish law, KPMG will be deemed to be reappointed as our independent auditors for the financial year ending December 31, 2019, without needing a shareholder vote at the annual meeting. However, our shareholders are being asked to ratify KPMG’s appointment on a non-binding advisory basis because we value our shareholders’ views on the company’s independent auditors. The board of directors and the audit committee intend to consider the results of this vote in making determinations in the future regarding the appointment of the company’s independent auditors.

 

Our shareholders are also being asked to authorize the board of directors, acting through the audit committee, to determine KPMG’s remuneration. This authorization is required by Irish law.

 

Less than 1% of the total fees that KPMG billed us for services last year were for services other than audit, audit-related and tax compliance services.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Proposal 3 — Non-Binding Advisory Vote on Executive Compensation

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see Proposal 3 starting on page 79

    

We are asking our shareholders for advisory approval of our NEOs’ compensation. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote. Our executive compensation program is aligned with our business strategy and priorities and encourages executive officers to work for meaningful shareholder returns consistent with our pay-for-performance philosophy. Our executive compensation program focuses on total compensation, combining short- and long-term components, cash and equity, and fixed and variable payments, in the proportions that we believe are the most appropriate to incentivize and reward our executive officers for achieving our corporate goals while minimizing incentives for excessive risk taking or unethical conduct. Our annual bonus awards are not earned unless pre-determined levels of performance are achieved against annual corporate objectives approved by our board of directors at the beginning of the year. Likewise, our stock option awards will not provide realizable value and our restricted stock unit, or RSU, awards will not provide increased value unless there is an increase in the value of our shares, which benefits all shareholders. We also have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders. Our 2018 advisory say-on-pay proposal was approved by approximately 92% of total votes cast.

 

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Index of Frequently Requested Information

 

   

 Page

Anti-Hedging/Pledging Policy

  23

Auditor Fees

  77

Auditor Tenure

  77

Board Diversity

  22

Board Leadership

  15

Board Meeting Attendance

  16

Code of Conduct

  23

Compensation Consultant Fees

  21

Corporate Governance Guidelines

  23

Corporate Responsibility

  5

Director Biographies

  72

Director Commitments

  16

Director Independence

  15

Director Qualifications

  71

Environment, Health and Safety

  5

Human Capital Management

  4

Majority Voting for Directors

  71

Pay Ratio Disclosure

  65

Peer Group Companies

  34

Procedures for Shareholder Proposals and Director Nominations for the 2020 Annual Meeting

  81

Related Party Transactions

  70

Risk Oversight

  15

Severance Benefits

  62

Share Ownership Guidelines for Directors

  67

Share Ownership Guidelines for Executives

  50

Shareholder Ability to Call Extraordinary Meetings

  23

Shareholder Communications with the Board

  23

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

LOGO

PROXY STATEMENT

FOR THE 2019 ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST  1, 2019

GENERAL

Purpose of this Proxy Statement and Other General Information

Our board of directors is soliciting proxies for use at our 2019 annual general meeting of shareholders, or the annual meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the annual meeting. Please read it carefully. The Notice of Internet Availability of Proxy Materials and our proxy materials, which include this proxy statement, our annual letter to shareholders and our 2018 Annual Report on Form 10-K, are first being mailed to shareholders on or about June 18, 2019. Our proxy materials are also available online at https://materials.proxyvote.com/G50871. The specific proposals to be considered and acted upon at the annual meeting are summarized in the accompanying Notice of 2019 Annual General Meeting of Shareholders. Each proposal is described in more detail in this proxy statement.

This solicitation is made on behalf of our board of directors and all solicitation expenses, including costs of preparing, assembling and mailing proxy materials and notices, will be borne by us. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. In addition, we have retained Alliance Advisors, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $12,500, plus reimbursement of expenses.

Our board of directors has set the close of business on June 5, 2019 as the record date for the annual meeting. Shareholders of record who owned our ordinary shares on that date are entitled to vote at and attend the annual meeting. Each ordinary share is entitled to one vote. There were 56,635,552 of our ordinary shares outstanding and entitled to vote on the record date.

Basis of Presentation

In this proxy statement, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the company,” “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries, except when the context makes clear that the time period being referenced is prior to January 18, 2012, in which case such terms are references to Jazz Pharmaceuticals, Inc. and its consolidated subsidiaries. On January 18, 2012, the businesses of Jazz Pharmaceuticals, Inc. and Azur Pharma Public Limited Company, or Azur Pharma, were combined in a merger transaction, or the Azur Merger, in connection with which Azur Pharma was re-named Jazz Pharmaceuticals plc, and we became the parent company of and successor to Jazz Pharmaceuticals, Inc., with Jazz Pharmaceuticals, Inc. becoming our wholly owned subsidiary. In addition, on June 12, 2012, we completed our acquisition of EUSA Pharma Inc., which we refer to in this proxy statement as the EUSA Acquisition. In January 2014, we completed our acquisition of a controlling interest in Gentium S.r.l., or Gentium, which we refer to in this proxy statement as the Gentium Acquisition, and, in July 2016, we completed the acquisition of Celator Pharmaceuticals, Inc., which we refer to in this proxy statement as the Celator Acquisition.

 

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QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these materials?

Our board of directors is soliciting your proxy to vote at the annual meeting, including at any adjournments or postponements of the annual meeting. This proxy statement contains important information regarding the annual meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and voting procedures.

Why did I receive a notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?

We are pleased to take advantage of SEC rules that allow companies to furnish their proxy materials over the internet. Most of our shareholders will not receive paper copies of our proxy materials (unless requested), and will instead be sent a Notice of Internet Availability of Proxy Materials, or Notice. All shareholders receiving a Notice will have the ability to access the proxy materials on the website referred to in the Notice and to request a printed set of the proxy materials. Instructions on how to access the proxy materials via the internet or to request a printed set of the proxy materials may be found in the Notice.

Why did I receive a full set of proxy materials in the mail instead of a notice regarding the internet availability of proxy materials?

We are providing shareholders who have previously requested a printed set of our proxy materials with paper copies of our proxy materials instead of a Notice.

What is the annual report included in the proxy materials?

Under applicable U.S. securities laws, we are required to send an annual report to security holders along with this proxy statement. We intend to satisfy this annual report requirement by sending the 2018 Annual Report on Form 10-K together with this proxy statement.

How do I attend the annual meeting?

You are invited to attend the annual meeting to vote on the proposals described in this proxy statement. The annual meeting will be held on Thursday, August 1, 2019, at 10:30 a.m. local time at our corporate headquarters located at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland. For directions to attend the annual meeting in person, please contact our Investor Relations department at +353.1.634.7892 (Ireland) or +1.650.496.2800 (United States) or by email at investorinfo@jazzpharma.com. Information on how to vote in person at the annual meeting is discussed below. However, you do not need to attend the annual meeting to vote your shares.

Who can vote at the annual meeting?

Only shareholders of record at the close of business on June 5, 2019, the record date for the annual meeting, will be entitled to vote at the annual meeting.

Shareholders of Record: Shares registered in your name

If, at the close of business on June 5, 2019, your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A., then you are a shareholder of record. As a shareholder of record, you may vote in person at the annual meeting or vote by proxy. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy over the telephone or via the internet as instructed below, or, for those shareholders who receive a paper proxy card in the mail, by mailing a completed proxy card.

Beneficial Owners: Shares registered in the name of a broker, bank or other agent

If, at the close of business on June 5, 2019, your shares were held not in your name, but rather in an account at a brokerage firm, bank or other agent, then you are the beneficial owner of shares held in “street name” and a Notice is being sent to you by that broker, bank or other agent. The broker, bank or other agent holding your account is considered to be the shareholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker, bank or other agent regarding how to vote the shares in your account as set forth in the voting instructions in the Notice from your broker, bank or other agent. You are also invited to attend the annual meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the annual meeting unless you request and obtain a valid proxy from your broker, bank or other agent.

 

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Questions and Answers About These Proxy Materials and Voting (continued)

 

 

What am I voting on?

There are three matters scheduled for a vote at the annual meeting:

 

 

Election by separate resolutions of the four named nominees for director to hold office until the 2022 annual meeting of shareholders (Proposal 1).

 

 

Ratification, on a non-binding advisory basis, of the appointment of KPMG as the independent auditors of the company for the fiscal year ending December 31, 2019 and the authorization, in a binding vote, of the board of directors, acting through the audit committee, to determine the independent auditors’ remuneration (Proposal 2).

 

 

Approval, on a non-binding advisory basis, of the compensation of our NEOs as disclosed in this proxy statement (Proposal 3).

What are the board’s voting recommendations?

The board of directors recommends that you vote your shares “FOR” each of the director nominees named below to hold office until the 2022 annual meeting of shareholders, and “FOR” both of the other two proposals.

What if another matter is properly brought before the annual meeting?

The board of directors knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, it is the intention of the persons named in the accompanying proxy, referred to in this proxy statement as the “proxy holders,” to vote on those matters in accordance with their best judgment.

How do I vote?

For the election of directors (Proposal 1), you may vote “FOR” or “AGAINST” each nominee, or you may abstain from voting for all or any of the nominees. For each of the other two proposals, you may vote “FOR” or “AGAINST” or abstain from voting.

Shareholders of Record: Shares registered in your name

If you are a shareholder of record, you may vote in person at the annual meeting, you may vote by electronic proxy over the telephone or via the internet as instructed below, or, for those shareholders who receive a paper proxy card in the mail, by mailing a completed proxy card. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the annual meeting and vote in person even if you have already voted by proxy.

 

 

To vote in person, come to the annual meeting and we will give you a ballot when you arrive. Please bring your admission ticket or proof of ownership, as further discussed under “Do I need a ticket to attend the annual meeting?” below.

 

 

To vote using a proxy card, simply complete, sign and date the proxy card that was mailed to you and return it promptly in the envelope provided. Proxy cards must be received by July 31, 2019. If you return your signed proxy card before this time, we will forward it to the company’s registered office electronically in accordance with Irish law and we will vote your shares as you direct.

 

 

To vote by telephone, dial toll-free +1.800.690.6903 within the United States, U.S. territories and Canada using a touch-tone phone and follow the recorded instructions to submit an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., U.S. Eastern Time, on July 31, 2019 to be counted.

 

 

To vote via the internet, go to www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., U.S. Eastern Time, on July 31, 2019 to be counted.

Beneficial Owners: Shares registered in the name of a broker, bank or other agent

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a Notice or the full set of proxy materials containing voting instructions from that broker, bank or other agent rather than from us. Simply follow the voting instructions in the Notice or the full set of proxy materials to ensure that your vote is counted. Alternatively, you may vote by telephone or via the internet as instructed by your broker, bank or other agent. To vote in person at the annual meeting, you must request and obtain a valid proxy from your broker, bank, or other agent. Follow the voting instructions from your broker, bank or other agent, or contact your broker, bank or other agent to request a proxy form.

 

We provide internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

 

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Questions and Answers About These Proxy Materials and Voting (continued)

 

 

How many votes do I have?

On each matter to be voted upon, you have one vote for each ordinary share you owned as of the close of business on June 5, 2019.

If I am a shareholder of record and I do not vote, or if I return a proxy card or otherwise vote without giving specific voting instructions, what happens?

If you are a shareholder of record and you do not vote by completing your proxy card, vote by proxy via the internet or by telephone, or vote in person at the annual meeting, your shares will not be voted.

If you are a shareholder of record and you do not specify your vote on each proposal individually when voting by proxy via the internet or by telephone, or if you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the board of directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the annual meeting. The voting recommendations of the board of directors are set forth under “What are the boards voting recommendations?” above.

If I am a beneficial owner of shares held in street name and I do not provide my broker or bank with voting instructions, what happens?

If you are a beneficial owner of shares held in street name and you do not instruct your broker, bank or other agent how to vote your shares, your broker, bank or other agent may still be able to vote your shares in its discretion. In this regard, under the rules of the New York Stock Exchange (NYSE), brokers, banks and other securities intermediaries that are subject to NYSE rules may use their discretion to vote your “uninstructed” shares with respect to matters considered to be “routine” under NYSE rules, but not with respect to “non-routine” matters. In this regard, Proposals 1 and 3 are considered to be “non-routine” under NYSE rules meaning that your broker may not vote your shares on those proposals in the absence of your voting instructions. However, Proposal 2 is considered to be a “routine” matter under NYSE rules meaning that if you do not return voting instructions to your broker by its deadline, your shares may be voted by your broker in its discretion on Proposal 2.

If you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.

What does it mean if I receive more than one set of proxy materials, more than one Notice, or a combination thereof?

If you receive more than one set of proxy materials, more than one Notice, or a combination thereof, your shares may be registered in more than one name or are registered in different accounts. Please follow the voting instructions on each set of proxy materials or Notices to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the commencement of the annual meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

 

You may submit another properly completed proxy card with a later date.

 

 

You may grant a subsequent proxy by telephone or via the internet.

 

 

You may send a timely written notice that you are revoking your proxy to our Company Secretary at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

 

 

You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy.

 

 

Your most recent proxy card or telephone or internet proxy is the one that is counted.

If your shares are held by your broker, bank or other agent as a nominee or agent, you should follow the instructions provided by your broker, bank or other agent.

 

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Questions and Answers About These Proxy Materials and Voting (continued)

 

 

Do I need a ticket to attend the annual meeting?

Yes, you will need an admission ticket or proof of ownership of ordinary shares to enter the annual meeting. If you are a shareholder of record and you received a full set of proxy materials in the mail, your admission ticket is attached to the proxy card sent to you. If you plan to attend the annual meeting, please so indicate when you vote and bring the ticket and valid photo identification with you to the annual meeting. If you are a shareholder of record and you received a Notice in the mail, your admission ticket is your Notice. Please bring your Notice and valid photo identification with you to the annual meeting. If your shares are held in the name of a bank, broker or other holder of record, your admission ticket is on your voting instruction form. If you do not bring your admission ticket, you will need proof of ownership to be admitted to the annual meeting. A recent brokerage statement or letter from a bank or broker is an example of proof of ownership. If you arrive at the annual meeting without an admission ticket, we will admit you only if we are able to verify that you are a shareholder of our company. For directions to attend the annual meeting in person, please contact our Investor Relations department at +353.1.634.7892 (Ireland) or +1.650.496.2800 (United States) or by email at investorinfo@jazzpharma.com.

How are votes counted?

Votes will be counted by the inspector of elections appointed for the meeting. The inspector of elections will separately count, with respect to the proposal to elect directors (Proposal 1), votes “FOR,” “AGAINST,” abstentions and broker non-votes; and, with respect to the two other proposals, votes “FOR,” “AGAINST,” abstentions, and, as applicable, broker non-votes.

What are “broker non-votes”?

As discussed above, when a beneficial owner of shares held in street name does not give voting instructions to his or her broker, bank or other securities intermediary holding his or her shares as to how to vote on matters deemed to be “non-routine” under NYSE rules, the broker, bank or other such agent cannot vote the shares. These un-voted shares are counted as “broker non-votes.” Proposals 1 and 3 are considered to be “non-routine” under NYSE rules and we therefore expect broker non-votes in connection with those proposals.

As a reminder, if you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.

How many votes are needed to approve each proposal?

Assuming that a quorum is present at the annual meeting, the following votes will be required for approval:

 

Proposal

 

 

  

 

Vote Required for Approval

 

Proposal 1

   Each director nominee must receive the affirmative vote of a majority of the votes cast on his or her election to hold office until the 2022 annual meeting of shareholders.

Proposal 2

   Affirmative vote of a majority of the votes cast

Proposal 3

   Affirmative vote of a majority of the votes cast

What are the treatment and effect of abstentions and broker non-votes?

Abstentions and broker non-votes will be treated as shares present for purposes of determining the presence of a quorum for the transaction of business at the annual meeting. Abstentions and broker non-votes will not, however, be considered votes cast at the annual meeting. Because the approval of all of the proposals is based on the votes cast at the annual meeting, abstentions and, as applicable, broker non-votes will not have any effect on the outcome of voting on the proposals.

What is the quorum requirement?

A quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if shareholders holding a majority of the issued and outstanding ordinary shares entitled to vote as of the record date are present at the annual meeting or represented by proxy. On the record date, there were 56,635,552 ordinary shares outstanding and entitled to vote. Your shares will be counted towards the quorum only if you submit a valid proxy (or if one is submitted on your behalf by your broker, bank or other agent) or, provided that you are a shareholder of record, if you vote in person at the annual meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum within one hour of the time scheduled for the annual meeting, the annual meeting will stand adjourned to August 8, 2019 at 10:30 a.m. local time at the same location, or such other time or place as the board of directors may determine.

 

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Questions and Answers About These Proxy Materials and Voting (continued)

 

 

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. In addition, final voting results will be published in a quarterly report on Form 10-Q or a current report on Form 8-K that we expect to file with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 10-Q or a Form 8-K within four business days after the annual meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

What are the Irish statutory financial statements and where can I access them?

We are presenting for consideration our Irish statutory financial statements, and the respective reports of the directors and the auditors thereon, at the annual meeting. Since we are an Irish company, we are required to prepare Irish statutory financial statements under applicable Irish company law and to deliver those financial statements together with the respective reports of the directors and the auditors thereon to shareholders of record in connection with our annual meetings of shareholders. The Irish statutory financial statements cover the results of operations and financial position of Jazz Pharmaceuticals plc for the year ended December 31, 2018. The Irish statutory financial statements were prepared in accordance with the International Financial Reporting Standards as adopted by the European Union and as applied in accordance with the 2014 Act. There is no requirement under Irish law that the Irish statutory financial statements be approved by the shareholders, and no such approval will be sought at the annual meeting.

Our Irish statutory financial statements, and the respective reports of the directors and the auditors thereon, will be delivered to shareholders of record in accordance with our obligations under Irish law. We will mail without charge, upon written request, a copy of the Irish statutory financial statements, together with the respective reports of the directors and the auditors thereon, to beneficial “street name” owners of our shares. Requests should be sent to: Jazz Pharmaceuticals plc, Attention: Company Secretary, Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

What proxy materials are available on the internet?

This proxy statement, our letter to shareholders and the annual report are available at https://materials.proxyvote.com/G50871.

Who should I call if I have any questions?

If you require any assistance in voting your shares or have any other questions, please contact Alliance Advisors, our proxy solicitor, at +1.855.600.8108.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

CORPORATE GOVERNANCE AND BOARD MATTERS

Overview

We are committed to exercising good corporate governance practices. In furtherance of this commitment, we regularly monitor developments in the area of corporate governance and review our processes, policies and procedures in light of such developments. Key information regarding our corporate governance initiatives can be found on our website, www.jazzpharmaceuticals.com, including our Corporate Governance Guidelines, Code of Conduct, and the charters for our audit, compensation and nominating and corporate governance committees. We believe that our strong corporate governance policies and practices, including the substantial percentage of independent directors on our board of directors and the robust duties of our Lead Independent Director, empower our independent directors to effectively oversee our management—including the performance of our Chief Executive Officer—and provide an effective and appropriately balanced board governance structure. In addition, we believe that our directors are all actively and constructively engaged in the exercise of their duties and responsibilities, with each independent director, other than Ms. O’Riordan who recently joined our board in February 2019, serving on at least one board committee and engaging with management between board meetings to remain well-informed of our strategy and our business.

Independence of the Board of Directors

As required under the Nasdaq listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our board of directors consults with counsel to ensure that the board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in the applicable Nasdaq listing standards, as in effect from time to time. Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and our company, our senior management and our independent registered public accounting firm, the board of directors affirmatively determined that all of our current directors are independent directors within the meaning of the applicable Nasdaq listing standards, except that Bruce Cozadd, our Chairman and Chief Executive Officer, is not independent by virtue of his employment with our company. In addition, our board of directors has determined that each member of the audit committee, compensation committee and nominating and corporate governance committee meets the applicable Nasdaq and SEC rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the company. In determining that Seamus Mulligan is independent within the meaning of the applicable Nasdaq listing standards, the Board considered Mr. Mulligan’s former employment relationship with us, which ended more than six years ago.

Board Leadership Structure and Risk Oversight

Mr. Cozadd has served as our Chairman and Chief Executive Officer since the closing of the Azur Merger in January 2012. He co-founded Jazz Pharmaceuticals, Inc. in 2003 and served as its Chairman and Chief Executive Officer since April 2009 and, prior to that, as Executive Chairman.

The board of directors believes that the Chief Executive Officer is best suited to serve as our Chairman because he is the member of the board of directors who is most familiar with our business as a whole, and the most capable of identifying and bringing to the attention of the full board of directors the strategic priorities and key issues facing the company. The board of directors also believes that having Mr. Cozadd in particular in a combined Chairman/Chief Executive Officer role helps provide strong, unified leadership for our management team and optimizes communication with our board of directors. In addition, having previously served for many years as a director of other publicly-traded and privately-held companies, as well as in executive management roles, Mr. Cozadd brings both a strategic and operational perspective to this combined position.

To counterbalance concerns regarding our board’s decision to have a combined Chairman and Chief Executive Officer, our Corporate Governance Guidelines require that the independent directors elect a Lead Independent Director when the roles of Chairman and Chief Executive Officer are held by the same person. Since 2014, Rick Winningham has served as our Lead Independent Director. A critical function of the Lead Independent Director is to help to ensure the effective independent functioning of the board of directors in its oversight responsibilities and to provide an appropriate balance in the company’s leadership.

Specific roles and responsibilities of the Lead Independent Director, which are detailed in our Corporate Governance Guidelines, include:

 

 

serving as the principal liaison between the independent directors and the Chairman;

 

 

coordinating the activities of the independent directors, including developing agendas for and presiding at executive sessions of the independent directors;

 

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Corporate Governance and Board Matters (continued)

 

 

 

advising the Chairman on board and committee agendas, meeting schedules and information provided to other board members, including the quality, quantity and timeliness of such information that is necessary or appropriate for the directors to effectively and responsibly perform their duties;

 

 

discussing the results of the Chief Executive Officer’s performance evaluation with the chairperson of the compensation committee; and

 

 

presiding at all meetings of the board of directors at which the Chairman is not present.

The Lead Independent Director also has the authority to call meetings of the independent directors of the board of directors and is available for consultation and communication with significant shareholders. In addition to fulfilling the basic requirements of his role as Lead Independent Director, Mr. Winningham attends meetings of committees where he is not a member to remain informed and engaged, communicates with the Chief Executive Officer on matters involving the company on a regular basis, regularly seeks input from other independent directors relating to significant developments at the company between regular board meetings, attends certain meetings at the company involving strategic portfolio and/or scientific reviews, and makes himself available for direct communication with significant shareholders as necessary.

In addition, our board of directors is currently comprised of 12 directors, of whom 11 are independent. At meetings of our board of directors, the independent directors regularly convene executive sessions without the presence of our Chairman and Chief Executive Officer and other members of management.

We believe that our directors provide effective oversight of risk management for our company (including financial, operational, business, intellectual property, information technology (including cybersecurity), reputational and governance risks), particularly as a result of the work of our committees and the ongoing dialogue between the full board, our Chairman and Chief Executive Officer and our active and engaged Lead Independent Director. Our audit committee is responsible for overseeing our financial reporting process on behalf of our board of directors and reviewing with management and our auditors, as appropriate, our major financial risk exposures and the steps taken by management to monitor and control these exposures. In 2018, our board of directors formalized our audit committee’s role in oversight of risks related to information security, including cybersecurity. In its oversight role, the audit committee receives quarterly updates on information security developments, cybersecurity incidents and the steps taken by management to monitor and mitigate risk exposures in these areas. Our compensation committee approves compensation of executive officers and all material compensation plans for our company and reviews our compensation practices to ensure that they do not encourage excessive risk taking and provide appropriate incentives for meeting both short-term and long-term objectives and increasing shareholder value over time. Our compensation committee also works with our full board of directors to oversee matters related to human capital management, which includes reviewing workforce trends, executive succession plans and talent risk and maintaining compensation objectives and corporate policies that appropriately incentivize creating and maintaining a positive workplace and corporate culture. Our nominating and corporate governance committee oversees the company’s risk management, other than with respect to the company’s major financial risk exposures or risks related to our compensation programs and policies, on behalf of our board of directors. At its meetings, our full board of directors receives reports concerning the management of the relevant risks from each committee, in addition to reports concerning material risks and concerns or significant updates on such matters from our General Counsel and other executive officers, as necessary.

Meetings of the Board of Directors

The board of directors met five times during 2018 and did not act by written consent during the year. All directors attended at least 75% of the aggregate number of meetings of the board of directors and of the committees on which they served that were held during 2018. As required under applicable Nasdaq listing standards, in 2018, the independent directors generally met at each regular board meeting in scheduled executive sessions at which only independent directors were present.

Director Commitments

Our board of directors believes that all members of the board should have sufficient time and attention to devote to board duties and to otherwise fulfill the responsibilities required of directors. In assessing whether directors and nominees for director have sufficient time and attention to devote to board duties, the nominating and corporate governance committee and our board of directors consider, among other things, whether directors may be “overboarded,” which refers to the situation where a director serves on an excessive number of boards. Our Corporate Governance Guidelines also require that directors seek approval from the Chairman, the Lead Independent Director and the chairperson of the nominating and corporate governance committee prior to accepting an invitation to serve on any additional corporate boards.

Our board of directors believes that each of our directors, including each of our director nominees, has demonstrated the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of directors. However, we understand that certain institutional investors and proxy advisory firms may deem Dr. Riedel overboarded based on the number of public company boards

 

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Corporate Governance and Board Matters (continued)

 

 

on which he serves. In addition to our board of directors, Dr. Riedel serves on the boards of directors of two other public companies: Eton Pharmaceuticals, Inc., or Eton, and Aptinyx Inc., or Aptinyx, where he also serves as Chief Executive Officer and President.

Our board of directors does not believe that Dr. Riedel’s outside boards or other commitments limit his ability to devote sufficient time and attention to his duties as a director of Jazz Pharmaceuticals. Our board of directors believes that Dr. Riedel has demonstrated, and will continue to demonstrate, his ability to dedicate sufficient time to carry out his board duties effectively and believes that it is in the company’s best interest that he continue to serve as a director for the following reasons:

 

 

Dr. Riedel has served tirelessly on our board for over six years and has assured our board of directors that he is fully committed to continuing to dedicate the appropriate amount of time to fulfill his duties as a member of the board and compensation committee.

 

 

Dr. Riedel is consistently prepared and has exemplary participation at meetings of the board and compensation committee, as demonstrated by his insightful questions and comments, and he contributes significantly to discussions and decision making. He is also appropriately engaged with management and the other members of the board outside of meetings of the board and compensation committee including attending certain meetings at the company involving strategic portfolio, scientific and similar reviews.

 

 

Dr. Riedel’s attendance record demonstrates his commitment to our board, participating in 100% of board meetings and 100% of compensation committee meetings for the past three years.

 

 

Dr. Riedel’s experience in senior management positions in the pharmaceutical industry provides significant industry knowledge and operational and management expertise to our board of directors. His experience on the boards of directors of other public companies will benefit us by providing him with insight and experience that enhances his value to our board of directors.

 

 

Each of Eton and Aptinyx is a clinical-stage pharmaceutical company headquartered in Illinois, where Dr. Riedel resides. Dr. Riedel has attended 100% of the board meetings of Aptinyx since 2015. He has also attended 100% of the board and committee meetings of Eton since he joined the board in 2017. Limited travel is required to attend Eton and Aptinyx board meetings and the travel required to attend our board meetings has not hindered Dr. Riedel’s ability to be present and involved as a member of our board of directors. In addition, Eton and Aptinyx completed initial public offerings in 2018 and each is a smaller reporting company within the meaning of applicable SEC rules. As reported in their respective annual reports on Form 10-K for the year ended December 31, 2018, Eton and Aptinyx had 15 and 63 full-time employees, respectively, as of the dates specified therein.

 

 

Dr. Riedel has served as the CEO of Aptinyx, or its predecessor company, since 2014 and as a member of the board of directors of Eton since 2017. Dr. Riedel has assured our board that his ongoing commitments to Aptinyx and Eton are not expected to exceed the demands that existed in past years and the fact that both companies transitioned from private to public companies in 2018 will not detract from his service on our board going forward.

Information About Board Committees

The standing committees of the board of directors include an audit committee, a compensation committee and a nominating and corporate governance committee. Each of these committees is comprised solely of independent directors, has a chairperson and has a written charter approved by the board of directors reflecting applicable standards and requirements adopted by the SEC and Nasdaq. A copy of each committee charter can be found on our website, www.jazzpharmaceuticals.com, in the section titled “About” under the subsection titled “Board of Directors.”

The following table provides membership information for 2018 for each of the audit, compensation, and nominating and corporate governance committees of our board of directors:

 

 Name      Audit      Compensation     

Nominating and Corporate 

Governance

 

 Paul L. Berns

          M     

 

 Patrick G. Enright

     M      M     

 

 Peter Gray

     C          

 

 Heather Ann McSharry

     M           C

 

 Kenneth W. O’Keefe

     M          

 

 Norbert G. Riedel, Ph.D.

          C     

 

 Elmar Schnee

               M

 

 Catherine A. Sohn, Pharm.D.

          M      M

 

 Rick E Winningham

                   M

C = committee chairperson; M = committee member

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Corporate Governance and Board Matters (continued)

 

 

Audit Committee

The audit committee of the board of directors oversees our corporate accounting and financial reporting processes, our systems of internal control over financial reporting and audits of our financial statements, the quality and integrity of our financial statements and reports, the qualifications, independence and performance of the auditors engaged as our independent registered public accounting firm for purposes of preparing or issuing an audit report or performing audit services and certain enterprise risk issues. Specific responsibilities of the audit committee include:

 

 

evaluating the performance of and assessing the qualifications of the independent auditors;

 

 

determining and approving the engagement and remuneration of the independent auditors;

 

 

determining whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors;

 

 

determining and approving the engagement of the independent auditors to perform any proposed permissible non-audit services;

 

 

monitoring the rotation of partners of the independent auditors on our audit engagement team as required by applicable laws and rules;

 

 

reviewing and advising on the selection and removal of the head of our internal audit function, the activities and organizational structure of the internal audit function and the results of internal audit activities;

 

 

reviewing and approving the internal audit charter at least annually and the annual internal audit plan and budget;

 

 

meeting to review our annual audited financial statements, our quarterly financial statements and our financial press releases with management and the independent auditors, including reviewing our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual and quarterly reports filed with the SEC;

 

 

reviewing, overseeing and approving transactions between our company and any related persons;

 

 

conferring with management, the internal audit function and the independent auditors regarding the scope, adequacy and effectiveness of our internal control over financial reporting;

 

 

reviewing with management, the internal audit function and the independent auditors, as appropriate, major financial risk exposures, including reviewing, evaluating and approving our hedging and other financial risk management policies, as well as the steps taken by management to monitor and control these exposures;

 

 

establishing procedures, when and as required under applicable laws and rules, for the receipt, retention and treatment of any complaints received by our company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and

 

 

reviewing with management our information security (including cybersecurity) risk exposures and the steps taken by management to monitor and mitigate these exposures.

The audit committee was during all of 2018 and is currently composed of four directors: Mr. Enright, Mr. Gray, Ms. McSharry and Mr. O’Keefe. Mr. Gray serves as chairperson of the audit committee. Our board of directors has determined that each of Mr. Enright, Mr. Gray, Ms. McSharry and Mr. O’Keefe meets the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Nasdaq listing standards with respect to audit committee members. Our board of directors has also determined that each of Mr. Enright, Mr. Gray, Ms. McSharry and Mr. O’Keefe is an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K of the Exchange Act. In making this determination, our board of directors considered the overall knowledge, experience and familiarity of each of Mr. Enright, Mr. Gray, Ms. McSharry and Mr. O’Keefe with accounting matters and in analyzing and evaluating financial statements, and, in the case of Mr. O’Keefe, managing private equity investments, and, in the case of Mr. Enright, managing venture capital investments.

The audit committee met four times during 2018 and did not act by written consent during the year. The audit committee also had a number of informal discussions and consultations with one another, with our Chief Financial Officer, Principal Accounting Officer and our Head of Internal Audit and with Mr. Cozadd during 2018.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Corporate Governance and Board Matters (continued)

 

 

Report of the Audit Committee of the Board of Directors(1)

The audit committee has reviewed and discussed the company’s audited financial statements for the fiscal year ended December 31, 2018 with management of the company. The audit committee has discussed with KPMG, the independent registered public accounting firm that audited the company’s financial statements for the fiscal year ended December 31, 2018, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or PCAOB, and the SEC. The audit committee has also received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence, and has discussed with KPMG that firm’s independence. Based on the foregoing, the audit committee recommended to the board of directors that the audited financial statements be included in the 2018 Annual Report on Form 10-K filed with the SEC.

Respectfully submitted,

The Audit Committee of the Board of Directors

Mr. Peter Gray (Chairperson)

Mr. Patrick Enright

Ms. Heather Ann McSharry

Mr. Kenneth W. O’Keefe

 

 

(1)

The material under the heading “Report of the Audit Committee of the Board of Directors” in this proxy statement is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

The compensation committee of the board of directors reviews and oversees our compensation policies, plans and programs and reviews and generally determines the compensation to be paid to the executive officers and directors, and prepares and reviews the compensation committee report included in our annual proxy statement. Specific responsibilities and authority of our compensation committee include:

 

 

reviewing, modifying (as needed) and approving overall compensation strategy and policies;

 

 

recommending to our board of directors for determination and approval the compensation and other terms of employment of our Chief Executive Officer and evaluating our Chief Executive Officer’s performance in light of relevant goals and objectives;

 

 

reviewing and approving the goals and objectives of our other executive officers and determining and approving the compensation and other terms of employment of these executive officers, as appropriate;

 

 

reviewing and recommending to our board of directors the type and amount of compensation to be paid or awarded to the members of our board of directors;

 

 

having the full power and authority of our board of directors regarding the adoption, amendment and termination of our compensation plans and programs and administering these plans and programs;

 

 

having direct responsibility for appointing, and providing compensation and oversight of the work of, any compensation consultants and other advisors retained by the compensation committee and considering the independence of each such advisor;

 

 

reviewing our practices and policies of employee compensation as they relate to risk management and risk-taking incentives, to determine whether such compensation policies and practices are reasonably likely to have a material adverse effect on our company;

 

 

periodically reviewing with our Chief Executive Officer the plans for succession to the offices of our executive officers and making recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; and

 

 

reviewing and discussing with management our disclosures contained under the caption “Compensation Discussion and Analysis” in our annual proxy statement.

 

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Corporate Governance and Board Matters (continued)

 

 

The compensation committee was during all of 2018 and is currently composed of four directors: Mr. Berns, Mr. Enright, Dr. Riedel and Dr. Sohn. Dr. Riedel currently serves as the chairperson of the compensation committee. Each member of the compensation committee meets the independence requirements of the Nasdaq listing standards with respect to compensation committee members. In determining whether Mr. Berns, Mr. Enright, Dr. Riedel and Dr. Sohn are independent within the meaning of the Nasdaq listing standards pertaining to compensation committee membership, our board of directors determined, based on its consideration of factors specifically relevant to determining whether any such director has a relationship to us that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, that no member of the compensation committee has a relationship that would impair that member’s ability to make independent judgments about compensation of our executive officers.

The compensation committee held six meetings during 2018 and did not act by written consent during the year. The compensation committee also had a number of informal discussions and consultations with one another and with Mr. Cozadd.

Compensation Committee Processes and Procedures

Our compensation committee meets as often as it determines necessary to carry out its duties and responsibilities through regularly scheduled meetings and, if necessary, special meetings. The agenda for each compensation committee meeting is usually developed by members of our human resources department and our Chief Executive Officer, with input from members of our legal department, and is reviewed and finalized with the chairperson of the compensation committee. Members of our human resources and legal departments also attend compensation committee meetings. From time to time, various other members of management and other employees as well as outside advisors or consultants may be invited by the compensation committee to make presentations, provide financial or other background information or advice or otherwise participate in the compensation committee meetings.

In making executive compensation determinations (other than for our Chief Executive Officer), the compensation committee considers recommendations from our Chief Executive Officer. In making his recommendations, our Chief Executive Officer receives input from our human resources department and from the individuals who manage or report directly to the other executive officers, and he reviews various third party compensation surveys and compensation data provided by the independent compensation consultant to the compensation committee, as described in the section of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis.” While our Chief Executive Officer discusses his recommendations for the other executive officers with the compensation committee, he does not participate in the deliberations and recommendations to our board of directors concerning, or our board of directors’ determination of, his own compensation. The charter of the compensation committee grants the compensation committee full access to all books, records, facilities and personnel of the company, as well as authority to obtain, at our expense, advice and assistance from compensation consultants and internal and external legal, accounting or other advisors and consultants and other external resources that the compensation committee considers necessary or appropriate in the performance of its duties. In particular, the compensation committee has the authority, in its sole discretion, to retain or obtain, at the expense of the company, compensation consultants to assist in its evaluation of executive compensation, and is directly responsible for the appointment, compensation and oversight of the work of its compensation consultants. The compensation committee engages an independent compensation consultant each year to provide a competitive compensation assessment with respect to the executive officers to assist the compensation committee in making annual compensation decisions. Since 2010, Radford, a business area within Aon plc, or Aon, has been engaged by the compensation committee each year to provide peer company and industry compensation data and provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regarding non-employee director compensation.

The charter of the compensation committee provides that the compensation committee may delegate any responsibility or authority of the compensation committee under its charter to the chairperson of the committee or to one or more committee members, including subcommittees, except to the extent inconsistent with any applicable laws and rules, including the Nasdaq listing standards. Our compensation committee does not, however, delegate any of its functions to others in determining or recommending executive or director compensation.

For additional information regarding our processes and procedures for the consideration and determination of executive compensation, including the role of Radford in determining and recommending executive compensation, see the section of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis.” With respect to director compensation matters, our compensation committee recommends to our board of directors and our board of directors determines and sets non-employee director compensation. Our compensation arrangements for our non-employee directors are described under the section of this proxy statement entitled “Director Compensation.

 

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Corporate Governance and Board Matters (continued)

 

 

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee during 2018 was at any time our officer or employee. None of our executive officers serve, or in the past fiscal year served, as a member of the board of directors or the compensation committee of any entity that has one or more of its executive officers serving on our board of directors or compensation committee.

Compensation Consultant Fees

As described above, since 2010, Radford has been engaged by the compensation committee each year to provide peer company and industry compensation data and provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regarding non-employee director compensation. In 2018, the cost of Radford’s executive compensation and director compensation consulting services provided to the compensation committee was approximately $204,000. In addition, in 2018 management also engaged Radford to provide survey data relating to non-executive employee compensation and other affiliates of Aon to provide director and officer liability insurance-related services, pension-related services, other insurance brokerage services and risk services. The aggregate cost of such other consulting services provided in 2018 by Radford and other affiliates of Aon (not related to Radford’s executive compensation and director compensation consulting services provided to the compensation committee) was approximately $97,000, of which approximately $86,000 related to various insurance-related and benefits consulting services and approximately $11,000 related to general survey data. Although the compensation committee was aware of the nature of the services performed by affiliates of Aon and the non-executive employee compensation survey data provided by Radford, the compensation committee did not review and approve such services and surveys, as those were reviewed and approved by management in the ordinary course of business.

Compensation Committee Report(1)

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis contained herein. Based on this review and discussion, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in our proxy statement for the 2019 annual meeting of shareholders and be included in the Annual Report on Form 10-K we filed with the SEC for the fiscal year ended December 31, 2018.

Respectfully submitted,

The Compensation Committee of the Board of Directors

Dr. Norbert G. Riedel, Ph.D. (Chairperson)

Mr. Paul L. Berns

Mr. Patrick G. Enright

Dr. Catherine A. Sohn, Pharm.D.

 

(1) 

The material under the heading “Compensation Committee Report” in this proxy statement is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee of our board of directors is responsible for, among other things:

 

 

overseeing all aspects of our corporate governance functions on behalf of our board of directors;

 

 

making recommendations to our board of directors regarding corporate governance issues;

 

 

identifying, reviewing and evaluating candidates to serve on our board of directors, and reviewing and evaluating incumbent directors;

 

 

reviewing, evaluating and considering the recommendation for nomination of incumbent members for reelection to our board of directors and monitoring the size of our board;

 

 

recommending director candidates to our board of directors;

 

 

overseeing on behalf of our board of directors the company’s compliance with applicable laws and regulations, other than the financial compliance issues overseen by the audit committee;

 

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Corporate Governance and Board Matters (continued)

 

 

 

overseeing on behalf of our board of directors the company’s risk management matters, other than with respect to risks that are financial or information security risks (as to which the audit committee has oversight responsibility on behalf of our board of directors) or risks related to compensation policies (as to which the compensation committee has oversight responsibility on behalf of our board of directors);

 

 

evaluating director nominations and proposals by our shareholders and establishing policies, requirements, criteria and procedures in furtherance of the foregoing; and

 

 

reviewing, discussing and assessing the performance of our board of directors, including committees of our board of directors, seeking input from all board members, senior management and others.

The nominating and corporate governance committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age, and the highest personal integrity and ethics. The nominating and corporate governance committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to our affairs, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our shareholders. However, the nominating and corporate governance committee retains the right to modify these qualifications from time to time. Members of the nominating and corporate governance committee obtain recommendations for potential directors from their and other board members’ contacts in our industry, and we or the nominating and corporate governance committee have in the past and may from time to time again in the future engage a search firm to assist in identifying potential directors.

Candidates for director nominees are reviewed in the context of the then current composition of the board of directors, the operating requirements of the company and the long-term interests of shareholders. In this regard, we examine the experience and expertise of our board as a whole to ensure alignment between the abilities and contributions of our board and our strategic priorities and long-range plan, emphasizing, among other things, expertise in global and U.S. sales and marketing, in product development, in financial management and in corporate development transactions. In addition, while we do not have specific numerical targets with respect to board diversity, the nominating and corporate governance committee’s policy is to take into account a broad range of considerations when assessing director candidates, including individual backgrounds, gender, skill sets, professional experience, geographic residency and other factors. The nominating and corporate governance committee assesses the effectiveness of its diversity policy through its periodic evaluation of the composition of the full board of directors. Recently, in recruiting and nominating candidates for our board of directors, our nominating and corporate governance committee has focused on increasing diversity overall, including with respect to gender and geographic residency.

Our board of directors has three female directors and five European directors, four of whom are Irish. The most recent member of our board of directors, Ms. O’Riordan, is Irish and resides in Hong Kong. In addition to her other qualifications, the board of directors considered diversity in its election of Ms. O’Riordan, including the value of adding additional gender and geographic residency diversity to our board of directors. In the case of incumbent directors whose terms of office are set to expire, the nominating and corporate governance committee reviews these directors’ overall service to the company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence, as well as the results of the board of directors’ self-evaluation, which is generally conducted annually, to determine whether to recommend them to the board of directors for nomination for a new term. In the case of new director candidates, the nominating and corporate governance committee also determines whether the nominee is “independent” based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The nominating and corporate governance committee conducts appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the board of directors. The nominating and corporate governance committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the board of directors.

The nominating and corporate governance committee will consider director candidates recommended by shareholders on a case-by-case basis, as appropriate. Shareholders wishing to recommend individuals for consideration by the nominating and corporate governance committee may do so by delivering a written recommendation to our Company Secretary at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland with the candidate’s name, biographical data and qualifications and a document indicating the candidate’s willingness to serve if elected. The nominating and corporate governance committee does not intend to alter the manner in which it evaluates candidates based on whether the candidate was recommended by a shareholder or not.

To date, the nominating and corporate governance committee has not received any such nominations nor has it rejected a director nominee from a shareholder or shareholders.

 

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Corporate Governance and Board Matters (continued)

 

 

Our nominating and corporate governance committee was during all of 2018 and is currently composed of four directors: Ms. McSharry, Mr. Schnee, Dr. Sohn and Mr. Winningham. Ms. McSharry serves as chairperson of the nominating and corporate governance committee. Each member of the nominating and corporate governance committee meets the independence requirements of the Nasdaq listing standards.

The nominating and corporate governance committee met four times during 2018 and did not act by written consent during the year.

Other Corporate Governance Matters

Corporate Governance Guidelines.  As a part of our board of directors’ commitment to enhancing shareholder value over the long term, our board of directors has adopted a set of Corporate Governance Guidelines to provide the framework for the governance of our company and to assist our board of directors in the exercise of its responsibilities. Our Corporate Governance Guidelines cover, among other topics, board composition, structure and functioning, director qualifications and board membership criteria, director independence, board and board committee annual self-evaluations, committees of the board, board access to management and outside advisors, board share ownership guidelines, and director orientation and education. Our Corporation Governance Guidelines are available on our website at www.jazzpharmaceuticals.com under the section entitled “About” under “Board of Directors.”

Anti-Hedging/Pledging Policy.  Our insider trading policy prohibits directors, executive officers and other employees from engaging in speculative trading activities, including hedging transactions or other inherently speculative transactions with respect to our securities. Our insider trading policy also prohibits directors, executive officers and other employees from pledging our securities as collateral for any loans.

Share Ownership Guidelines for Directors and Executive Officers.  We maintain and periodically review share ownership guidelines for our non-employee directors, Chief Executive Officer and certain other employees who serve on our executive committee. More information about our share ownership guidelines (including the increased thresholds adopted in May 2018) can be found under the sections of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis—Additional Compensation Information—Ownership Guidelines for Executive Officers” and “Director Compensation—Ownership Guidelines for Directors.”

Shareholder Ability to Call Extraordinary Meetings.  Irish law provides that shareholders holding 10% or more of the total voting rights may at any time request that the directors call an extraordinary general meeting (i.e., special meeting). The shareholders who wish to request an extraordinary general meeting must deliver to our principal executive office a written notice, signed by the shareholders requesting the meeting and stating the purposes of the meeting. If the directors do not, within 21 days of the date of delivery of the request, proceed to convene a meeting to be held within two months of that date, those shareholders (or any of them representing more than half of the total voting rights of all of them) may themselves convene a meeting within a specified period, but any meeting so convened cannot be held after the expiration of three months from the date of delivery of the request.

Code of Conduct.  Our Code of Conduct applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and those of our subsidiaries. The Code of Conduct is available on our website at www.jazzpharmaceuticals.com under the section entitled “About” under “Corporate Ethics.” We intend to satisfy the disclosure requirements under Item 5.05 of SEC Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Conduct by posting such information on our website at the website address and location specified above.

Shareholder Communications with the Board of Directors.  Our board of directors believes that shareholders should have an opportunity to communicate with the board, and efforts have been made to ensure that the views of shareholders are heard by the board of directors or individual directors, as applicable, and that appropriate responses are provided to shareholders in a timely manner. We believe that our responsiveness to shareholder communications to the board of directors has been excellent. Shareholders interested in communicating with the board of directors or a particular director (including our Chairman or our Lead Independent Director) may do so by sending written communication to: Jazz Pharmaceuticals plc, Attention: Company Secretary, Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland. Each communication should set forth the name and address of the shareholder as it appears on our records (and, if the shares are held by a nominee, the name and address of the beneficial owner of the shares), and the number of our ordinary shares that are owned of record by the record holder or beneficially by the beneficial owner, as applicable. The Company Secretary will, in his or her discretion, screen out communications from shareholders that are not related to the duties and responsibilities of the board of directors. The purpose of this screening is to allow the board of directors to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications). If deemed an appropriate communication, the Company Secretary will forward the communication, depending on the subject matter, to the Chairman, the Lead Independent Director or the chairperson of the appropriate committee of the board of directors.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our ordinary shares as of May 13, 2019 (except as noted) by: (i) each director; (ii) each of the executive officers named in the Summary Compensation Table under “Executive Compensation” below (referred to throughout this proxy statement as our NEOs); (iii) all of our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our ordinary shares.

 

     Beneficial Ownership(2)
 Name and Address of Beneficial Owner(1)   Number of Shares     

Percentage of    

Total    

 

 5% Shareholders:

    

 

 The Vanguard Group(3)

    5,044,866      8.9%

 100 Vanguard Blvd.

    

 Malvern, PA 19355

    

 

 FMR LLC(4)

    4,734,301      8.4%

 245 Summer Street

    

 Boston, MA 02210

    

 Putnam Investments, LLC(5)

    3,144,814      5.6%

 100 Federal Street

    

 Boston, MA 02109

    

 Named Executive Officers and Directors:

    

 

 Bruce C. Cozadd(6)

 

 

 

 

667,212

 

 

  

 

1.2%

 

 Daniel N. Swisher, Jr.(7)

 

 

 

 

19,887

 

 

  

 

*

 

 Matthew P. Young(8)

 

 

 

 

111,565

 

 

  

 

*

 

 Suzanne Sawochka Hooper(9)

 

 

 

 

163,179

 

 

  

 

*

 

 Michael P. Miller(10)

 

 

 

 

74,829

 

 

  

 

*

 

 Paul L. Berns(11)

 

 

 

 

35,936

 

 

  

 

*

 

 Patrick G. Enright(12)

 

 

 

 

31,741

 

 

  

 

*

 

 Peter Gray(13)

 

 

 

 

31,655

 

 

  

 

*

 

 Heather Ann McSharry(14)

 

 

 

 

30,977

 

 

  

 

*

 

 Seamus Mulligan(15)

 

 

 

 

1,125,341

 

 

  

 

2.0%

 

 Kenneth W. O’Keefe(16)

 

 

 

 

57,867

 

 

  

 

*

 

 Anne O‘Riordan

 

 

 

 

 

 

  

 

*

 

 Norbert G. Riedel, Ph.D.(17)

 

 

 

 

29,964

 

 

  

 

*

 

 Elmar Schnee(18)

 

 

 

 

23,267

 

 

  

 

*

 

 Catherine A. Sohn, Pharm.D.(19)

 

 

 

 

35,627

 

 

  

 

*

 

 Rick E Winningham(20)

 

 

 

 

18,703

 

 

  

 

*

 

 All directors and executive officers as a group (18 persons)(21)

 

 

 

 

2,449,346

 

 

  

 

4.3%

 

*

Less than 1%.

 

(1)

Unless otherwise provided in the table above or in the notes below, the address for each of the beneficial owners listed is c/o Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

 

(2)

This table is based upon information supplied by officers and directors as well as Schedules 13G or 13D filed with the SEC by beneficial owners of more than five percent of our ordinary shares. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole voting and investment power with respect to the ordinary shares indicated as beneficially owned. Applicable percentages are based on 56,584,756 ordinary shares outstanding on May 13, 2019, adjusted as required by rules promulgated by the SEC. The number of shares beneficially owned includes ordinary shares issuable pursuant to the exercise of stock options that are exercisable and RSUs that will vest within 60 days of May 13, 2019, and shares credited to individual non-employee director phantom stock accounts under our Directors Deferred Plan as of May 13, 2019. Amounts credited to individual non-employee director phantom stock accounts under our Directors Deferred Plan are payable solely in our ordinary shares, but such shares do not have current voting or investment power. Shares issuable pursuant to the exercise of stock options that are exercisable and RSUs that will vest within 60 days of May 13, 2019 and shares issuable pursuant to our Directors Deferred Plan are deemed to be outstanding and beneficially owned by the person to whom such shares are issuable for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

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Security Ownership of Certain Beneficial Owners and Management (continued)

 

 

(3)

This information is based on a Schedule 13G/A filed with the SEC on February 13, 2019 by The Vanguard Group, or Vanguard. According to the Schedule 13G/A, as of December 31, 2018, Vanguard has sole power to vote or direct the vote of 46,284 ordinary shares, shared power to vote or direct the vote of 11,962 ordinary shares, sole power to dispose or direct the disposition of 4,988,277 ordinary shares, and shared power to dispose or direct the disposition of 56,589 shares. The Schedule 13G/A also indicates that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 26,521 ordinary shares as a result of its serving as investment manager of collective trust accounts, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 49,229 ordinary shares as a result of its serving as investment manager of Australian investment offerings. The Schedule 13G/A provides information only as of December 31, 2018 and, consequently, the beneficial ownership of the above-mentioned entities may have changed between December 31, 2018 and May 13, 2019.

 

(4)

This information is based on a Schedule 13G/A filed with the SEC on February 13, 2019 by FMR LLC, or FMR, and Abigail P. Johnson. According to the Schedule 13G/A, as of December 31, 2018, FMR has sole power to vote or direct the vote of 301,552 ordinary shares and the sole power to dispose or direct the disposition of 4,734,301 ordinary shares, and Ms. Johnson has the sole power to dispose or direct the disposition of 4,734,301 ordinary shares. The Schedule 13G/A indicates that FMR is acting as a parent holding company or control person for a number of its relevant entities that beneficially owned the ordinary shares being reported, including FMR Co., Inc., an investment adviser reported as beneficially owning 5% or greater of our ordinary shares. In addition, Ms. Johnson is a Director, the Chairman, and the Chief Executive Officer of FMR. Ms. Johnson and members of her family are the predominant owners, directly or through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, or Investment Company Act, to form a controlling group with respect to FMR. Neither FMR nor Ms. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act, or the Fidelity Funds, advised by Fidelity Management & Research Company, or FMRC, a wholly owned subsidiary of FMR, which power resides with the Fidelity Funds’ Boards of Trustees. FMRC carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The Schedule 13G/A provides information only as of December 31, 2018 and, consequently, the beneficial ownership of the above-mentioned persons and entities may have changed between December 31, 2018 and May 13, 2019.

 

(5)

This information is based on a Schedule 13G/A filed with the SEC on February 14, 2019 by Putnam Investments, LLC d/b/a Putnam Investments, or Putnam, on behalf of itself and on behalf of Putnam Investment Management, LLC, or PIM and The Putnam Advisory Company, LLC, or PAC. According to the Schedule 13G/A, as of December 31, 2018, Putnam has sole power to vote or direct the vote of 47,733 ordinary shares and sole power to dispose or the direct the disposition of 3,144,814 ordinary shares. Of these shares, PIM, a wholly-owned subsidiary of Putnam, is the beneficial owner of 3,099,419 ordinary shares, with sole power to vote or direct the vote of 4,661 ordinary shares and sole power to dispose or direct the disposition of 3,099,419 ordinary shares in its capacity as investment adviser to the Putnam family of mutual funds; and PAC, a wholly owned subsidiary of Putnam, is the beneficial owner of 45,395 ordinary shares, with sole power to vote or direct the vote of 43,072 ordinary shares and sole power to dispose or direct the disposition of 45,395 ordinary shares in its capacity as investment adviser to Putnam’s institutional clients. The Schedule 13G/A provides information only as of December 31, 2018 and, consequently, the beneficial ownership of the above-mentioned entities may have changed between December 31, 2018 and May 13, 2019.

 

(6)

Includes 457,297 ordinary shares Mr. Cozadd has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(7)

Includes 16,876 ordinary shares Mr. Swisher has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(8)

Includes 101,665 ordinary shares Mr. Young has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(9)

Includes 140,145 ordinary shares Ms. Hooper has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019. Ms. Hooper resigned from her position as Executive Vice President and General Counsel as of March 1, 2019 and is expected to continue as a part-time, non-executive employee until September 30, 2019.

 

(10)

Includes 63,957 ordinary shares Mr. Miller has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019 and 250 shares Mr. Miller is expected to receive pursuant to RSUs scheduled to vest within 60 days of May 13, 2019.

 

(11)

Includes 4,691 ordinary shares issuable to Mr. Berns pursuant to our Directors Deferred Plan as of May 13, 2019 and 25,968 ordinary shares Mr. Berns has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(12)

Includes 9,929 ordinary shares issuable to Mr. Enright pursuant to our Directors Deferred Plan as of May 13, 2019 and 6,838 ordinary shares Mr. Enright has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(13)

Includes 24,968 ordinary shares Mr. Gray has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(14)

Includes 24,968 ordinary shares Ms. McSharry has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(15)

Includes 25,968 ordinary shares Mr. Mulligan has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(16)

Includes 11,195 ordinary shares held by The Kenneth W. O’Keefe Trust U/A/D 2/12/1997, of which Mr. O’Keefe is the sole trustee and sole beneficiary, and 22,249 ordinary shares issuable to Mr. O’Keefe pursuant to our Directors Deferred Plan as of May 13, 2019 and 21,468 ordinary shares Mr. O’Keefe has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(17)

Includes 24,968 ordinary shares Dr. Riedel has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

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Security Ownership of Certain Beneficial Owners and Management (continued)

 

 

(18)

Includes 18,668 ordinary shares Mr. Schnee has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(19)

Includes 29,468 ordinary shares Dr. Sohn has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(20)

Includes 16,968 ordinary shares Mr. Winningham has the right to acquire pursuant to options exercisable within 60 days of May 13, 2019.

 

(21)

Includes 981,311 ordinary shares that our executive officers and non-employee directors have the right to acquire pursuant to options exercisable within 60 days of May 13, 2019, 250 ordinary shares that one of our executive officers is expected to receive pursuant to RSUs scheduled to vest within 60 days of May 13, 2019, and 36,869 ordinary shares issuable to non-employee directors pursuant to our Directors Deferred Plan as of May 13, 2019. See footnotes (6) through (8) and (10) through (20) above. Because Ms. Hooper is not currently serving as an executive officer of Jazz Pharmaceuticals, the number of ordinary shares and percentage ownership indicated in the table above with respect to the beneficial ownership of all directors and executive officers as a group do not include any ordinary shares beneficially owned by Ms. Hooper.

 

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EXECUTIVE OFFICERS

The following table provides information regarding our executive officers as of June 1, 2019.

 

 Name

  

Age

  

Position

 

 Bruce C. Cozadd

  

 

55

  

 

Chairman and Chief Executive Officer

 

 Daniel N. Swisher, Jr.

  

 

56

  

 

President and Chief Operating Officer

 

 Robert Iannone

  

 

52

  

 

Executive Vice President, Research and Development

 

 Michael P. Miller

  

 

62

  

 

Executive Vice President, U.S. Commercial

 

 Matthew P. Young

  

 

50

  

 

Executive Vice President and Chief Financial Officer

 

 Iain McGill(1)

  

 

47

  

 

Senior Vice President, Jazz Pharmaceuticals Europe and Rest of World

 

 Paul Treacy

  

 

58

  

 

Senior Vice President, Technical Operations

 

 Karen J. Wilson

  

 

56

  

 

Senior Vice President, Finance and Principal Accounting Officer

 

(1)

In April 2019, Mr. McGill notified us of his decision to resign from his position as Senior Vice President, effective as of June 28, 2019.

Bruce C. Cozadd. Biographical information regarding Mr. Cozadd is set forth below under “Proposal 1—Election of Directors— Class III Directors Continuing in Office Until the 2020 Annual Meeting.”

Daniel N. Swisher, Jr. was appointed our President and Chief Operating Officer as of January 2018. From December 2003 to December 2017, Mr. Swisher was Chief Executive Officer and a member of the board of directors of Sunesis Pharmaceuticals, Inc., a biopharmaceutical company focused on the development of novel targeted cancer therapeutics in hematologic and solid tumor malignancies. He also served as Chief Business Officer and Chief Financial Officer of Sunesis from 2001 to 2003. Prior to 2001, Mr. Swisher served in various management roles, including Senior Vice President of Sales and Marketing, for ALZA Corporation from 1992 to 2001. He currently serves as Chairman of the board of directors of Cerus Corporation, a biomedical products company focused on the field of blood transfusion safety, and as a member of the board of directors of Corcept Therapeutics Inc., a pharmaceutical company focused on cortisol-modulating therapeutics to address metabolic and other serious medical conditions. Mr. Swisher received a B.A. from Yale University and an M.B.A. from the Stanford Graduate School of Business.

Robert Iannone, M.D., M.S.C.E. was appointed our Executive Vice President, Research and Development as of May 2019. From April 2018 until May 2019, Dr. Iannone served as Head of Research and Development and Chief Medical Officer of Immunomedics, Inc., a biopharmaceutical company. Prior to that, from July 2014 to April 2018, he served in the roles of Senior Vice President and Head of Immuno-oncology, Global Medicines Development and the Global Products Vice President at AstraZeneca plc, a global science-led biopharmaceutical company. From 2004 to 2014, Dr. Iannone served in management roles at Merck Co., Inc., a global biopharmaceutical company, culminating in his role as Executive Director and Section Head of Oncology Clinical Development. From 2001 to 2004, he served as Assistant Professor of Pediatrics and from 2004 to 2012 as Adjunct Assistant Professor of Pediatrics at the University of Pennsylvania School of Medicine. Since 2011, he has been serving on the Cancer Steering Committee of the Foundation for the National Institutes of Health. Dr. Iannone received a B.S. from The Catholic University of America, an M.D. from Yale University and an M.S.C.E. from University of Pennsylvania and completed his residency in Pediatrics and fellowship in Pediatric Hematology-Oncology at Johns Hopkins University.

Michael P. Miller was appointed our Executive Vice President, U.S. Commercial, as of May 2017 and served as our Senior Vice President, U.S. Commercial, from April 2014 until May 2017. From April 2010 to January 2014, Mr. Miller was Senior Vice President and Chief Commercial Officer of Vivus, Inc., a biopharmaceutical company. From February 2006 to April 2010, he served as Vice President, Sales and Marketing, leading the HER Family Oncology Franchise, of Genentech, Inc., a biotechnology company and wholly owned subsidiary of Roche Holding Ltd. From January 2003 to December 2005, Mr. Miller served as the Senior Vice President, Chief Commercial Officer of Connetics Corporation, a specialty pharmaceutical company acquired by Stiefel Laboratories, Inc. Previously, from 1997 to 2001, he served as Vice President of the Urology Business Unit of ALZA Corporation, a pharmaceutical company acquired by Johnson & Johnson. Prior to 1997, Mr. Miller served 13 years in various sales and marketing positions at Syntex Corporation, a pharmaceutical company acquired by Roche Holding Ltd. He currently serves as a director on the board of Puma Biotechnology, Inc., a biopharmaceutical company, and as a member of two non-profit boards, the Leukemia and Lymphoma Society (Silicon Valley Chapter) and the Zane Beadles Parade Foundation. Mr. Miller received a B.S. in Business Administration and Finance from the University of San Francisco and an M.B.A. in Information and Computer Systems from San Francisco State University.

 

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Executive Officers (continued)

 

 

Matthew P. Young was appointed our Executive Vice President and Chief Financial Officer as of February 2015 and previously served as our Senior Vice President and Chief Financial Officer from March 2014 to February 2015 and as our Senior Vice President, Corporate Development from April 2013 to March 2014. Prior to joining us, Mr. Young worked in investment banking for approximately 20 years. From February 2009 to April 2013, he served as a managing director in global healthcare of Barclays Capital Inc., an investment banking firm, where his role included acting as the co-head of life sciences at Barclays Capital. From 2007 to 2008, Mr. Young served as a managing director of Citigroup Global Markets Inc., an investment banking firm, and from 2003 to 2007, as a managing director of Lehman Brothers Inc., an investment banking firm. From 1992 to 2003, he served in various capacities at other investment banking firms. In 2015, Mr. Young joined the board of directors of PRA Health Sciences, Inc., a contract research company, where he currently serves on the compensation and audit committees. He also serves as lead independent director and Chairman of the audit committee of CytomX Therapeutics, Inc., a biopharmaceutical company. Mr. Young received a B.S. in Economics and an M.B.A. from the Wharton School of the University of Pennsylvania.

Iain McGill was appointed our Senior Vice President, Jazz Pharmaceuticals Europe and Rest of World as of March 2015. Mr. McGill served as Head of EUSA International and Senior Vice President, Jazz Pharmaceuticals from March 2014 to March 2015 and our Chief Commercial Officer, EUSA Pharma, from June 2012, when he joined Jazz Pharmaceuticals in connection with the EUSA Acquisition. From October 2011 until he joined Jazz Pharmaceuticals, Mr. McGill served as Chief Commercial Officer at EUSA Pharma (Europe) Ltd., where he previously served from August 2010 to September 2011 as President, Europe, International & Global Marketing, and from January 2010 to July 2010 as President of Europe. From 2006 to 2009, he served as Vice President and Global Business Manager at Wyeth, a pharmaceutical company acquired by Pfizer Inc. Mr. McGill began his pharmaceutical career in sales and over 20 years, held various positions in sales management, market research, marketing, business development and general management at Syntex Corporation (acquired by Roche Holding Ltd.), Roche Holding Ltd. and Novartis AG. In 2016, he joined the board of directors and the audit committee of Otonomy Inc., a biopharmaceutical company. Mr. McGill received a B.Sc in Biochemistry from the University of London.

Paul Treacy was appointed our Senior Vice President, Technical Operations in July 2014. From April 2010 to May 2013, Mr. Treacy was Head of CMC, Supply Chain and Manufacturing at Janssen Alzheimer Immunotherapy Research & Development, LLC, a biotechnology company and a subsidiary of Johnson & Johnson. From August 2005 to April 2010, he served as General Manager of Janssen Biologics Ireland, a biopharmaceutical company and a subsidiary of Johnson & Johnson. From August 2002 to August 2005, Mr. Treacy was Vice President, Manufacturing Operations at Centocor Inc., a subsidiary of Johnson & Johnson, and from February 1999 to August 2002, he served as Executive Director, Operations, at Centocor BV. Mr. Treacy received a B.S. and an M.S. in Microbiology and a Higher Diploma in Computer Science from University College Cork and a Higher Diploma in Pharmaceutical Manufacturing Technology from Trinity College Dublin.

Karen J. Wilson was appointed our Senior Vice President, Finance and Principal Accounting Officer as of February 2013 and served as our Vice President, Finance and Principal Accounting Officer from the closing of the Azur Merger in January 2012 until February 2013. Prior to the Azur Merger, she served as Jazz Pharmaceuticals, Inc.’s Vice President, Finance beginning in February 2011 and was appointed Principal Accounting Officer in March 2011. From 2009 to January 2011, she served as Vice President of Finance and Principal Accounting Officer at PDL BioPharma, Inc., a biotechnology company. From 2005 to 2009, she served as a principal at the consulting firm Wilson Crisler LLC. Prior to that, from 2001 to 2004, she was Chief Financial Officer of ViroLogic, Inc., a biosciences company. Prior to joining ViroLogic, Ms. Wilson served as Chief Financial Officer and Vice President of Operations for Novare Surgical Systems, Inc. from 1999 to 2001. Prior to 1999, Ms. Wilson worked for Deloitte & Touche LLP for ten years, serving clients in both the life sciences and technology fields. Ms. Wilson is a Certified Public Accountant in the State of California and received a B.S. in Business from the University of California, Berkeley.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis describes the material elements of compensation for the following individuals who served as our principal executive officer, principal financial officer and three other most highly compensated executive officers as of December 31, 2018. These individuals are our named executive officers, or NEOs, for 2018.

 

   

 

 Bruce C. Cozadd

  

 

Chairman and Chief Executive Officer (CEO)

 

 Daniel N. Swisher, Jr.

  

 

President and Chief Operating Officer (COO)

 

 Matthew P. Young

  

 

Executive Vice President and Chief Financial Officer (CFO)

 

 Suzanne Sawochka Hooper

  

 

Former Executive Vice President and General Counsel (GC)

Michael P. Miller

  

 

Executive Vice President, U.S. Commercial

Table of Contents to Compensation Discussion and Analysis

 

   

Page

Executive Summary

  30

2018 Performance Highlights

  30

Key Features of Our Executive Compensation Program

  31

2018 Pay-for-Performance Overview

  32

Compensation Philosophy and Objectives

  32

How We Determine Executive Compensation

  33

Role of Our Compensation Committee and Executive Officers

  33

Role of the Independent Compensation Consultant

  33

Competitive Assessment of Compensation – Peer Companies and Market Data

  34

Factors Used in Determining Executive Compensation

  36

2018 Advisory Vote on Executive Compensation and Shareholder Engagement

  36

Key Components and Design of the Executive Compensation Program

  37

Total Direct Compensation

  37

Components of Total Direct Compensation

  38

2018 Performance Bonus Program

  40

Quantitative Objectives

  40

Qualitative Objectives

  43

2018 Compensation Decisions for Our Named Executive Officers

  43

General Approach

  43

Summary of 2018 Compensation Decisions

  44

Individual NEO Compensation Decisions

  45

Additional Compensation Information

  50

Ownership Guidelines for Executive Officers

  50

Change in Control Plan

  50

Equity Grant Timing and Equity Plan Information

  51

Accounting and Tax Considerations

  51

Risk Assessment Concerning Compensation Practices and Policies

  52

Reconciliations of Non-GAAP Financial Measures

  52

 

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Executive Compensation (continued)

 

 

Executive Summary

Our compensation policies and elements are intended to provide the necessary incentives to properly align our executive officers’ performance with the interests of our shareholders while maintaining equitable and competitive executive compensation practices that enable us to attract and retain the highest caliber of executive officers.

2018 Performance Highlights

In 2018, we delivered record revenues and made substantial progress on key milestones, including advancing multiple pre-clinical and early- and late-stage clinical development programs. In support of our strategy, we continued to expand and advance our research and development pipeline in our sleep and hematology/oncology therapeutic areas, both by conducting activities internally and by leveraging partnerships with third parties.

 

 

LOGO   LOGO   LOGO

 

(1) 

Generally accepted accounting principles, or GAAP, net income per diluted share (GAAP earnings per share, or EPS) and non-GAAP adjusted net income per diluted share (Non-GAAP Adjusted EPS) for the 2015 period are attributable to Jazz Pharmaceuticals plc.

 

(2) 

For 2017, GAAP net income included a net tax benefit of $149 million resulting from provisional estimates based on our analysis of the U.S. Tax Cuts and Jobs Act, or the U.S. Tax Act. Among other adjustments, the net tax benefit resulting from the U.S. Tax Act for 2017 was excluded from non-GAAP adjusted net income.

 

(3)

See the section “Reconciliations of Non-GAAP Financial Measures” below for reconciliations between GAAP net income and non-GAAP adjusted net income (and the related per share measures) and, for the 2015 period, GAAP net income attributable to Jazz Pharmaceuticals plc and non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share measure).

 

(4) 

Represents the compound annual growth rate (CAGR) for the period from 2015 through 2018.

 

 
Financial      2018 total revenues of $1,891 million increased 17% over 2017
 
    2018 GAAP net income of $447 million, or $7.30 per diluted share, compared to $488 million, or $7.96 per diluted share, for 2017 (as noted above, 2017 GAAP net income included a net tax benefit of $149 million resulting from provisional estimates based on our analysis of the U.S. Tax Act)
 
    2018 non-GAAP adjusted net income of $839 million, or $13.70 per diluted share, compared to $677 million, or $11.04 per diluted share, for 2017
 
Xyrem      2018 net sales of Xyrem of $1,405 million increased 18% over 2017
 
    Settled all remaining patent infringement litigation against the nine companies that filed an abbreviated new drug application, or ANDA, for a generic version of Xyrem
 
    In October 2018, received approval from U.S. Food and Drug Administration, or FDA, for Xyrem in the treatment of cataplexy or excessive daytime sleepiness, or EDS, in pediatric narcolepsy patients ages seven and older, with pediatric exclusivity which added six months to the expiration date of our existing Orange Book-listed Xyrem patents
 
Defitelio/defibrotide      2018 net sales of Defitelio of $149 million increased 12% over 2017

 

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Executive Compensation (continued)

 

 

 
Vyxeos       2018 net sales of Vyxeos of $101 million compared to $34 million in 2017
 
     In August 2018, received approval from European Commission for Vyxeos for adults with newly-diagnosed therapy-related acute myeloid leukemia, or t-AML, or AML with myelodysplasia-related changes, or AML-MRC, and shortly thereafter, commenced a rolling launch in the European Union, or EU
 
Regulatory  Submissions       In March 2018, FDA accepted for filing our new drug application, or NDA, for SunosiTM (solriamfetol) as a treatment to improve wakefulness in adult patients with EDS associated with obstructive sleep apnea or narcolepsy, and, in the first quarter of 2019, FDA approved Sunosi
 
     In November 2018, submitted a marketing authorization application, or MAA, to the European Medicines Agency for solriamfetol
 
Research &  Development       In August 2018, announced a five-year collaboration with The University of Texas MD Anderson Cancer Center to evaluate potential treatment options for hematologic malignancies, with a near-term focus on Vyxeos, and shortly thereafter commenced activities under this collaboration
 
     During 2018, commenced and/or advanced several development programs in both sleep and hematology/oncology, including (i) completing patient enrollment in our Phase 3 clinical trial evaluating JZP-258 for the treatment of EDS and cataplexy in narcolepsy, (ii) commencing patient enrollment in our Phase 3 clinical trial evaluating JZP-258 for the treatment of idiopathic hypersomnia and (iii) commencing patient enrollment in our Phase 2 clinical trial evaluating defibrotide for the prevention of acute Graft-versus-Host Disease

Key Features of Our Executive Compensation Program

 

     What We Do        What We Don’t Do
 

Design executive compensation to align pay with performance

 

   

No excessive change in control or severance payments

 

 

Balance short-term and long-term incentive compensation, with the majority of executive compensation being “at-risk”

 

   

No “single-trigger” cash or equity change in control benefits

 

 

Use same performance bonus plan for all non-sales employees, including executives, with 100% of CEO’s bonus based on pre-established corporate performance goals

 

   

No repricing of underwater stock options without prior shareholder approval

 

 

Establish maximum payout amount under performance bonus plan and require threshold level of achievement for payout with respect to financial metrics

 

   

No excessive perquisites

 

 

Maintain share ownership guidelines

 

   

No tax gross ups on severance or change in control benefits

 

 

Provide “double-trigger” change in control benefits

 

   

No post-termination retirement or pension benefits that are not available to employees generally

 

 

Prohibit hedging and pledging by executive officers and directors

 

   

No guaranteed bonuses or base salary increases

 

 

Have 100% independent directors on the compensation committee

 

   
 

Hire independent compensation consultant who reports directly to the compensation committee

 

   

 

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Executive Compensation (continued)

 

 

2018 Pay-for-Performance Overview

A significant portion of target total direct compensation for our CEO and other NEOs is structured in the form of “at-risk” compensation, consisting of annual performance bonus and equity incentive awards, with the performance bonus payouts and equity award values dependent upon our company performance. This aligns our executives’ interests with those of our shareholders for near- and long-term performance. Target total direct compensation for 2018, as shown below, reflects annual base salary paid, annual target performance bonus, the cash signing bonus Mr. Swisher received in connection with his appointment as President and COO and the grant date fair value of equity awards granted during the year (as such equity awards are reported in the Summary Compensation Table).

 

 

LOGO

Compensation Philosophy and Objectives

Our executive compensation program is designed with the following objectives and philosophy:

 

 

Attract, incentivize, reward and retain diverse, talented individuals with relevant experience in the life sciences industry through a competitive pay structure. We reward individuals fairly over time and seek to retain those individuals who continue to meet our high expectations.

 

 

Deliver balanced total compensation packages to accomplish our business objectives and mission. Our executive compensation program focuses on total compensation, combining short- and long-term components, cash and equity, and fixed and variable payments, in the proportions that we believe are the most appropriate to incentivize and reward our executive officers for achieving our corporate goals while minimizing incentives for excessive risk-taking or unethical conduct.

 

 

Align pay with our performance. Our annual bonus awards are not earned unless pre-determined levels of performance are achieved against annual corporate objectives approved by our board of directors at the beginning of the year. Likewise, our stock option awards will not provide realizable value and our restricted stock unit, or RSU, awards will not provide increased value unless there is an increase in the value of our shares, which benefits all shareholders. We also have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders.

 

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Executive Compensation (continued)

 

 

How We Determine Executive Compensation

Role of Our Compensation Committee and Executive Officers

The compensation committee is (and was at all times during 2018) composed entirely of independent directors, as defined by Rule 5605(a)(2) of the Nasdaq listing standards. Our compensation committee meets as often as it determines necessary to carry out its duties and responsibilities through regularly scheduled meetings and, if necessary, special meetings. Our compensation committee also has the authority to take certain actions by written consent of all members. The agenda for each compensation committee meeting is usually developed by members of our human resources department and our CEO, with input from members of our legal department, and is reviewed and finalized with the chairperson of the compensation committee. In 2018, the compensation committee met six times and did not act by unanimous written consent. As of the date of this proxy statement, in 2019, the compensation committee has met three times and has not acted by unanimous written consent.

The compensation committee reviews and oversees our compensation policies, plans and programs and reviews and generally determines the compensation to be paid to the executive officers, including the NEOs. Either the compensation committee or the independent members of our board of directors, upon recommendation from the compensation committee, who receives input and advice from its independent compensation consultant, approve the compensation of our CEO. References in this Compensation Discussion and Analysis to our board of directors approving our CEO’s compensation are to the independent members of our board of directors. The compensation committee does not delegate any of its functions to others in determining executive compensation.

In making other executive compensation determinations, the compensation committee considers recommendations from our CEO. In making his recommendations, our CEO receives input from our human resources department and from the individuals who manage or report directly to the other executive officers, and he reviews various third party compensation surveys and compensation data provided by the independent compensation consultant to the compensation committee, as described below. While our CEO discusses his recommendations for the other executive officers with the compensation committee, he does not participate in the deliberations and recommendations to our board of directors concerning, or our board of directors’ determination of, his own compensation. Members of our human resources and legal departments also attend compensation committee meetings.

Below are the highlights of the annual cycle our compensation committee follows in reviewing and making decisions with respect to our executive compensation program.

 

 

LOGO

Role of the Independent Compensation Consultant

The compensation committee engages an independent compensation consultant each year to provide a competitive compensation assessment with respect to the executive officers to assist the compensation committee in making annual compensation decisions. Since 2010, Radford has been engaged by the compensation committee each year to provide peer company and industry compensation data and provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regarding non-employee director compensation. The compensation committee has also consulted with Radford to update the peer company and industry compensation data on an annual basis and as needed with respect to specific questions that arise and on an advisory basis with respect to addressing other responsibilities arising under the compensation committee charter, including trends and best practices regarding executive compensation and compensation committees, in order to help inform the compensation committee’s decisions. Radford reports directly to the compensation committee, which maintains the authority to direct Radford’s work and engagement, and advises the compensation committee and our human resources department on projects from time to time. Radford interacts with management to gain access to company information that is required to perform services and to understand the culture and policies of the organization. Radford attends compensation committee meetings, and the compensation committee and Radford meet in executive session with no members of management present, as needed, to address various compensation matters, including deliberations regarding our CEO’s compensation.

 

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In assessing Radford’s independence from management in providing executive compensation services to the compensation committee, the compensation committee considered that Radford is only engaged by, takes direction from, and reports to, the compensation committee for such services and, accordingly, only the compensation committee has the right to terminate or replace Radford as its compensation consultant at any time. The compensation committee also analyzed whether the work of Radford as a compensation consultant with respect to executive and director compensation raised any conflict of interest, taking into consideration the following factors:

 

  the provision of other services to our company by Radford and its affiliates;       any business or personal relationship of the individual compensation advisors with any compensation committee member;

 

 

 

the amount of fees we paid to Radford and its affiliates as a percentage of Radford’s total revenue;

   

 

 

 

Radford’s policies and procedures that are designed to prevent conflicts of interest; and

 

 

 

any business or personal relationship of Radford or the individual compensation advisors employed by it with any executive officer of our company;

   

 

 

 

any ordinary shares of our company owned by Radford or the individual compensation advisors employed by it.

The compensation committee has determined, based on its analysis of the above factors, that the work of Radford and the individual compensation advisors employed by Radford as compensation consultants to our company has not created any conflict of interest.

Competitive Assessment of Compensation – Peer Companies and Market Data

Because we aim to attract and retain the most highly qualified executive officers in an extremely competitive market, the compensation committee believes that it is important when making its compensation decisions to be informed as to the current practices of comparable public companies with which we compete for top talent. To this end, the compensation committee reviews market data for each executive officer’s position, compiled by Radford as described below, including information relating to the mix and levels of compensation for executive officers in the life sciences industry, with a focus on target total direct compensation in line with the compensation committee’s holistic approach to executive compensation.

2018 Peer Group. When developing a proposed list of peer companies to be used in connection with making compensation decisions for 2018, Radford re-examined our compensation philosophy and peer group criteria and companies to recommend changes to our 2017 peer group company list to reflect our growth, the increase in our revenues and market capitalization and the consolidation in our industry. Radford recommended considering companies:

 

 

in the life sciences industry (specifically biotechnology and specialty bio/pharma companies) with commercial products on the market;

 

 

with revenue of approximately one-fourth (0.25x) to three times (3x) our then-projected revenue (resulting in a range of $375 million to $5 billion in revenue);

 

 

with market values of approximately one-fourth (0.25x) to four times (4x) our market capitalization at the time (resulting in a range of between $2.3 billion to $36 billion in market capitalization); and

 

 

primarily located in the U.S. with a secondary focus on companies that are headquartered in Europe.

Based on these criteria, in August 2017, to form our 2018 peer group, Radford recommended, and our compensation committee approved, eliminating Actelion Ltd. and Medivation, Inc. (which were acquired since the 2017 peer group company list was approved) from our peers and adding Bioverativ Inc. to form our 2018 peer group.

2019 Peer Group. When developing a proposed list of peer companies to be used in connection with making compensation decisions for 2019, Radford recommended companies based on the same criteria used for the 2018 peer group, adjusted for then-current revenue and market values. Based on these criteria, in October 2018, Radford recommended, and our compensation committee approved, eliminating Bioverativ Inc. (which was acquired since the 2018 peer group company list was approved), Shire plc (which announced its intent to be

 

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acquired in May 2018) and The Medicines Company (which fell below the then-current revenue criteria) from our peers and adding Exelixis, Inc. (which met both the revenue and market capitalization criteria) and Nektar Therapeutics, Neurocrine Biosciences, Inc. and Sarepta Therapeutics, Inc. (which each met the market capitalization criteria) to form our 2019 peer group.

 

 Name

 

Peer Group Inclusion

 

2017

 

2018

 

2019

Actelion Ltd.

 

   

Alexion Pharmaceuticals, Inc.

 

 

 

Alkermes plc

 

 

 

BioMarin Pharmaceutical Inc.

 

 

 

Bioverativ Inc.

   

 

Endo International plc

 

 

 

Exelixis, Inc.

     

Horizon Therapeutics plc (formerly Horizon Pharma plc)

 

 

 

Incyte Corporation

 

 

 

Ionis Pharmaceuticals, Inc.

 

 

 

Mallinckrodt plc

 

 

 

Medivation, Inc.

 

   

Nektar Therapeutics

     

Neurocrine Biosciences, Inc.

     

Regeneron Pharmaceuticals, Inc.

 

 

 

Sarepta Therapeutics, Inc.

     

Seattle Genetics Inc.

 

 

 

Shire plc

 

 

 

The Medicines Company

 

 

 

United Therapeutics Corporation

 

 

 

Vertex Pharmaceuticals Incorporated

 

 

 

Peer Group Metrics ($ in millions)

     

Peer Revenue – 50th Percentile

 

1,144

 

1,226

 

  1,221

Jazz Revenue

 

1,352

 

1,528

 

  1,687

Jazz Revenue Percentile Rank

 

55th

 

56th

 

65th

Peer Market Cap – 50th Percentile

 

8,229

 

8,785

 

  8,234

Jazz Market Cap

 

8,683

 

9,152

 

10,576

Jazz Market Cap Percentile Rank

 

51st

 

57th

 

67th

The Jazz percentile ranks shown above reflect trailing 12 months’ revenue and 30-day average market capitalization for our company and the median of each peer group, measured as of the time Radford prepared its final recommendations regarding each peer group for the compensation committee.

2018 Market Data. In early 2018, Radford completed an assessment of executive compensation based on our 2018 peer group to inform the compensation committee’s determinations of executive compensation for 2018. This assessment used market data that was compiled from multiple sources, including: (i) data from the Radford Global Life Sciences Survey with respect to the 2018 peer group companies listed above, or the peer survey data; (ii) the 2018 peer group companies’ publicly disclosed information, or public peer data; and (iii) data from public biotechnology and pharmaceutical companies in the Radford Global Life Sciences Survey that had revenue from $375 million to $5 billion, or the general survey data, which included survey data with respect to our selected 2018 peer group companies. The components of the market data were based on the availability of sufficient comparative data for an executive officer’s position. Generally, peer survey data and public peer data are used in establishing market data reference points, and the general survey data is used when there is a lack of peer survey data and public peer data for an executive officer’s position. The peer survey data, the general survey data, and the public peer data, collectively referred to in this proxy statement as market data, were reviewed by the compensation committee, with the assistance of Radford, and used as one reference point, in addition to other factors, in setting our NEOs’ compensation.

Use of 2018 Market Data. The compensation committee reviews target total direct compensation, comprising both target total cash compensation and equity compensation, against the market data described above primarily to ensure that our executive compensation

 

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program, as a whole, is positioned competitively to attract and retain the highest caliber of executive officers and that the total direct compensation opportunity for the executive officer group is aligned with our corporate objectives and strategic needs. The compensation committee does not target a specific percentile for setting the level of compensation for the NEOs and does not otherwise use a formulaic approach to setting pay against the market data; rather, the compensation committee reviews a range of market reference points (generally at the 25th, 50th, 60th and 75th percentiles of the market data) for target total direct compensation including the elements of pay (base salary, target annual performance bonus and equity awards) as one factor before making compensation determinations. The compensation committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account company-to-company variations among actual roles with similar titles or the specific performance of the executive officers.

Factors Used in Determining Executive Compensation

Our compensation committee sets the compensation of our executive officers at levels that the compensation committee determines to be competitive and appropriate for each NEO, using the compensation committee’s professional experience and judgment. The compensation committee’s pay decisions are not driven by a particular target level of compensation to market data, and the compensation committee does not otherwise use a formulaic approach to setting executive pay. Instead, the compensation committee believes that executive pay decisions require consideration of multiple relevant factors, which may vary from year to year. The figure below reflects the factors the compensation committee considers in determining and approving the amount, form and mix of pay for our NEOs.

 

LOGO

 

2018 Advisory Vote on Executive Compensation and Shareholder Engagement

At our 2018 annual meeting, the shareholders approved, on an advisory basis, the compensation of the NEOs, as disclosed in the proxy statement for that meeting pursuant to the compensation disclosure rules of the SEC. The compensation committee reviewed the final vote results for the proposal, and, given the significant level of shareholder support (92% of total votes cast with respect to the advisory proposal), concluded that our compensation program continues to provide a competitive pay-for-performance package that effectively incentivizes the NEOs and encourages long-term retention. Accordingly, the compensation committee and, with respect to our CEO’s compensation, our board of directors, determined not to make any significant changes to our executive compensation policies or decisions as a result of the vote. Our compensation committee and, with respect to our CEO’s compensation, our board of directors, will continue to consider the outcome of our say-on-pay votes and our shareholders’ views when making future compensation decisions for the NEOs.

We also engage with our shareholders when they have topics of particular concern, which may include issues related to executive compensation. Shareholder feedback is reported to our compensation committee throughout the year. The following graphic describes our typical shareholder outreach and engagement cycle.

 

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LOGO

Key Components and Design of the Executive Compensation Program

Total Direct Compensation

Our compensation program focuses on target total direct compensation, which consists of base salary, target bonus opportunity (which, together with base salary, we refer to as target total cash compensation), and long-term equity awards (valued based on an approximation of grant date fair value).

 

 

LOGO

 

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We also offer our executive officers severance benefits upon certain types of involuntary terminations in connection with a change in control. The table below captioned “Components of Total Direct Compensation” provides an explanation of key features of each of the primary components of our executive compensation program and why we provide the particular compensation component.

The compensation committee takes a holistic approach to compensation and seeks to ensure that the aggregate level of pay across all of the pay elements is meeting the company’s desired objectives for each executive officer. The compensation committee does not have any formal policies for allocating compensation among salary, performance bonus opportunity and equity grants. Instead, the compensation committee uses its experience and business judgment to establish a total compensation program for each NEO that is a mix of current, short-term and long-term incentive compensation, and cash and non-cash compensation, which it believes appropriate to achieve the goals of our executive compensation program and our corporate goals.

Because we believe it is important to our success to pursue long-term corporate objectives, to avoid excessive risk-taking, and to preserve our cash resources, a significant portion of the NEOs’ total direct compensation is comprised of “at-risk” compensation, consisting of performance-based bonus opportunities and long-term equity awards, which align the executive officers’ incentives with the interests of our shareholders. This allocation between “at-risk” and fixed compensation is consistent with our pay-for-performance philosophy.

Components of Total Direct Compensation

 

Component

 

Key Features

 

Purpose

Base Salary

 

 

•  Fixed cash compensation

 

 

 

•  Provides fixed level of compensation that is competitive within our industry and geographic areas

 

   

•  No amount is guaranteed

 

   

•  Amounts are reviewed and determined annually, and are generally effective by March 1 each year

 

Performance

Bonus Award

 

 

•  Cash compensation under the performance bonus plan, which is “at-risk” because the realized value is dependent upon achievement of performance objectives

 

 

 

•  Provides financial incentives for our executives officers to achieve key corporate objectives that drive our business

 

•  Rewards our executive officers for attaining corporate objectives and, for executive officers other than our CEO, their individual contributions toward such achievements

   

•  Target bonuses are reviewed and determined annually and expressed as a percentage of annual base salary earned

 

   

•  Bonus opportunity is directly dependent on achievement of specific corporate objectives derived from our annual corporate goals

 

   

•  Actual bonuses paid shortly after the end of each year, based on the extent corporate goals are attained as determined by the compensation committee, and for executive officers other than our CEO, their individual contributions toward such achievements

 

 

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Component   Key Features   Purpose

Long-Term

Incentive

Compensation

 

 

•  Equity compensation generally in the form of stock options and RSUs granted under the 2011 Equity Incentive Plan, which is “at-risk” because the realized value is dependent upon our share price

 

•  Awards are discretionary and reviewed and generally granted annually, early in the year, at time of hire or promotion or in other rare circumstances such as recognition of outstanding performance

 

•  Awards to executive officers are granted shortly after annual or quarterly financial results released to public

 

•  Stock options and RSUs generally vest over a 4-year period subject to executive officer’s continued service with us; stock option exercise price is set equal to fair market value on date of grant (i.e., closing price on Nasdaq Global Select Market)

 

•  We have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders

 

 

 

•  Fosters ownership culture

 

•  Links compensation to long-term success

 

•  Stock options are a key aspect of our pay-for-performance culture, by providing a return to our executive officers only if the market price of our ordinary shares appreciates over the stock option term

 

•  RSU awards cover fewer shares than the stock options that deliver a similar value to an executive officer, and as a result, RSU awards enable the company to minimize dilution to shareholders while reinforcing the importance of shareholder value creation

 

•  RSU awards provide a return based on the market price of our ordinary shares; if our share price declines, RSU awards correspondingly decline in value but still maintain value, and therefore, a mix of RSU awards and stock options aligns executive officers’ interests with those of shareholders by minimizing incentive for short-term risk-taking at the expense of realizing long-term value

 

Other Benefits. Executive officers based in the United States are eligible to participate in all of our benefit plans, such as the 401(k) Plan (see the section below “Description of Compensation Arrangements–401(k) Plan”), our medical, dental, vision, short-term disability, long-term disability and group life insurance plans, in each case generally on the same basis as other employees. Executive officers based in the United States or Ireland are eligible to participate in our Employee Stock Purchase Plan, or ESPP, generally on the same basis as other employees. We also have a section 125 flexible benefits healthcare plan and a flexible benefits childcare plan under which employees can set aside pre-tax funds to pay for qualified healthcare expenses and qualified childcare expenses not reimbursed by insurance. We do not currently offer pension or other retirement benefits in the United States, but do offer pension or other retirement benefits in certain other countries.

Severance Benefits upon Change in Control. Executive officers based in the United States are also eligible to participate in our Amended and Restated Executive Change in Control and Severance Benefit Plan, or the change in control plan, which is described below under the headings “Additional Compensation InformationChange in Control Plan” and “Potential Payments upon Termination or Change in ControlAmended and Restated Executive Change in Control and Severance Benefit Plan.” The change in control plan provides certain severance benefits to participants, in connection with specified involuntary termination events, including termination without cause and constructive termination, following a change in control. Certain executive officers who are not employed by our U.S. affiliates receive comparable change in control benefits pursuant to their employment agreements. The compensation committee believes these severance benefits are important from a retention perspective to provide some level of protection to our executives who might be terminated following a change in control and that the amounts are reasonable and maintain the competitiveness of our executive compensation and retention program. The compensation committee believes this structure serves to mitigate the distraction and loss of key executive officers that may occur in connection with rumored or actual fundamental corporate changes. Such payments protect the interests of our shareholders by enhancing executive focus during rumored or actual change in control activity, retaining executives despite the uncertainty that generally exists while a transaction is under consideration and encouraging the executives responsible for negotiating potential transactions to do so with independence and objectivity. We do not provide any tax gross up payments on severance benefits.

Clawback Requirement. As a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, our CEO and CFO may be legally required to reimburse our company for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002.

 

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2018 Performance Bonus Program

The corporate objectives and relative weightings established by the board of directors for the 2018 performance bonus program that were communicated to the NEOs in early 2018 are described in the chart below. The total revenue objective described below included stretch goals with the opportunity to earn up to an additional 15% bonus program funding.

 

 

LOGO

Following the end of the year, after adding together the resulting bonus pool funding percentages for the quantitative and qualitative objectives based on their relative weightings of 70% and 30%, respectively, the compensation committee approved an overall bonus pool funding percentage of 100.1% of the target bonus pool for the 2018 plan year, as further described below.

The compensation committee did not set specific objectives for individual executive officers. Each executive officer is responsible for contributing to the corporate objectives, individually and as part of the leadership team, with each objective deemed to be important in determining the level of the company’s performance during the year. In approving individual bonus awards, the compensation committee considers the individual contribution towards the company’s achievement of the corporate objectives by each executive officer (other than our CEO). The actual bonus payments approved for each of the NEOs for 2018 are described below under “2018 Compensation Decisions for Our Named Executive Officers.

Quantitative Objectives

Each of the three main quantitative, or objectively measurable, objectives for 2018, with a total relative overall weighting of 70%, is described in the table and accompanying footnotes below, including each objective’s weighting, actual results and performance multipliers, as well as the total bonus pool funding percentage resulting from the level of achievement of the quantitative objectives.

The compensation committee approved an algorithm with respect to each main quantitative objective (as well as the total revenue stretch goals discussed below) for calculating the bonus pool funding attributable to the extent of achievement for each such objective. With respect to the total revenue objective, the compensation committee approved three related additional, or stretch, goals, each with its own individual weighting. The compensation committee set specific threshold and maximum levels of achievement for the total revenue objective and the related stretch goals, which are described in the footnotes to the table below. For the quantitative product development objectives, the compensation committee established various objectively measurable target goals within these objectives but did not set a threshold performance level; rather, an overall achievement of between 0% and 200%, measured against the multiple targets as described in more detail below, was determined by the compensation committee and used to calculate the applicable bonus pool funding percentage attributable to the product development objectives.

 

 

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  Quantitative Objectives   Weighting   Actual Results   Multiplier   Bonus Pool  

Funding(3)  

 

  1.

 

 

Total Revenue Objective: Achieve total revenue in 2018 of $1,908 million (at budgeted foreign currency exchange rates)(1)

 

 

   30%

 

 

Below target: Total revenue of $1,898 million

 

 

  97%(2)

 

 

29.2%

 

 

•   Stretch goal: Achieve certain Xyrem year-over-year bottle volume growth(4)

 

 

     7%

 

 

Above target

 

 

100%

 

 

  7.0%

 

 

•   Stretch goal: Exceed budgeted Vyxeos U.S. sales volume(5)

 

 

5.75%

 

 

Below threshold

 

 

    0%

 

 

     0%

 

 

•   Stretch goal: Achieve market access for Vyxeos in UK, France and Germany(6)

 

 

2.25%

 

 

Achieved in UK

 

 

  33%

 

 

0.75%

 

  2.

 

 

Adjusted Net Income Objective: Achieve non-GAAP adjusted net income* in 2018 of $801 million(1)

 

 

   15%

 

 

Above target: non-GAAP adjusted net income* of $840 million

 

 

124%(7)

 

 

18.7%

 

  3.

 

 

Product Development Objectives: advance internal molecule strategies and execute on defined R&D projects(8)

 

 

   25%

 

 

Achieved at 90% level(8)

 

 

  90%

 

 

22.5%

         

 

 

 

Total

        78.14%(9)
         

 

 

 

(1) 

If the specified threshold annual performance level was met (90% of target for the total revenue objective and the adjusted net income objective), then a pre-established scaled performance multiplier (ranging from 50% to 150% for the total revenue objective and 50% to 200% for the adjusted net income objective) would be used to calculate the applicable bonus pool funding percentage attributable to such quantitative objective. The performance multiplier would be zero if performance was below the threshold level, 50% if performance was at the threshold level, and then scaled for performance above 50% up to the applicable maximum level. The performance multiplier was capped for performance above the specified maximum performance level (110% of target for the total revenue objective and 120% of target for the adjusted net income objective).

 

(2) 

To calculate the threshold performance achievement level and performance multiplier, the reported revenue of $1,890.9 million was increased by approximately $7.7 million to adjust for certain budgeted revenues following the closing of the sale of our Prialt® (ziconotide) intrathecal infusion, or Prialt, assets and reduced by approximately $0.5 million to adjust for the impact of foreign currency exchange rates that were more favorable than the budgeted rates.

 

(3) 

The percentages in this column represent, for each quantitative corporate objective, the weight of the quantitative objective multiplied by the performance multiplier that corresponds to the actual achievement of such quantitative objective.

 

(4) 

With respect to the Xyrem total bottle growth stretch goal, 3.8% annual bottle volume growth would have resulted in 3.5% added to the total bonus pool funding percentage, and 4.8% annual bottle volume growth would have resulted in another 3.5% added to the total bonus pool funding percentage. Actual achievement of 5.5% bottle volume growth for 2018 was above the threshold level of achievement.

 

(5) 

With respect to the Vyxeos U.S. sales volume stretch goal, the performance levels were set at achievement above the budgeted U.S. sales volume. This stretch goal was inherently difficult to achieve from the outset given that we are still in the early stages of our launch of Vyxeos in a competitive and complex marketplace for AML. Exceeding the sales volume budget by 5% would have resulted in 2.875% added to the total bonus pool funding percentage, and exceeding the sales volume budget by 10% would have resulted in another 2.875% added to the total bonus pool funding percentage. Actual Vyxeos U.S. sales volume for 2018 was below the budgeted U.S. sales volume.

 

(6) 

With respect to the Vyxeos market access stretch goal, the performance goal consisted of achievement of market access for Vyxeos in three European countries: UK, France and Germany. Achieving market access in each of those countries would result in 0.75% per country being added to the total bonus pool funding percentage, for a potential total of 2.25%. We were able to achieve market access only in the UK in 2018, which resulted in 0.75% added to the total bonus pool funding percentage.

 

(7) 

To calculate the threshold performance achievement level and performance multiplier, both reported non-GAAP adjusted net income and the related performance objective were increased by approximately $1.4 million to account for certain budgeted earnings following the closing of the sale of our Prialt assets.

 

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(8) 

With respect to the product development objectives, the compensation committee determined that the actual achievement by the company was 90%, resulting in a performance multiplier of 90%, and therefore, a 22.5% bonus pool funding percentage, based on achievement with respect to the target goals as described below:

 

    

 

Performance Category

  

 

Target Goals and Results

 

 

Sleep Therapeutic Area Clinical Activities

  

 

This performance category consisted of the following goals: (i) FDA approval of Sunosi (solriamfetol) by the fourth quarter of 2018; (ii) solriamfetol MAA submission in the EU by the fourth quarter of 2018; (iii) achieving last patient out in Phase 2 trial of Sunosi for the treatment of excessive sleepiness in Parkinson’s disease by the fourth quarter of 2018; (iv) supplemental NDA, or sNDA, and pediatric written request submission for Xyrem by the second quarter of 2018; (v) achieving NDA submission readiness for JZP-507 by mid-2018; and (vi) completion of patient randomization in Phase 3 trial of JZP-258 by the fourth quarter of 2018. The compensation committee determined that we had met each of the performance goals for this category except for FDA approval of Sunosi by the end of 2018.

 

 

Hematology/Oncology Therapeutic Area Clinical Activities

  

 

This performance category consisted of the following goals: (i) receiving regulatory approval from European Commission for Vyxeos for adults with newly-diagnosed t-AML or AML-MRC by the fourth quarter of 2018; (ii) cumulative enrollment of 200 patients in Phase 3 trial of defibrotide for prevention of veno-occlusive disease by the third quarter of 2018; (iii) first patient enrolled in Phase 2 trial of defibrotide for prevention of acute Graft versus Host Disease by the first quarter of 2018; (iv) specific progress on a new recombinant crisantaspase program; and (v) selection of formulation for investigational new drug-, or IND-, enabling activities for a new CombiPlex product candidate by the fourth quarter of 2018. The compensation committee determined that we had met each of these performance goals for this category.

   

 

Molecule Strategies

  

 

This performance category consisted of the following goals: (i) delivering updated integrated molecule strategy plans and 2018 portfolio recommendations by the fourth quarter of 2018 and (ii) delivering a plan to generate data to inform use in specific patient subpopulations by the second quarter of 2018. The compensation committee determined that we had met each of these performance goals for this category.

 

  

With respect to the product development objectives, each of the three “top priority” goals – those relating to FDA approval of Sunosi, JZP-258 Phase 3 trial patient randomization and EU regulatory approval of Vyxeos – carried a 20% weight, for a collective weight of 60%. The three “high priority” goals – those relating to sNDA and pediatric written request submission for Xyrem, specific progress on a new recombinant crisantaspase program and selection of formulation for IND-enabling activities for CombiPlex – collectively carried a 20% weight. The molecule strategy development goals collectively carried a 10% weight. All other goals carried a 10% weight.

 

  

In determining that the actual achievement by the company was 90% for the product development objective, the compensation committee employed a holistic analysis that took into account the compensation committee’s assessment of the degree to which the product development objective criteria were met as a whole against the backdrop of competing development priorities. In this regard, the compensation committee took into account the fact that the company had multiple planned milestones in 2018 and that the Xyrem sNDA submission and regulatory approval and the solriamfetol MAA submission in particular required dedication of significant development resources that made achieving the established performance criteria more difficult. In addition, certain of the 2018 development criteria were aggressive and set at challenging levels. Although we had achieved 12 out of our 13 performance criteria, the compensation committee considered that the FDA’s decision on approval of Sunosi, one of the three “top priority” goals, was postponed to 2019 through an extension of the Prescription Drug User Fee Act date resulting from a submission we made during the course of discussions with the FDA regarding draft labeling. After considering the extent to which the performance criteria had been met as a whole against the backdrop of competing priorities, and after factoring in the difficulty of achievement of the performance criteria that were met and that were not met, the compensation committee determined that, on balance, the achievement by the company was at the 90% level.

 

(9) 

Amounts may not total due to rounding.

 

*

Non-GAAP adjusted net income is a non-GAAP financial measure that both excludes certain items from our GAAP reported net income and includes certain tax-related adjustments. For more information on our presentation and calculation of non-GAAP adjusted net income, and a reconciliation of non-GAAP adjusted net income to GAAP net income, see “Reconciliations of Non-GAAP Financial Measures” below. In addition, solely for purposes of calculating the performance multiplier for 2018, non-GAAP adjusted net income and the performance objective included additional adjustments as set forth in footnote (7) to this table.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Qualitative Objectives

The qualitative corporate objectives approved by the board of directors fell into two categories: (1) progress on corporate development activities, with a relative weighting of 20%, and (2) a demonstrated commitment to and progress on certain organizational goals, with a relative weighting of 10%. Achievement of the qualitative objectives is inherently less objectively measurable than with respect to the quantitative objectives.

Corporate Development Objective. The objective relating to progress on corporate development activities consisted of identifying and implementing new collaborations and acquisitions and expanding our development and commercial portfolio of innovative products through a range of strategic and partnering transactions with a focus on sleep, hematology/oncology and identification of additional therapeutic area opportunities. The multiplier applied to the corporate development objective ranged from 0% to 200%, based on the compensation committee’s determination of the extent to which the corporate development objective was achieved during the year. In considering the company’s corporate development accomplishments in 2018, the compensation committee noted that we had identified one significant opportunity which we ultimately determined not to pursue and completed a significant strategic partnership deal with Codiak, Inc., which closed in the first week of 2019, that we believe will allow us to potentially develop multiple new therapies as we seek to add long-term value for patients and shareholders. The compensation committee weighed heavily our successful divestiture of our Prialt assets, our efforts to enhance our internal corporate development approval process and governance structure, our successful refinancing of our credit agreement, and our active and thoughtful corporate development process that led to the evaluation of several other opportunities during the year. However, because we were not able to close at least one significant corporate development transaction, the compensation committee determined that, as a whole, our achievement resulted in a multiplier of 60% and, therefore, a 12% bonus pool funding percentage for the 2018 corporate development objective.

Organizational Objective. With respect to the organizational objective, the compensation committee established three sub-goals. Because the sub-goals are not objectively measurable, they were not assigned individual weightings. The multiplier applied to the organizational corporate objective ranged from 0% to 200%, based on the compensation committee’s determination of the extent to which the aggregate organizational corporate objective, including sub-goals, were achieved, as a whole, during the year. The organizational corporate objective sub-goals were:

 

 

developing, implementing and recognizing inclusive people leadership practices and behaviors across the company;

 

 

continuing to attract and retain talent to drive execution of initiatives in line with the company’s strategy, mission and values; and

 

 

enhancing our differentiating capabilities and driving organizational efficiencies.

In evaluating the organizational objective, the compensation committee determined that, among other things, the following organizational and operational accomplishments were relevant: entry into innovative settlement agreements with our remaining Xyrem ANDA filers which provide additional clarity related to our Xyrem intellectual property; refinement of our global molecule team and project team structures to enhance accountability for strategy development and execution and to achieve a more scalable, streamlined and thoughtful portfolio management process; specified hiring quality scores and voluntary turnover rates at or below certain thresholds; and implementation of a launch framework for Vyxeos in the EU and Sunosi in the U.S. After taking into consideration both our accomplishments and challenges with respect to these sub-goals, the compensation committee determined that as a whole, our overall achievement resulted in a multiplier of 100% and therefore, a 10% bonus pool funding percentage for the 2018 organizational objective.

2018 Compensation Decisions for Our Named Executive Officers

General Approach

In making compensation decisions for 2018, the compensation committee considered the factors discussed in “Factors Used in Determining Executive Compensation” above and the compensation committee’s specific compensation objectives for 2018. Our compensation committee did not use a formula or assign a particular weight to any one factor in determining each NEO’s target total direct compensation. Rather, our compensation committee’s determination of the target total direct compensation, mix of cash and equity and fixed and “at-risk” pay opportunities was a subjective, individualized decision for each NEO. The compensation committee reviewed and considered each element of pay in the context of the overall target total direct compensation for each NEO. When the compensation committee made changes to one element of pay, those changes were made in the context of the levels of the other elements of pay, and the resulting target total direct compensation for each NEO. As a result, the 2018 pay decisions for each NEO are presented holistically in this section.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

The compensation committee also reviewed market data with respect to target total direct compensation for similarly-situated executives of our peer companies, and also had access to market data with respect to target total cash compensation and target equity award grants. However, as described above, the compensation committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account company-by-company variations among actual roles with similar titles or the specific performance of our executive officers.

Summary of 2018 Compensation Decisions

Target Total Cash Compensation. The compensation committee increased each NEO’s base salary for 2018, and the new base salary rates were effective February 17, 2018. There were no changes to the 2018 target performance bonuses (expressed as a percentage of base salary) for any of the NEOs because the compensation committee determined the current percentages remained at appropriate levels and were consistent with our philosophy that the target percentages should generally vary based on each NEO’s job level in order to promote internal equity for positions of similar scope and impact and to reinforce teamwork across the executive group. Mr. Cozadd’s annual target performance bonus (as a percentage of salary) was set at a higher percentage than the percentages for other NEOs to reflect that he has ultimate responsibility for our company’s performance. Mr. Cozadd’s target bonus percentage has remained the same since 2012.

Target Equity Compensation and Impact on Target Total Direct Compensation. In determining the appropriate size of 2018 equity award grants, at the time the compensation committee (and the board of directors, with respect to Mr. Cozadd) made its decisions, after careful consideration, the compensation committee aimed to deliver equity awards to each executive officer of a similar value to those delivered in 2017 to balance the need to manage overall dilution to our shareholders, maintain equity opportunities competitive with the market and serve the retention and incentive purposes of the awards. As a result of our share price decreasing slightly between when the compensation committee approved the equity awards and when the equity awards were granted pursuant to our equity incentive grant policy, as further described below under “Equity Grant Timing and Equity Plan Information,” certain NEOs’ equity award grant date values, and resulting target total direct compensation for 2018, were modestly lower than in 2017, as shown in the tables below.

Form and Mix of Equity Awards and Share Amount Determinations. The compensation committee intended to deliver approximately 50% of the potential value of each NEO’s equity award in the form of stock options and 50% of the potential value in the form of RSUs, in each case based on an approximation of grant date fair value, using an approximately 2.5 to 1 ratio of stock option grants to RSUs, in order to mitigate dilution and to reflect the increased value of receiving shares at full value without the payment of an exercise price. The 50/50 value split was consistent with our historical practices for both our executive officers and other employees and took into consideration peer practices and market data. The actual share amounts granted to each executive officer were determined by applying the company’s 90-day average share price (as of December 31, 2017) to the grant date fair value of the award, which the compensation committee and, in the case of Mr. Cozadd, the board of directors, intended to deliver (dividing such value by the average share price, in the case of RSUs, and applying a Black-Scholes option pricing model calculation using the average share price, in the case of stock options). A 90-day average share price was used, rather than a single day share price, in order to provide a more stabilized share value less susceptible to possible swings in the market. The exercise price of each stock option is equal to our closing share price on Nasdaq Global Select Market on the date of grant. The compensation committee understands that this process can result in the actual reported grant date value of an award being higher or lower than the intended value approved by the compensation committee, but has considered, in consultation with Radford, various approaches to granting equity awards, each of which have advantages and disadvantages, and determined that the process described above, which has been used historically by the compensation committee, is the most appropriate for the company at this time. The shares subject to the option awards vest over four years, with 25% vesting on the one-year anniversary of the grant date and the remainder vesting in equal monthly installments thereafter over the remaining 36 months. The RSUs vest over four years in equal annual installments.

On an annual basis, the compensation committee reviews market trends, including market peer use of performance-based vesting for equity awards, which are often favored by proxy advisory firms and certain institutional investors. For 2018, the compensation committee determined that equity awards vesting over time continued to be the most appropriate incentive structure for our executive officers to reward performance over time and achieve our retention objectives. Our time-based vesting schedules deliver retention incentives for the company over the long-term and, unlike awards that vest based on pre-determined operational or market goals, do not create incentives for inappropriate short-term risk-taking at the expense of realizing long-term value or the potential incentive for unethical conduct. In addition, we deliver a meaningful portion of compensation in the form of annual incentive compensation that is directly tied to, and incentivizes our executives to work towards, achievement of our key corporate goals. The key purposes served by time-vesting options and RSUs for 2018 are further discussed above in the chart captioned “Components of Total Direct Compensation.

 

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Executive Compensation (continued)

 

 

Individual NEO Compensation Decisions

Below are summaries, for each NEO individually, of the compensation committee’s decisions about 2018 target total direct compensation and the changes from each NEO’s 2017 target total direct compensation. As described above, when making the 2018 compensation decisions, the compensation committee focused primarily on the target total direct compensation for each NEO while considering the factors set forth in the section titled “Factors Used in Determining Executive Compensation” and the compensation committee’s specific compensation objectives for 2018. The footnotes to the tables also include the actual performance bonus paid to each of the NEOs for 2018 and how that actual bonus compared to each NEO’s target bonus.

Bruce C. Cozadd, Chairman and CEO

 

  2017 Pay ($) 2018 Pay ($) Change (%)

2018 Pay Relative    

to Market Data    

(percentile)(1)    

 

   Target Total Cash Compensation

 

 

 

 

 

1,905,385

 

 

 

 

 

 

 

 

1,962,985

 

 

 

 

 

3.0

 

%

 

Base Salary(2)

 

 

 

955,000

 

 

 

 

 

983,700

 

 

Target Performance Bonus(3)

 

 

950,385

 

 

 

 

 

979,285

 

 

 

   Target Equity Compensation(4)

 

 

 

8,381,703

 

 

 

 

 

9,470,396

 

 

 

 

13.0

 

%

 

Options

 

 

 

3,669,875

 

 

 

 

 

4,265,610

 

 

RSUs

 

 

 

4,711,828

 

 

 

 

 

5,204,786

 

 

Target Total Direct Compensation(5)

  10,287,088     11,433,381   11.1 %   50th

 

(1) 

Reflects where the 2018 target total direct compensation (annual base salary, target performance bonus and the target equity compensation value approved by the compensation committee) fell within the market data at the time reviewed and approved by the compensation committee. The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with FASB Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC 718, which was modestly lower than the target equity compensation value approved by the compensation committee as a result of the timing of the grant and a slight decrease in our share price as of the grant date, as described above.

 

(2) 

Represents annual base salary rate for the applicable year.

 

(3) 

Target amounts are as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively, and reflect the target percentage of base salary earned for each fiscal year. The 2018 amount reflects a target performance bonus of 100% of base salary earned, unchanged from the target performance bonus percentage for 2017. The actual 2018 performance bonus paid was $980,300, reflecting 100.1% of the target performance bonus, based entirely on the overall 2018 bonus pool funding percentage of 100.1%. The compensation committee (with approval from the board of directors) determined that the overall 2018 bonus pool funding percentage of 100.1% was applicable to Mr. Cozadd, because, as CEO, Mr. Cozadd is responsible for the company meeting all of its objectives.

 

(4) 

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively. See the Grants of Plan-Based Awards Table for the number of shares subject to each award.

 

(5) 

The compensation committee and board of directors designed Mr. Cozadd’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. The compensation committee believed it was appropriate to provide a modest increase to his base salary and an increase in the value of equity awards granted to Mr. Cozadd in 2018 in recognition of his individual performance, the performance of the company under his leadership and an assessment of internal equity and to remain in line with general market increases. As described above, Mr. Cozadd’s target bonus percentage remained the same as in 2017, and while the increase in his base salary resulted in a higher target performance bonus opportunity, Mr. Cozadd’s target total direct compensation for 2018 did not exceed the median of the market data.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Daniel N. Swisher, Jr., President and COO

 

      2017 Pay ($)      2018 Pay ($)      Change (%)(1)     

2018 Pay Relative     

to Market Data     

(percentile)(2)     

 

   Target Total Cash Compensation

 

  

 

 

 

 

N/A     

 

 

 

 

  

 

 

 

 

1,084,495

 

 

 

 

  

 

 

 

 

N/A     

 

 

 

 

  

Base Salary(3)

 

       

 

625,000

 

 

 

     

Target Performance Bonus(4)

 

       

 

334,495

 

 

 

     

Signing Bonus(5)

 

       

 

125,000

 

 

 

     

 

   Target Equity Compensation(6)

     N/A             4,607,220        N/A          

Options

 

       

 

2,075,162

 

 

 

     

RSUs

 

       

 

2,532,058

 

 

 

     

Target Total Direct Compensation(7)

     N/A             5,691,715        N/A           50th

 

(1)

In December 2017, we entered into an employment offer letter with Mr. Swisher pursuant to which he agreed to serve as our President and COO effective January 3, 2018.

 

(2)

Reflects where the 2018 target total direct compensation (annual base salary, target performance bonus and the target equity compensation value approved by the compensation committee) fell within the market data for a newly hired President and COO at the time reviewed and approved by the compensation committee. The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718.

 

(3)

Represents annual base salary rate for 2018.

 

(4)

Target amounts are as reported in the Grants of Plan-Based Awards Table for 2018 and reflect the target percentage of base salary earned for 2018. The actual 2018 performance bonus paid was $400,000, reflecting 119.0% of target performance bonus, based on the overall 2018 bonus pool funding percentage of 100.1% and Mr. Swisher’s individual contributions to such achievement. Specifically, the compensation committee considered that Mr. Swisher oversaw a large and complex function, and, with the vacancy in the company’s role of head of research and development for the majority of the year, the compensation committee took into account Mr. Swisher’s scope of responsibility and the criticality of his role.

 

(5)

Represents the cash signing bonus Mr. Swisher received in connection with his appointment as President and COO. To the extent Mr. Swisher had voluntarily resigned within one year of his employment start date, he would have been required to repay the full amount of the signing bonus on or within 30 days of the later of his resignation or termination date.

 

(6)

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2018. See the Grants of Plan-Based Awards Table for the number of shares subject to each award. As a result of the timing of Mr. Swisher’s new-hire equity awards, he was not eligible to receive regular annual equity awards during 2018.

 

(7) 

The compensation committee designed Mr. Swisher’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. In determining his compensation package, the compensation committee considered the company’s executive compensation program and received advice from Radford to design a competitive, market-based compensation package appropriate for a senior executive with Mr. Swisher’s skills and experience.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Matthew P. Young, Executive Vice President and CFO

 

      2017 Pay ($)      2018 Pay ($)      Change (%)    

2018 Pay Relative     

to Market Data     

(percentile)(1)     

 

   Target Total Cash Compensation

 

  

 

 

 

 

849,962

 

 

 

 

  

 

 

 

 

896,462

 

 

 

 

  

 

 

 

 

5.5

 

 

 

 

Base Salary(2)

 

    

 

550,000

 

 

 

    

 

580,000

 

 

 

    

Target Performance Bonus(3)

 

    

 

299,962

 

 

 

    

 

316,462

 

 

 

    

 

   Target Equity Compensation(4)

 

  

 

 

 

 

2,422,458

 

 

 

 

  

 

 

 

 

2,405,993

 

 

 

 

  

 

 

 

 

(0.7

 

 

)% 

 

 

Options

 

    

 

1,060,658

 

 

 

    

 

1,083,695

 

 

 

    

RSUs

 

    

 

1,361,800

 

 

 

    

 

1,322,297

 

 

 

    

Target Total Direct Compensation(5)

     3,272,420        3,302,454        0.9   50th  

 

(1)

Reflects where the 2018 target total direct compensation (annual base salary, target performance bonus and the target equity compensation value approved by the compensation committee) fell within the market data at the time reviewed and approved by the compensation committee. The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718, which was modestly lower than the target equity compensation value approved by the compensation committee as a result of the timing of the grant and a slight decrease in our share price as of the grant date, as described above.

 

(2) 

Represents annual base salary rate for the applicable year.

 

(3) 

Target amounts are as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively, and reflect the target percentage of base salary earned for each fiscal year. The 2018 amount reflects a target performance bonus of 55% of base salary earned, unchanged from the target performance bonus percentage for 2017. The actual 2018 performance bonus paid was $365,000, reflecting 115% of target performance bonus, based on the overall 2018 bonus pool funding percentage of 100.1% and Mr. Young’s significant individual contributions to such achievement. Specifically, the compensation committee considered Mr. Young’s overall leadership across the company, including our finance organization, investor relations, facilities and information technology, his performance with respect to the execution of corporate development and capital financing priorities in 2018, particularly with respect to the refinancing of our credit agreement and in light of the vacancy in the company’s role of head of corporate development for a majority of the year, and his criticality to the company’s business as a whole.

 

(4) 

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively. See the Grants of Plan-Based Awards Table for the number of shares subject to each award.

 

(5) 

The compensation committee designed Mr. Young’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. Consistent with the approach for 2018 equity award grants described above, the compensation committee generally aimed to deliver equity awards to the executive vice presidents of a similar grant date value to those delivered to executive vice presidents in 2017. Mr. Young’s target equity award grant date value and resulting target total direct compensation for 2018 were comparable to 2017. The compensation committee determined it was appropriate to increase Mr. Young’s base salary from an internal pay equity perspective, in an amount that reflects his knowledge and expertise in the role and the criticality of Mr. Young’s role as our CFO and to bring his base salary closer to other NEOs who contribute similarly. In addition, the compensation committee considered the retention value of his compensation given Mr. Young’s criticality to the company’s business development strategy and the breadth of his impact on the business. As described above, Mr. Young’s target bonus percentage remained the same as in 2017, and the increase in his base salary resulted in the higher target performance bonus opportunity shown above.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Suzanne Sawochka Hooper, Former Executive Vice President and GC

 

      2017 Pay ($)    2018 Pay ($)    Change (%)   2018 Pay Relative    
to Market Data    
(percentile)(1)    

 

   Target Total Cash Compensation

 

    

 

 

 

 

850,385

 

 

 

    

 

 

 

 

896,462

 

 

 

    

 

 

 

 

5.4

 

 

%

 

   

Base Salary(2)

 

      

 

550,000

 

 

      

 

580,000

 

 

        

Target Performance Bonus(3)

 

      

 

300,385

 

 

      

 

316,462

 

 

        

 

   Target Equity Compensation(4)

       2,422,458        2,405,993        (0.7 )%    

Options

 

      

 

1,060,658

 

 

      

 

1,083,695

 

 

        

RSUs

 

      

 

1,361,800

 

 

      

 

1,322,297

 

 

        

Target Total Direct Compensation(5)

       3,272,843        3,302,454        0.9 %       50-60 th  

 

(1)

Reflects where the 2018 target total direct compensation (annual base salary, target performance bonus and the target equity compensation value approved by the compensation committee) fell within the market data at the time reviewed and approved by the compensation committee. The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718, which was modestly lower than the target equity compensation value approved by the compensation committee as a result of the timing of the grant and a slight decrease in our share price as of the grant date, as described above.

 

(2)

Represents annual base salary rate for the applicable year.

 

(3)

Target amounts are as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively, and reflect the target percentage of base salary earned for each fiscal year. The 2018 amount reflects a target performance bonus of 55% of base salary earned, unchanged from the target performance bonus percentage for 2017. The actual 2018 performance bonus paid was $400,000, reflecting 126.0% of target performance bonus, based on the overall 2017 bonus pool funding percentage of 100.1% and Ms. Hooper’s significant individual contributions to such achievement. Specifically, the compensation committee considered Ms. Hooper’s leadership in settling the company’s litigation with the last remaining Xyrem ANDA filers, her oversight of complex strategic matters relating to Xyrem and our other products and her performance with respect to executing financing priorities in 2018.

 

(4) 

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively. See the Grants of Plan-Based Awards Table for the number of shares subject to each award.

 

(5) 

The compensation committee designed Ms. Hooper’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. Consistent with the approach for 2018 equity award grants described above, the compensation committee generally aimed to deliver equity awards to the executive vice presidents of a similar grant date value to those delivered to executive vice presidents in 2017. Ms. Hooper’s target equity award grant date value and resulting target total direct compensation for 2018 were comparable to 2017. Ms. Hooper’s resulting target total direct compensation fell between the 50th and 60th percentile of the market data, which the compensation committee determined was appropriate because of Ms. Hooper’s experience, her oversight of multiple functions including legal, compliance, corporate affairs and government relations, and her sustained contribution and overall criticality to our business. The compensation committee determined it was appropriate to increase Ms. Hooper’s base salary because of her contributions to achieving strategic initiatives in line with corporate objectives. As described above, Ms. Hooper’s target bonus percentage remained the same as in 2017, and the increase in her base salary resulted in the higher target performance bonus opportunity shown above. In January 2019, Ms. Hooper notified us of her decision to resign from her position as Executive Vice President and GC, effective as of March 1, 2019.

 

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2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Michael P. Miller, Executive Vice President, U.S. Commercial

 

      2017 Pay ($)    2018 Pay ($)    Change (%)   2018 Pay Relative    
to Market Data    
(percentile)(1)    

 

   Target Total Cash Compensation

 

    

 

 

 

 

770,769

 

 

 

 

    

 

 

 

 

811,635

 

 

 

      

 

5.3

 

%

 

   

Base Salary(2)

 

      

 

500,000

 

 

 

      

 

525,000

 

 

        

Target Performance Bonus(3)

 

      

 

270,769

 

 

 

      

 

286,635

 

 

        

 

   Target Equity Compensation(4)

    

 

 

 

2,092,403

 

 

    

 

 

 

2,047,653

 

    

 

 

 

(2.1

 

)%

   

Options

 

      

 

915,873

 

 

 

      

 

922,294

 

 

        

RSUs

 

      

 

1,176,530

 

 

 

      

 

1,125,359

 

 

        

Target Total Direct Compensation(5)

       2,863,172          2,859,288        (0.1 )%       60 th  

 

(1)

Reflects where the 2018 target total direct compensation (annual base salary, target performance bonus and the target equity compensation value approved by the compensation committee) fell within the market data at the time reviewed and approved by the compensation committee. The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718, which was modestly lower than the target equity compensation value approved by the compensation committee as a result of the timing of the grant and a slight decrease in our share price as of the grant date, as described above.

 

(2)

Represents annual base salary rate for the applicable year.

 

(3)

Target amounts are as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively, and reflect the target percentage of base salary earned for each fiscal year. The actual 2018 performance bonus paid was $275,000, reflecting 96.0% of target performance bonus, based on the overall 2018 bonus pool funding percentage of 100.1%. The compensation committee awarded Mr. Miller a bonus that was closer to the corporate funding percentage given Mr. Miller’s U.S. commercial organization delivered solid overall performance in 2018.

 

(4)

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2017 and 2018, respectively. See the Grants of Plan-Based Awards Table for the number of shares subject to each award.

 

(5) 

The compensation committee designed Mr. Miller’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective, in line with our pay-for-performance philosophy. Consistent with the approach for 2018 equity award grants described above, the compensation committee aimed to deliver equity awards to Mr. Miller of a similar grant date value to those delivered to Mr. Miller in 2017. Mr. Miller’s resulting target total direct compensation fell at the 60th percentile of the market data, which the compensation committee determined was appropriate because of Mr. Miller’s experience and overall contribution to our business. The compensation committee determined it was appropriate to increase Mr. Miller’s base salary in line with the market data. As described above, Mr. Miller’s target bonus percentage increased in 2018, and the increase in his base salary resulted in the higher target performance bonus opportunity shown above.

 

JAZZ PHARMACEUTICALS  |  Proxy Statement    49


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Additional Compensation Information

Ownership Guidelines for Executive Officers

We maintain share ownership guidelines for our CEO and certain other employees who serve on our executive committee, including our NEOs. Under the guidelines, which were amended in May 2018, these individuals are expected to own a number of the company’s ordinary shares with a value equal to six times base salary (increased from three times base salary) for the company’s CEO, two times base salary (increased from one times base salary) for each other member of the company’s executive committee who is an officer for purposes of Section 16 of the Exchange Act, and one times base salary for each other member of the company’s executive committee. The guidelines provide that the officers are expected to establish the minimum ownership levels within five years of first becoming subject to the guidelines (and, with respect to the increased amounts established by the amended guidelines, by the last day of 2021 for officers who were subject to the guidelines as of January 1, 2018). Each of our continuing NEOs was in compliance with the guidelines as of May 13, 2019, except as noted below.

Ownership Guidelines and Compliance

 

 Name    Ownership
Requirement(1)
  

Actual

Ownership(2)

 Bruce C. Cozadd

 

      

 

6.0x

 

 

      

 

27.9x

 

 

 Daniel N. Swisher, Jr.(3)

 

      

 

2.0x

 

 

      

 

0.6x

 

 

 Matthew P. Young

 

      

 

2.0x

 

 

      

 

2.2x

 

 

 Michael P. Miller

 

      

 

2.0x

 

 

      

 

2.7x

 

 

 

(1) 

This column reflects the increased ownership requirement in the guidelines as amended in May 2018 (increased from three times to six times for the CEO and one times to two times for each Section 16 officer).

 

(2) 

Actual ownership calculated based on (a) value of shares owned as of May 13, 2019, using the closing price of the company’s ordinary shares on May 13, 2019 of $135.79, divided by (b) 2019 base salary. Under the guidelines as amended in May 2018, once an officer has reached his or her compliance deadline, such officer’s share ownership will be assessed annually at the end of each fiscal year using the average closing price of the company’s ordinary shares over the 90-day period ending on the last day of the company’s immediately preceding fiscal year.

 

(3) 

Mr. Swisher was appointed our President and COO as of January 3, 2018 and, accordingly, has five years from his appointment, or until 2023, to comply with the guidelines.

Shares that count toward satisfaction of these guidelines include: shares owned outright by the individual (including RSUs that have vested but not yet settled, net of taxes); shares retained after an option exercise or issuance under another type of equity award granted under the company’s equity incentive plans; shares retained after purchase under the ESPP; and shares held in trust for the benefit of the individual. The compensation committee has discretion to develop an alternative individual guideline or an alternative method of complying with the applicable individual guideline for an individual covered by the guidelines if compliance would place a significant hardship on such individual.

Change in Control Plan

Our compensation committee periodically reviews the terms of our change in control plan, including its “double-trigger” structure and benefits, against market data to ensure that the benefits we offer remain appropriate.

The compensation committee last made refinements to the program in 2016 to provide greater clarity, reflect market practice and improvements for both the executives and our company and updates in applicable law since the plan was originally adopted in 2007. Only our executive officers who are employees of our U.S. affiliates are eligible to participate in the change in control plan, which includes all of our NEOs. Certain executive officers who are not employed by our U.S. affiliates receive comparable change in control benefits pursuant to their employment agreements. The compensation committee believes that the change in control benefits we provide are representative of market practice, both in terms of design and cost, and are sufficient to retain our current executive team and to recruit talented executive officers in the future. The terms of the change in control plan are described below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

 

50    JAZZ PHARMACEUTICALS  |  Proxy Statement


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Equity Grant Timing and Equity Plan Information

Our equity incentive grant policy, which was initially approved by our board of directors after the Azur Merger and amended and restated most recently in November 2017, provides that all equity grants that are approved for executive officers will be granted on the second trading day following the filing date of our next quarterly or annual report filed under the Exchange Act that occurs after the date on which such grants are approved by our board of directors or compensation committee, as applicable. Accordingly, our equity incentive grant policy requires that grants to our executive officers, if any, be made shortly after we have released information about our financial performance to the public for the applicable annual or quarterly period, so that the market will have an opportunity to absorb the financial and other information included in our annual and periodic reports before such grants are awarded. As a result, the timing of equity awards is not coordinated in a manner that intentionally benefits our executive officers; rather, the policy is designed with the objective that the market price of our ordinary shares at the time of grant can generally be expected to reflect our then-current results and prospects.

We currently grant equity awards to the NEOs, including stock options and RSUs, under the 2011 Equity Incentive Plan, or the 2011 Plan. The 2011 Plan was adopted by Jazz Pharmaceuticals, Inc.’s board of directors and approved by Jazz Pharmaceuticals, Inc.’s stockholders in connection with their approval of the Azur Merger in December 2011 and was assumed by us upon the completion of the Azur Merger. Before the 2011 Plan was adopted, we granted stock options under our 2007 Equity Incentive Plan, or the 2007 Plan, which was adopted by Jazz Pharmaceuticals, Inc.’s board of directors and approved by Jazz Pharmaceuticals, Inc.’s stockholders in connection with Jazz Pharmaceuticals, Inc.’s initial public offering. Awards granted under the 2007 Plan continue to be governed by the terms of the 2007 Plan, but subsequent equity awards have been, and continue to be, awarded under the 2011 Plan. The 2011 Plan affords the compensation committee the flexibility to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of employees of our company and its subsidiaries and to provide long-term incentives that align the interests of employees with the interests of our shareholders.

Additional long-term equity incentives are provided through the ESPP, which we assumed upon the completion of the Azur Merger. Pursuant to the ESPP, all eligible employees, including the NEOs, may allocate up to 15% of their base salary to purchase our stock at a 15% discount to the market price, subject to specified limits.

Accounting and Tax Considerations

Under ASC 718, the company is required to estimate and record an expense for each award of equity compensation (including stock options and RSUs) over the vesting period of the award. We record share-based compensation expense on an ongoing basis according to ASC 718. The compensation committee has considered, and may in the future consider, the grant of performance-based or other types of stock awards to executive officers in lieu of or in addition to stock option and time-based RSU grants in light of the accounting impact of ASC 718 and other considerations.

Under Section 162(m) of the Internal Revenue Code, or Section 162(m), compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible for tax purposes.

Prior to the enactment of the U.S. Tax Act, Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as “performance-based compensation” under Section 162(m). Pursuant to the U.S. Tax Act, the performance-based compensation exception under Section 162(m) was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 and which is not modified in any material respect on or after such date.

Compensation paid to each of the company’s “covered employees” in excess of $1 million per taxable year generally will not be deductible unless it qualifies for the performance-based compensation exception under Section 162(m) pursuant to the transition relief described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), as well as other factors beyond the control of the compensation committee, no assurance can be given that any compensation paid by the company will be eligible for such transition relief and be deductible by the company in the future. Although the compensation committee will continue to consider tax implications as one factor in determining executive compensation, the compensation committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the company’s NEOs in a manner consistent with the goals of the company’s executive compensation program and the best interests of the company and its stockholders, which may include providing for compensation that is not deductible by the company due to the deduction limit under Section 162(m). The compensation committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the company’s business needs.

 

JAZZ PHARMACEUTICALS  |  Proxy Statement    51


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Risk Assessment Concerning Compensation Practices and Policies

The compensation committee annually reviews the company’s compensation policies and practices to assess whether they encourage employees to take inappropriate risks. After reviewing each of the company’s compensation plans, and the checks and balances built into, and oversight of, each plan, in February 2019, the compensation committee determined that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on our company as a whole. In addition, the compensation committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks, and significant compensation decisions, as well as decisions concerning the compensation of the company’s executive officers, include subjective considerations by the compensation committee or the board of directors, which restrain the influence of formulae or objective factors on excessive risk-taking. Finally, the mix of short-term compensation (in the form of salary and annual bonus, if any), and long-term compensation (in the form of stock options and RSUs) also prevents undue focus on short-term results and helps align the interests of the company’s executive officers with the interests of our shareholders.

Reconciliations of Non-GAAP Financial Measures

To supplement our financial results presented in accordance with GAAP, we use certain non-GAAP (also referred to as non-GAAP adjusted) financial measures in this Compensation Discussion and Analysis. In particular, we present non-GAAP adjusted net income (and the related per share measures), which exclude certain items from reported GAAP net income and reported GAAP net income attributable to Jazz Pharmaceuticals plc (and the related per share measures), as applicable, as detailed in the reconciliation table that follows, adjust for the income tax effect of the non-GAAP adjustments and, for the 2017 and 2018 periods, adjust for the U.S. Tax Act benefit, and finally, for the 2015 period, adjust for the amount attributable to non-controlling interests.

We believe that each of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors and analysts. In particular, we believe that each of these non-GAAP financial measures, when considered together with our financial information prepared in accordance with GAAP, can enhance investors’ and analysts’ ability to meaningfully compare our results from period to period, and to identify operating trends in our business. In addition, these non-GAAP financial measures are regularly used by investors and analysts to model and track our financial performance. Our management also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions, and compensation of our executives is based in part on these non-GAAP financial measures. Because these non-GAAP financial measures are important internal measurements for our management, we also believe that these non-GAAP financial measures are useful to investors and analysts since these measures allow for greater transparency with respect to key financial metrics we use in assessing our own operating performance and making operating decisions.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures; should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP; have no standardized meaning prescribed by GAAP; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future, there may be other items that we may exclude for purposes of our non-GAAP financial measures, and we have ceased, and may in the future cease, to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of our adjustments to arrive at our non-GAAP financial measures. Because of the non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measures as used by us in this Compensation Discussion and Analysis have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

 

52    JAZZ PHARMACEUTICALS  |  Proxy Statement


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Reconciliations of GAAP reported net income to non-GAAP adjusted net income (and the related per share measures) for the 2016, 2017 and 2018 periods, and of GAAP reported net income attributable to Jazz Pharmaceuticals plc to non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share measures) for the 2015 period, are as follows (in millions, except percentages and per share amounts):

 

      2015     2016     2017     2018     2015-2018
CAGR
 

 

GAAP reported net income(1)

  

 

$

 

 329.5

 

 

 

 

$

 

 396.8

 

 

 

 

$

 

487.8

 

 

 

 

$

 

 447.1

 

 

 

 

Intangible asset amortization

  

 

 

 

98.2

 

 

 

 

 

 

102.0

 

 

 

 

 

 

152.1

 

 

 

 

 

 

201.5

 

 

 

 

Impairment charges and disposal costs

  

 

 

 

31.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44.0

 

 

 

 

Share-based compensation expense

  

 

 

 

91.5

 

 

 

 

 

 

98.8

 

 

 

 

 

 

106.9

 

 

 

 

 

 

102.4

 

 

 

 

Loss contingency

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57.0

 

 

 

 

Upfront and milestone payments

  

 

 

 

25.0

 

 

 

 

 

 

23.7

 

 

 

 

 

 

101.5

 

 

 

 

 

 

11.0

 

 

 

 

Transaction and integration related costs

  

 

 

 

18.2

 

 

 

 

 

 

13.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses related to certain legal proceedings and restructuring

  

 

 

 

1.6

 

 

 

 

 

 

6.1

 

 

 

 

 

 

6.0

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense

  

 

 

 

22.7

 

 

 

 

 

 

22.1

 

 

 

 

 

 

30.0

 

 

 

 

 

 

44.0

 

 

 

 

Loss on extinguishment and modification of debt

  

 

 

 

16.8

 

 

 

 

 

 

0.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect of above adjustments

  

 

 

 

(39.6

 

 

 

 

 

(36.7

 

 

 

 

 

(58.8

 

 

 

 

 

(60.9

 

 

 

U.S. Tax Act benefit

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(148.8

 

 

 

 

 

(7.5

 

 

 

Amount attributable to non-controlling interests(2)

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted net income(1)

  

 

$

 

595.5

 

 

 

 

$

 

627.2

 

 

 

 

$

 

676.7

 

 

 

 

$

 

838.6

 

 

 

 

 

 

 

GAAP reported net income per diluted share(1)

  

 

$

 

5.23

 

 

 

 

$

 

6.41

 

 

 

 

$

 

7.96

 

 

 

 

$

 

7.30

 

 

 

 

 

 

12%

 

 

 

Non-GAAP adjusted net income per diluted share(1)

  

 

$

 

9.45

 

 

 

 

$

 

10.14

 

 

 

 

$

 

11.04

 

 

 

 

$

 

13.70

 

 

 

 

 

 

13%

 

 

 

Weighted-average ordinary shares used in diluted per share calculations

 

  

 

 

 

 

63.0

 

 

 

 

 

 

 

 

 

61.9

 

 

 

 

 

 

 

 

 

61.3

 

 

 

 

 

 

 

 

 

61.2

 

 

 

 

       

 

(1) 

GAAP reported net income and non-GAAP adjusted net income for the 2015 period (and the related per share measure) are attributable to Jazz Pharmaceuticals plc.

 

(2) 

The adjustment for the amount attributable to non-controlling interests for the 2015 period was negligible and therefore not reflected in the table above which is measured in millions.

 

JAZZ PHARMACEUTICALS  |  Proxy Statement    53


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Summary of Compensation

The following table sets forth certain summary information for the years indicated with respect to the compensation earned by the NEOs during fiscal years 2018, 2017 and 2016, as applicable.

SUMMARY COMPENSATION TABLE

 

 Name and Principal Position   Year     Salary
($)(1)
    Bonus
($)
    Stock
Awards
($)(2)
    Option
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(4)
  All Other
Compensation
($)(5)
  Total ($)

 

 Bruce C. Cozadd

 

 

 

 

2018

 

 

 

 

 

 

979,285

 

 

 

 

 

 

 

 

 

 

 

 

5,204,786

 

 

 

 

 

 

4,265,610

 

 

 

 

980,300

 

 

13,152

 

 

11,443,133  

Chairman and CEO

    2017       950,385             4,711,828       3,669,875     961,800   10,722   10,304,610  
    2016       917,308             3,824,157       3,109,285     914,600     5,622     8,770,972  

 

 Daniel N. Swisher, Jr.(6)

 

 

 

 

2018

 

 

 

 

 

 

608,173

 

 

 

 

 

 

125,000

 

(7) 

 

 

 

 

2,532,058

 

 

 

 

 

 

2,075,162

 

 

 

 

400,000

 

 

12,948

 

 

  5,753,341  

President and COO

                  
               

 

 Matthew P. Young

 

 

 

 

2018

 

 

 

 

 

 

575,385

 

 

 

 

 

 

 

 

 

 

 

 

1,322,297

 

 

 

 

 

 

1,083,695

 

 

 

 

365,000

 

 

  9,960

 

 

  3,356,337  

Executive Vice President and CFO

    2017       545,385             1,361,800       1,060,658     315,000     9,810     3,292,653  
    2016       513,077             1,110,239       902,696     300,000     4,710     2,830,722  

 

 Suzanne Sawochka Hooper(8)

 

 

 

 

2018

 

 

 

 

 

 

575,385

 

 

 

 

 

 

 

 

 

 

 

 

1,322,297

 

 

 

 

 

 

1,083,695

 

 

 

 

400,000

 

 

10,872

 

 

  3,392,249  

Former Executive Vice President and GC

    2017       546,154             1,361,800       1,060,658     350,000   10,722     3,329,334  
    2016       521,154             1,110,239       902,696     300,000     5,622     2,839,711  

 

 Michael P. Miller

 

 

 

 

2018

 

 

 

 

 

 

521,154

 

 

 

 

 

 

 

 

 

 

 

 

1,125,359

 

 

 

 

 

 

922,294

 

 

 

 

275,000

 

 

15,774

 

 

  2,859,581  

Executive Vice President

    2017       492,308             1,176,530       915,873     270,000   15,624     2,870,335  

U.S Commercial

    2016       446,923             740,159       601,797     225,000     7,902     2,021,781  

 

(1) 

The dollar amounts in this column represent base salary earned during the indicated fiscal year 2018 base salary rates were effective February 17, 2018. For more information on salaries in 2018, see “Compensation Discussion and Analysis—2018 Compensation Decisions for Our Named Executive Officers—Individual NEO Compensation Decisions” above.

 

(2) 

The dollar amounts in this column reflect the aggregate grant date fair value of all RSU awards granted during the indicated fiscal year computed in accordance with ASC 718. The grant date fair value of each RSU award is measured based on the closing price of our ordinary shares on the date of grant. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

 

(3) 

The dollar amounts in this column reflect the aggregate grant date fair value of all stock option awards granted during the indicated fiscal year. These amounts have been calculated in accordance with ASC 718, using the Black-Scholes option-pricing model and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in the notes to our audited consolidated financial statements included in the company’s 2018 Annual Report on Form 10-K. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

 

(4) 

The dollar amounts in this column represent the cash bonus awarded under the performance bonus plan for the indicated fiscal year. For more information on the cash bonus awards for 2018, see “Compensation Discussion and Analysis—2018 Performance Bonus Program” and “Compensation Discussion and Analysis—2018 Compensation Decisions for Our Named Executive Officers” above.

 

(5) 

The dollar amounts in this column for 2018 include group term life insurance premiums paid and matching contributions under the 401(k) Plan.

 

(6) 

Mr. Swisher was appointed our President and COO as of January 2018.

 

(7) 

Represents a cash signing bonus of $125,000 paid to Mr. Swisher in 2018.

 

(8) 

Ms. Hooper resigned from her position as Executive Vice President and GC, effective as of March 1, 2019.

 

54    JAZZ PHARMACEUTICALS  |  Proxy Statement


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

Grants of Plan-Based Awards

The following table shows, for the fiscal year ended December 31, 2018, certain information regarding grants of plan-based awards to the NEOs.

GRANTS OF PLAN-BASED AWARDS IN FISCAL 2018

 

 Name Award Type Grant Date

Approval

Date

Estimated

Possible

Payouts

Under Non-

Equity

Incentive

Plan Awards

Target ($)(1)

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units (#)(2)

All Other

Option

Awards:

Number of

Securities

Underlying

Options (#)(2)

Exercise

or Base
Price of

Option

Awards

($/Sh)(3)

Grant Date

Fair Value

of Stock

and Option

Awards

($)(4)

 

 Bruce C. Cozadd

 

 

 

 

Annual Cash

 

 

 

 

 

 

 

 

 

 

 

979,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Option

 

 

3/1/2018

 

2/15/2018

 

 

 

 

 

 

 

 

 

 

 

92,500

 

 

 

 

140.67

 

 

 

 

4,265,610

 

 

 

 

Annual RSU

 

 

3/1/2018

 

2/15/2018

 

 

 

 

 

 

 

37,000

 

 

 

 

 

 

 

 

 

 

 

 

5,204,786

 

 

 Daniel N. Swisher, Jr.

 

 

Annual Cash

 

 

 

 

 

 

334,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial Option

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

 

 

 

 

45,000

 

 

 

 

140.67

 

 

 

 

2,075,162

 

 

 

 

Initial RSU

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

18,000

 

 

 

 

 

 

 

 

 

 

 

 

2,532,058

 

 

 Matthew P. Young

 

 

Annual Cash

 

 

 

 

 

 

316,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Option

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

 

 

 

 

23,500

 

 

 

 

140.67

 

 

 

 

1,083,695

 

 

 

 

Annual RSU

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

9,400

 

 

 

 

 

 

 

 

 

 

 

 

1,322,297

 

 

 Suzanne Sawochka Hooper

 

 

Annual Cash

 

 

 

 

 

 

316,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Option

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

 

 

 

 

23,500

 

 

 

 

140.67

 

 

 

 

1,083,695

 

 

 

 

Annual RSU

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

9,400

 

 

 

 

 

 

 

 

 

 

 

 

1,322,297

 

 

 Michael P. Miller

 

 

Annual Cash

 

 

 

 

 

 

286,635

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Option

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

 

 

 

 

20,000

 

 

 

 

140.67

 

 

 

 

922,294

 

 

 

 

Annual RSU

 

 

3/1/2018

 

2/14/2018

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

 

 

 

 

 

 

1,125,359

 

 

 

(1) 

This column sets forth the target bonus amount for each NEO for the year ended December 31, 2018 under the performance bonus plan. There are no thresholds or maximum bonus amounts for each individual officer established under the performance bonus plan. Target bonuses were set as a percentage of each NEO’s base salary earned for the fiscal year ended December 31, 2018 and were 100% for Mr. Cozadd and 55% for each of Messrs. Swisher, Young and Miller and Ms. Hooper. The dollar value of the actual bonus award earned for the year ended December 31, 2018 for each NEO is set forth in the Summary Compensation Table above. As such, the amounts set forth in this column do not represent either additional or actual compensation earned by the NEOs for the year ended December 31, 2018. For a description of the performance bonus plan, see “Compensation Discussion and Analysis—2018 Performance Bonus Program” above.

 

(2) 

Annual stock options and RSU awards were granted under the 2011 Plan. In January 2018, Mr. Swisher joined the company as President and COO, and received a new hire grant of stock option and RSU awards, which were granted under the 2011 Plan. Each of the annual stock option awards listed in the table above vested as to 25% of the ordinary shares underlying the stock options upon the one year anniversary of the applicable grant date and vest as to the remainder of the shares in 36 equal monthly installments thereafter. Each of the annual RSU awards vest in four equal annual installments on the anniversary of the vesting commencement date of March 5, 2018. Mr. Swisher’s initial stock option award vested as to 25% of the ordinary shares underlying the stock options upon the one year anniversary of his hire date of January 3, 2018 and vests as to the remainder of the shares in 36 equal monthly installments thereafter. His initial RSU award vests in four equal annual installments on the anniversary of his hire date of January 3, 2018. As a general matter, the vested portion of stock options granted to the NEOs will expire three months after each NEO’s last day of service, subject to extension upon certain termination situations, such as death or disability, and RSUs will cease vesting upon each NEO’s last day of service. Stock option and RSU awards are subject to potential vesting acceleration as described below under the headings “Description of Compensation Arrangements—Equity Compensation Arrangements—2011 Equity Incentive Plan” and “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control Plan and Severance Benefit Plan” below. See also “Description of Compensation Arrangements—Equity Compensation Arrangements—2011 Equity Incentive Plan” below for a general description of the material terms of the 2011 Plan.

 

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(3) 

Stock options were granted with an exercise price equal to 100% of the fair market value on the date of grant which was $140.67 per share for the March 1, 2018 annual grants.

 

(4) 

The dollar amounts in this column represent the grant date fair value of each stock option and RSU award, as applicable, granted to the NEOs in 2018. These amounts have been calculated in accordance with ASC 718. The grant date fair value of each stock option is calculated using the Black-Scholes option-pricing model and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in the notes to our audited consolidated financial statements included in the company’s 2018 Annual Report on Form 10-K. The grant date fair value of each RSU award is measured based on the closing price of our ordinary shares on the date of grant.

Description of Compensation Arrangements

Executive Employment and Severance Agreements

We do not have employment agreements currently in effect with any of our NEOs. Like other employees, executive officers are eligible for annual salary increases, participation in the performance bonus plan and discretionary equity grants. We have employment agreements in effect with certain employees based outside of the United States.

From time to time, we have provided an offer letter in connection with the commencement of employment of an executive officer based in the United States, which describes such executive officer’s initial terms of employment. For example, in November 2017, we provided an offer letter to Mr. Swisher that included his initial base salary and a hiring bonus of $125,000 payable in connection with commencement of employment. The employment of Mr. Swisher, as is the case for all of our employees based in the United States, is at-will and not governed by the terms of his offer letter. We do not have agreements currently in effect with any of our NEOs entitling such individuals to severance benefits (other than in connection with a change in control pursuant to our change in control plan described below).

Amended and Restated Executive Change in Control and Severance Benefit Plan

Each of the current NEOs is a participant in the change in control plan, a description of which is included below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

Equity Compensation Arrangements

Since the Azur Merger, we have granted stock options and RSU awards to employees, including the NEOs, under the 2011 Plan. From the initial public offering of Jazz Pharmaceuticals, Inc. until the Azur Merger, we granted stock options to our employees, including some of the NEOs, under the 2007 Plan. For more information on our current equity compensation program and decisions regarding the grants of equity awards in 2018 for our NEOs, see “Compensation Discussion and Analysis—2018 Compensation Decisions for Our Named Executive Officers.” The following is a brief summary of the material terms of each of our equity compensation plans.

2011 Equity Incentive Plan

In connection with the Azur Merger, Jazz Pharmaceuticals, Inc.’s board of directors adopted the 2011 Plan in October 2011, and its stockholders approved the 2011 Plan at the special meeting of the stockholders held in December 2011. The 2011 Plan became effective immediately before the consummation of the Azur Merger and was assumed and adopted by us upon the consummation of the Azur Merger and most recently amended and restated by the board of directors in November 2016. The following is a brief summary of the material terms of the 2011 Plan, as amended and restated.

Administration.  The board of directors has delegated its authority to administer the 2011 Plan to the compensation committee. Subject to the terms of the 2011 Plan, the board of directors or a committee authorized by the board determines recipients, dates of grant, the numbers and types of stock awards to be granted, and the terms and conditions of the stock awards, including the period of their exercisability and vesting. The compensation committee has the authority to delegate its administrative powers under the 2011 Plan to a subcommittee consisting of members of the compensation committee and may, at any time, revest in itself some or all of the power previously delegated to the subcommittee. Our board of directors may also delegate to one or more of our officers the authority to designate employees who are not officers to be recipients of certain stock awards and the number of shares subject to such stock awards, provided that our board of directors must specify the total number of shares that may be subject to the stock awards granted by such officer(s) and such officer(s) may not grant a stock award to himself or herself.

Types of Awards.  The 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, RSU awards, other stock awards, and performance awards that may be settled in cash, shares, or other property, which may be granted to employees, including officers.

 

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Corporate Transactions.  In the event of certain significant corporate transactions (as defined in the 2011 Plan and described below), our board of directors will have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or completion of such corporate transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by our board of directors at the time of grant:

 

 

arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring corporation (or its parent company);

 

 

arrange for the assignment of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award to the surviving or acquiring corporation (or its parent company);

 

 

accelerate the vesting, in whole or in part, and exercisability of a stock award and provide for its termination if it is not exercised at or prior to the corporate transaction;

 

 

arrange for the lapse of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award;

 

 

cancel or arrange for the cancellation of a stock award, to the extent not vested or exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration, if any, as the board of directors may consider appropriate; or

 

 

make a payment equal to the excess, if any, of (a) the value of the property that the participant would have received upon the exercise of the stock award over (b) any exercise price payable in connection with such exercise.

Our board of directors need not take the same action for each stock award or with regard to all participants.

For purposes of the 2011 Plan, a “corporate transaction” generally means (i) a sale or disposition of all or substantially all our assets or a sale or disposition of at least 90% of our outstanding securities; (ii) a merger, consolidation or similar transaction after which we are not the surviving corporation; or (iii) a merger, consolidation or similar transaction after which we are the surviving corporation but our ordinary shares are converted or exchanged into other property.

Change in Control. The board of directors has the discretion to provide additional acceleration of vesting and exercisability upon or after a change in control (as defined in the 2011 Plan and described below) as may be provided in a stock award agreement or any other written agreement between us or any of our affiliates and a participant. The forms of stock option agreement and RSU award agreement adopted by the board of directors under the 2011 Plan provide that in the event a participant’s service relationship with us or a successor entity is terminated due to an involuntary termination without cause (as defined in the stock award agreement and as described below) within 12 months following, or one month prior to, the effective date of a change in control, the vesting (and in the case of stock options, exercisability) of the stock award will accelerate in full.

For purposes of the 2011 Plan and the forms of stock option agreement and RSU award agreement issued thereunder, a “change in control” generally means (i) a person or group acquires ownership of more than 30% of the combined voting power of our outstanding securities (other than directly from our company); (ii) certain compromises or arrangements sanctioned by the Irish courts, certain schemes, contracts or offers that have become binding on all of our shareholders, certain takeover bids, certain offers or reverse takeover transactions or a reorganization, merger, statutory share exchange, consolidation or similar transaction involving us, and (A) after which our shareholders do not own more than 50% of the combined voting power of the surviving entity or its parent in substantially the same proportion as their ownership of our outstanding voting securities immediately before the transaction, (B) a person or group acquires ownership of more than 30% of the combined voting power of the surviving entity or its parent, or (C) at least a majority of the members of the board of directors of the parent (or the surviving entity, if there is no parent) following such transaction are not incumbent board members (as defined in (v) below) at the time our board of directors approves the transaction; (iii) our shareholders or our board of directors approves a complete dissolution or liquidation of our company, or a complete dissolution or liquidation of our company otherwise occurs (except for a liquidation into a parent company); (iv) a sale, lease, exclusive license or other disposition of all or substantially all of our assets, other than to certain entities; or (v) individuals who were members of our board of directors on the date of adoption of the 2011 Plan (or members of our board of directors approved or recommended by a majority vote of such members still in office), referred to as “incumbent board members,” cease to constitute at least a majority of our board of directors.

An “involuntary termination without cause” generally means that a participant’s service relationship with us is terminated for any reason other than for the following reasons (and not upon a participant’s death or disability): (i) participant’s commission of any felony or crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof (with respect to Irish participants, the participant’s conviction for any criminal offense (other than an offense under any road traffic legislation in Ireland, the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed) or any offense under any regulation or legislation relating to insider dealing, fraud or dishonesty);

 

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(ii) participant’s attempted commission of or participation in a fraud or act of dishonesty against us; (iii) participant’s intentional, material violation of any contract or agreement with us or of any statutory duty owed to us; (iv) participant’s unauthorized use or disclosure of our confidential information or trade secrets; or (v) participant’s gross misconduct.

2007 Equity Incentive Plan

The 2007 Plan, which was initially adopted by the Jazz Pharmaceuticals, Inc. board of directors and approved by the Jazz Pharmaceuticals, Inc. stockholders in connection with its initial public offering, was continued and assumed by us upon consummation of the Azur Merger. The 2007 Plan expired in April 2017, and accordingly, no new grants can be awarded under the 2007 Plan. The following is a brief summary of the material terms of the 2007 Plan.

Administration.  The board of directors delegated its authority to administer the 2007 Plan to the compensation committee. Subject to the terms of the 2007 Plan, the board of directors or a committee authorized by the board determined recipients, dates of grant, the numbers and types of stock awards to be granted, and the terms and conditions of the stock awards, including the period of their exercisability and vesting.

Types of Awards.  The 2007 Plan provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, RSU awards, stock appreciation rights, performance stock awards and other forms of equity compensation, which may be granted to employees, including officers, non-employee directors, and consultants. Incentive stock options were granted only to employees, including executive officers. Since the Azur Merger, all of the new grants under the 2007 Plan were granted to non-employee directors, vest ratably over service periods of one to three years and expire no more than 10 years after the date of grant.

Corporate Transactions.  Pursuant to the 2007 Plan, in the event of a corporate transaction (as defined in the 2007 Plan and described below), the board of directors will have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or completion of such corporate transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by our board of directors at the time of grant:

 

 

arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring corporation (or its parent company);

 

 

arrange for the assignment of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award to the surviving or acquiring corporation (or its parent company);

 

 

accelerate the vesting and exercisability of a stock award and provide for its termination if it is not exercised at or prior to the corporate transaction;

 

 

arrange for the lapse of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award;

 

 

cancel or arrange for the cancellation of a stock award, to the extent not vested or exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration as the board of directors may consider appropriate; or

 

 

make a payment equal to the excess, if any, of (a) the value of the property that the participant would have received upon the exercise of the stock award over (b) any exercise price payable in connection with such exercise.

The board of directors need not take the same action for each stock award or with respect to all participants. For purposes of the 2007 Plan, a “corporate transaction” generally means (i) a sale or disposition of all or substantially all our assets or a sale or disposition of at least 90% of our outstanding securities; (ii) a merger, consolidation or similar transaction after which we are not the surviving corporation; or (iii) a merger, consolidation or similar transaction after which we are the surviving corporation but our ordinary shares are converted or exchanged into other property.

Change in Control. The board of directors has the discretion to provide additional acceleration of vesting and exercisability upon or after a change in control (as defined in the 2007 Plan and described below) as may be provided in a stock award agreement or any other written agreement between us or any of our affiliates and a participant. The forms of stock option agreement and RSU award agreement adopted by the board of directors under the 2007 Plan provide that in the event a participant’s service relationship with us or a successor entity is terminated due to an involuntary termination without cause (as defined in the stock award agreement and as described below) within 12 months following, or one month prior to, the effective date of a change in control, the vesting (and in the case of stock options, exercisability) of the stock award will accelerate in full. For purposes of the 2007 Plan and the forms of stock option agreement and RSU award agreement issued thereunder, a “change in control” generally means (i) a person or group acquires ownership of more than 50% of the combined voting power of our outstanding securities (other than in connection with a financing or a repurchase program); (ii) a merger,

 

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consolidation or similar transaction involving us, after which our shareholders do not own more than 50% of the combined voting power of the surviving entity or its parent in substantially the same proportion as their ownership of our outstanding voting securities immediately before the transaction; (iii) our shareholders or our board of directors approves a complete dissolution or liquidation of our company, or a complete dissolution or liquidation of our company otherwise occurs (except for a liquidation into a parent company); (iv) a sale, lease, exclusive license or other disposition of all or substantially all of our assets, other than to certain entities; or (v) individuals who are members of our board of directors on the date of adoption of the 2007 Plan (or members of our board of directors approved or recommended by a majority vote of such members still in office) cease to constitute at least a majority of our board of directors.

The term “involuntary termination without cause” has a similar meaning as under the 2011 Plan, as described above.

2007 Employee Stock Purchase Plan

Additional long-term equity incentives are provided through the ESPP, which was amended and restated by Jazz Pharmaceuticals, Inc.’s board of directors in October 2011 and approved by its stockholders in December 2011, to be effective immediately prior to the Azur Merger, and, in October 2012, amended and restated by our compensation committee. The ESPP was assumed by us upon the consummation of the Azur Merger. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of section 423 of the Internal Revenue Code, or the Code. Under the ESPP, all of our regular employees and employees of any of our parent or subsidiary companies designated by the board of directors as eligible to participate may participate and may contribute, normally through payroll deductions, up to 15% of their earnings up to a total of $15,000 per purchase period for the purchase of our ordinary shares under the ESPP. The ESPP is currently offered to our regular employees in Ireland, Canada and the United States, including the NEOs. The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, we may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which our ordinary shares will be purchased for employees participating in the offering. Unless otherwise determined by the board of directors, ordinary shares are purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of an ordinary share on the first date of an offering or (b) 85% of the fair market value of an ordinary share on the date of purchase.

Performance Bonus Plan

We maintain a performance bonus plan to reward executive officers and other employees for successful achievement of company-wide performance objectives and individual contributions toward those objectives on an annual basis. More information regarding the performance bonus plan is provided above under the headings “Compensation Discussion and Analysis—2018 Performance Bonus Program” and “Compensation Discussion and Analysis—2018 Compensation Decisions for Our Named Executive Officers.”

401(k) Plan

Our employees based in the United States are eligible to participate in the 401(k) Plan. The 401(k) Plan is intended to qualify as a tax-qualified plan under section 401 of the Code. Employee contributions are held and invested by the 401(k) Plan’s trustee. The 401(k) Plan provides that each participant may contribute a portion of his or her pre-tax compensation, up to a statutory annual limit, which was $18,500 for employees under age 50, and $24,500 for employees age 50 and over in 2018. The 401(k) Plan also permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. In 2013, we began making discretionary matching contributions, which for 2018, consisted of a match of 50% of up to the first 6% of eligible compensation contributed by each employee toward his or her 401(k) plan.

Additional Benefits

The NEOs are eligible to participate in our benefit plans generally available to all employees, as described in “Compensation Discussion and Analysis—Key Components and Design of the Executive Compensation Program.”

Pension Benefits

Other than with respect to tax-qualified defined contribution plans such as the 401(k) Plan, the NEOs do not participate in any plan that provides for retirement payments and benefits, or payments and benefits that will be provided primarily following retirement.

 

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Executive Compensation (continued)

 

 

Nonqualified Deferred Compensation

During the year ended December 31, 2018, the NEOs did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth, for the fiscal year ended December 31, 2018, certain information regarding outstanding equity awards at fiscal year-end for the NEOs.

OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END TABLE

 

      Option Awards             Stock Awards

 Name

 

  

Number of

Securities

Underlying

Unexercised

Options

(#)

  Exercisable  

 

  

Number of

Securities

Underlying

Unexercised

Options

(#)(1)

  Unexercisable  

 

   

Option

Exercise

Price

($)

 

    

Option

  Expiration  

Date(2)

 

           

Number of

  Shares or Units  

of Stock That

Have Not

Vested

(#)(3)

 

    

Market Value of    

Shares or Units of    
Stock That Have    

Not Vested    

($)(4)    

 

 Bruce C. Cozadd(5)

            —      92,500  (6)      140.67        2/29/2028           37,000  (10)     4,586,520 
     37,843      48,657  (7)      136.18        3/1/2027           25,950  (11)     3,216,762 
     54,895      22,605  (8)      123.36        2/24/2026           15,500  (12)     1,921,380 
     69,479      3,021  (9)      175.19        2/25/2025           6,950  (13)        861,522 
     48,784      —  (5)      166.62        2/26/2024           —                   — 
     73,961      —  (5)      59.13        3/4/2023           —                   — 
   109,284      —  (5)      46.83        8/8/2022           —                   — 
       6,895

 

    

 

— 

 

(5)  

 

   

 

11.48

 

 

 

    

 

3/7/2020 

 

 

 

      

 

— 

 

 

 

               — 

 

 Daniel N. Swisher, Jr.

 

            —

 

    

 

45,000 

 

(14)  

 

   

 

140.67

 

 

 

    

 

2/29/2028 

 

 

 

      

 

18,000 

 

(15)  

 

   2,231,280 

 

 Matthew P. Young

  

         —

  

 

23,500 

(6) 

 

 

140.67

 

  

 

2/29/2028 

 

    

 

9,400 

(10) 

  

1,165,224 

     10,937      14,063  (7)      136.18        3/1/2027           7,500  (11)        929,700 
     15,937      6,563  (8)      123.36        2/24/2026           4,500  (12)        557,820 
     19,166      834  (9)      175.19        2/25/2025           1,918  (13)        237,755 
     12,500      —        130.23        5/11/2024           —                   — 
       9,000      —        166.62        2/26/2024           —                   — 
     19,000

 

    

 

— 

 

 

 

   

 

58.72

 

 

 

    

 

5/2/2023 

 

 

 

      

 

— 

 

 

 

               — 

 

 Suzanne Sawochka Hooper(18)

            —      23,500  (6)      140.67        2/29/2028           9,400  (10)     1,165,224 
     10,937      14,063  (7)      136.18        3/1/2027           7,500  (11)        929,700 
     15,937      6,563  (8)      123.36        2/24/2026           4,500  (12)        557,820 
     19,166      834  (9)      175.19        2/25/2025           1,918  (13)        237,755 
     20,000      —        166.62        2/26/2024           —                   — 
     30,309      —        59.13        3/4/2023           —                   — 
     35,337

 

    

 

— 

 

 

 

   

 

46.83

 

 

 

    

 

8/8/2022 

 

 

 

      

 

— 

 

 

 

               — 

 

 Michael P. Miller

  

         —

  

 

20,000 

(6) 

 

 

140.67

 

  

 

2/29/2028 

 

    

 

8,000 

(10) 

  

   991,680 

          989      1,511  (16)      155.18        5/10/2027           750  (17)          92,970 
       8,203      10,547  (7)      136.18        3/1/2027           5,625  (11)        697,275 
     10,625      4,375  (8)      123.36        2/24/2026           3,000  (12)        371,880 
     11,979      521  (9)      175.19        2/25/2025           1,198  (13)        148,504 
       20,000      —        141.98        5/4/2024                 —                   — 

 

(1) 

In addition to the specific vesting schedule for each stock award, each unvested stock award is subject to the general terms of the 2011 Plan or 2007 Plan, as applicable, including the potential for future vesting acceleration described above under the heading “Description of Compensation Arrangements—Equity Compensation Arrangements” as well as the potential vesting acceleration under the terms of the change in control plan described below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

(2) 

As a general matter, stock options granted to NEOs expire on the day before the tenth anniversary of their grant date, or earlier in the event of an NEO’s termination of service. In the event of an NEO’s termination of service, stock options generally expire three months after such termination of service, subject to extension under limited circumstances such as if the sale of shares during such time was prohibited by our insider trading policy or if exercise would result in violation of securities registration requirements. For more information, see description under the heading “Potential Payments upon Termination or Change in Control—Equity Compensation Plans.”

 

(3) 

Each award listed in this column represents an RSU award that vests in four equal annual installments on the anniversary of the applicable vesting commencement date.

 

60    JAZZ PHARMACEUTICALS  |  Proxy Statement


Table of Contents

2019 NOTICE OF MEETING AND PROXY STATEMENT   

 

Executive Compensation (continued)

 

 

(4) 

The market values of the RSU awards that have not vested are calculated by multiplying the number of shares underlying the RSU awards shown in the table by $123.96, the closing price of our ordinary shares on December 31, 2018.

 

(5) 

The number of shares reported reflects the transfer of beneficial ownership of a portion of the indicated stock option and RSU awards in 2015 to Mr. Cozadd’s former spouse pursuant to a domestic relations order.

 

(6) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vested with respect to 25% of the shares underlying the stock option on March 1, 2019, and the remainder vests monthly from April 1, 2019 to March 1, 2022.

 

(7) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vest monthly from January 2, 2019 to March 2, 2021.

 

(8) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vest monthly from January 25, 2019 to February 25, 2020.

 

(9) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vested monthly from January 26, 2019 to February 26, 2019.

 

(10) 

RSUs awarded on March 1, 2018, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2018.

 

(11) 

RSUs awarded on March 2, 2017, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2017.

 

(12) 

RSUs awarded on February 25, 2016, vesting in equal annual installments over four years measured from the vesting commencement date of February 25, 2016.

 

(13) 

RSUs awarded on February 26, 2015, vesting in equal annual installments over four years measured from the vesting commencement date of February 26, 2015.

 

(14) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vest monthly from January 3, 2019 to January 3, 2022.

 

(15) 

RSUs awarded on March 1, 2018, vesting in equal annual installments over four years measured from the vesting commencement date of January 3, 2018.

 

(16) 

The unexercisable shares subject to this stock option award as of December 31, 2018 vest monthly from January 11, 2019 to May 11, 2021.

 

(17) 

RSUs awarded on May 11, 2017, vesting in equal annual installments over four years measured from the vesting commencement date of June 5, 2017.

 

(18) 

Ms. Hooper resigned from her position as Executive Vice President and GC, effective as of March 1, 2019, and is expected to continue as a part-time, non-executive employee until September  30, 2019.

Option Exercises and Stock Vested

The following table provides information on RSUs vested and stock options exercised, including the number of shares acquired upon exercise and the value realized, determined as described below, for the NEOs in the year ended December 31, 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)

 

 Bruce C. Cozadd

 

    

 

         —

 

 

 

    

 

            —

 

 

 

      

 

30,688

 

 

 

    

 

4,594,038

 

 

 

 Daniel N. Swisher, Jr.

 

    

 

         —

 

 

 

    

 

            —

 

 

 

      

 

           —

 

 

 

    

 

                —

 

 

 

 Matthew P. Young

 

    

 

5,000

 

 

 

    

 

560,150

 

 

 

      

 

9,356

 

 

 

    

 

1,394,218

 

 

 

 Suzanne Sawochka Hooper

 

    

 

13,526

 

 

 

    

 

1,507,269

 

 

 

      

 

9,169

 

 

 

    

 

1,332,651

 

 

 

 Michael P. Miller

  

 

         —

 

  

 

            —