LETTER TO OUR SHAREHOLDERS
ZimVie Inc.
10225 Westmoor Drive
Westminster, Colorado 80021
www.zimvie.com
March 28, 2023
Dear Fellow Shareholders:
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2023 annual meeting of shareholders of ZimVie Inc. – our first as an independent company – to be held at 8 a.m. Mountain Time on Friday, May 12, 2023 at the Origin Hotel Westminster, 8875 Westminster Boulevard, Westminster, Colorado 80031.
2022 was a transformative year for ZimVie. It marked us making history as a new, public life sciences company after spinning off from Zimmer Biomet on March 1. We spent substantial time and energy over the past year to fully separate our operations and “stand up” our independent business—a heavy lift by our team members, who have my utmost esteem and gratitude.
It was a challenging, yet rewarding year with many lessons learned and milestones made. We created a new brand, culture, mission, and vision, which set our purpose and direction for the future. We made significant moves in strengthening our foundation strategically, operationally, and commercially, as well as building leadership and talent to be successful. Despite economic headwinds, we also made progress toward our commitment to innovate and drive performance, which continue to be priorities in 2023.
I am truly excited about the opportunities before us to drive long-term shareholder value. Our Dental business is strong, with leadership positions in premium implants, digital workflows, and biomaterials. We are enhancing it even further through innovative launches and operationalization. Our Spine business leads the market in cervical disc replacement and vertebral body tethering. While we have some work to do to realize an upturn in revenue, we have differentiated pieces of the portfolio and are actively assessing innovation and growth opportunities. This will take time, but we are sowing the seeds for Spine growth in the intermediate to longer term.
We believe everyone deserves to feel better, healthier, and stronger. Looking forward, it is that enduring mindset, coupled with the right leadership team, operational plans, and innovation pipeline that will drive growth for ZimVie.
The accompanying Notice of Annual Meeting of Shareholders and proxy statement describe the matters to be acted upon at our 2023 annual meeting. We are sending many of our shareholders a notice regarding the availability of this proxy statement, our 2022 Annual Report and other proxy materials via the Internet. This electronic process gives you fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. A paper copy of these materials can be requested using one of the methods described in the materials.
Your vote is important. Whether or not you plan to join us in person, please take the time to vote so that your shares will be represented and voted at the meeting. You may vote by proxy online or by telephone, by completing and mailing the enclosed proxy card in the return envelope provided, or in person at the meeting.
Thank you for the interest and support you’ve shown as we undertake this journey and continue to guide ZimVie toward long-term success and impact.
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Sincerely, |
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Vafa Jamali |
President, Chief Executive Officer and Director |
CORPORATE GOVERNANCE
OUR BOARD OF DIRECTORS AND CORPORATE GOVERNANCE FRAMEWORK
DIRECTOR CRITERIA, QUALIFICATIONS AND EXPERIENCE
We are a leading medical technology company dedicated to enhancing the quality of life for spine and dental patients worldwide. We develop, manufacture, and market a comprehensive portfolio of products and solutions designed to treat a wide range of spine pathologies and support dental tooth replacement and restoration procedures. We operate on a global scale and utilize a network of directly employed sales representatives, independent sales agents, and exclusive distributors to market our products in 70 countries in North America, Europe, Latin America and Asia. We have approximately 2,700 employees globally, with approximately 1,100 employees focusing on sales, marketing and key commercialization activities and approximately 150 employees focusing on research and development.
The Corporate Governance Committee is responsible for reviewing and assessing with the Board, on an annual basis, the experience, qualifications, attributes and skills sought of Board members in the context of our business and the then-current membership of the Board. The committee looks for current and potential directors collectively to have a mix of experience, skills and qualifications, some of which are described below:
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Director Experience, Skills and Qualifications |
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● Executive leadership experience |
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● Operations experience |
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● Finance / accounting / capital markets experience |
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● R&D / science / innovation / technology experience |
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● Global / international experience |
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● Reimbursement / health economics experience |
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● Government / legal / regulatory experience |
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● Risk management experience |
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● M&A / business development / strategic planning experience |
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● Sales / marketing / brand management experience |
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● Medical technology / healthcare industry experience |
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● Supply chain / logistics experience |
In evaluating director candidates and considering incumbent directors for nomination to the Board, the Corporate Governance Committee considers a variety of factors. These include each candidate’s business and professional experience, skills, qualifications, character and integrity, reputation for working constructively in a collegial environment and availability to devote sufficient time to Board matters. Diversity of background and diversity of gender, race, ethnicity, national origin and age are also relevant factors in the selection process. The Corporate Governance Committee also considers whether a candidate can meet the independence standards for directors and members of key committees under the rules of Nasdaq and the SEC. With respect to incumbent directors, the committee considers the director’s past performance on the Board and contributions to the committees on which he or she serves.
While the Board has not formally adopted a policy regarding director diversity, the Corporate Governance Committee actively considers diversity in director recruitment and nomination. In connection with new director searches, the Board expects to utilize a process that requires the final pool of candidates to include potential directors who will increase the Board’s ethnic and/or gender diversity. The Board believes that the diversity of the current Board members, including as to gender, race, ethnicity, national origin, international work experience and age, provides significant benefits to the Board and to ZimVie.
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BOARD’S ROLE IN RISK OVERSIGHT |
Our Board of Directors oversees the risk management processes that are designed and implemented by our executives to determine whether those processes are consistent with our strategy and risk appetite, are functioning as intended, and that necessary steps are taken to foster a culture that recognizes and appropriately escalates and addresses risk-taking beyond our determined risk appetite. The Board of Directors executes its oversight responsibility for risk management directly and through its committees.
The Audit Committee is specifically tasked with overseeing our compliance with legal and regulatory requirements and ethical standards, including oversight of our Corporate Compliance Program, discussing our risk assessment and risk management processes with management, and receiving information on certain material legal and regulatory matters, including litigation, as well as on information technology, data security, business continuity and cybersecurity-related matters. Our head of Internal Audit, who reports directly to the committee, coordinates our global risk assessment process. We use this process to identify, assess and prioritize internal and external risks, to develop processes for responding to, mitigating and monitoring risks, and to inform the development of our internal audit plan and our annual operating plan.
The Audit Committee receives reports regarding our risk assessment process and its meeting agendas include discussions of individual risk areas throughout the year. Members of our management who have responsibility for designing and implementing our risk management processes regularly meet with the committee. The committee discusses our major financial risk exposures with our Chief Financial Officer (“CFO”) and our Chief Accounting Officer. The committee receives regular reports from our Chief Information Officer regarding cybersecurity-related matters and other information technology-related matters. The committee receives regular reports from our Chief Compliance Officer on our Corporate Compliance Program, which is designed to address risks related to, among other matters, anti-bribery, anti-corruption and anti-kickback laws in the countries where we do business. The committee also receives reports from our Chief Legal Officer and other persons who are involved in our risk management processes.
The Board’s other committees oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee oversees risks relating to our executive compensation programs and practices. In addition, in conjunction with the full Board, the Compensation Committee oversees risks relating to human capital management, including succession planning. The Corporate Governance Committee oversees risks relating to environmental, social and governance matters. The Quality, Regulatory and Technology Committee oversees risks relating to our compliance with laws and regulations enforced by the U.S. Food and Drug Administration and comparable foreign government regulators, including product quality and safety, and receives regular reports from our Senior Vice President, Regulatory Affairs, Quality Assurance, and Clinical.
The Board of Directors receives regular reports from members of our executive leadership team and other personnel that include discussions of the risks and exposures involved with their respective areas of responsibility. Further, the Board of Directors is routinely informed of developments that could affect our risk profile or other aspects of our business. Primary areas of risk oversight for the full Board include, but are not limited to, general commercial risks in the medical technology / healthcare industry, such as competition, pricing pressures, and the reimbursement landscape; risks associated with our strategy, business model, and annual operating plan; risks related to our operations and supply chain; and risks related to the separation from Zimmer Biomet and other complex transactions.
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POLICIES ON CORPORATE GOVERNANCE |
We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving shareholders well and maintaining our integrity in the marketplace. Our Board has adopted Corporate Governance Guidelines, which, in conjunction with our amended and restated certificate of incorporation, amended and restated bylaws, Board committee charters and key Board policies, form the framework for our governance. Our Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, committee charters and key policies as warranted.
The current versions of the following documents are available in the Investor Relations/Corporate Governance section of our website, www.zimvie.com:
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Code of Business Conduct and Ethics, which applies to all directors, officers, and employees; |
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Code of Ethics for Chief Executive Officer and Senior Financial Officers (the “finance code of ethics”), which applies to our CEO, CFO, Chief Accounting Officer, and other finance organization employees; |
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Corporate Governance Guidelines; |
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Audit Committee Charter; |
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Compensation Committee Charter; |
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Corporate Governance Committee Charter; |
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Quality, Regulatory and Technology Committee Charter; |
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Board Policy on Ratification of Independent Registered Public Accounting Firm; and |
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Policy on the Care and use of Animals in Research and Development. |
If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our CEO, CFO, or Chief Accounting Officer, we will disclose the nature of that amendment or waiver in the Investor Relations section of our website.
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LIMIT ON OTHER DIRECTORSHIPS |
Under our Corporate Governance Guidelines, no member of the Board may simultaneously serve on the board of directors of more than three other public companies, except that our CEO and any non-employee director who serves as an executive officer of a public company must limit the total number of public company boards on which he or she serves to three.
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BOARD SELF-EVALUATION PROCESS |
Pursuant to the Corporate Governance Guidelines and the charters of each of the Board’s committees, the Board and each of its committees are required to conduct self-evaluations of their performance. The Board recognizes that a robust and constructive evaluation process is an essential component of good corporate governance. These self-evaluations, which are conducted annually, are intended to facilitate a candid assessment and discussion by the Board and each committee of its effectiveness as a group in fulfilling its responsibilities, evaluating its performance and identifying areas for improvement.
The Chair of the Corporate Governance Committee oversees the annual self-evaluation process. Each director is expected to participate and provide feedback on a range of topics, including: the Board and committee agendas; meetings; practices and dynamics; Board refreshment; committee structure, membership and leadership; the flow of information to and from the Board and its committees; management succession planning; and shareholder engagement. Director feedback is solicited on an individual basis through written questionnaires/assessments. The Chair of the Corporate Governance Committee reviews the feedback from the self-evaluation process and makes recommendations for areas with respect to which the Board and its committees should consider improvements. These areas and the overall assessments are further discussed at a meeting led by the Chair of the Corporate Governance Committee at which all Board members are present. At the conclusion of this meeting, the Chair of the Corporate Governance Committee, working with the senior management team, develops action plans for any items that require follow-up.
Our Board of Directors has determined that all members of the Board of Directors, except Mr. Jamali, our President and CEO, are independent, as determined in accordance with the rules of Nasdaq. In making such independence determination, the Board of Directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that the Board of Directors deemed relevant in determining their independence, and affirmatively determined that none of such non-employee directors has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
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MAJORITY VOTE STANDARD FOR ELECTION OF DIRECTORS |
Our amended and restated bylaws require directors to be elected by the majority of the votes cast with respect to that director in uncontested elections (the number of shares voted “for” a director must exceed the number of votes cast “against” that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.
If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our amended and restated bylaws, any director who fails to be elected must tender his or her resignation to the Board, subject to acceptance by the Board. The Corporate Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the Corporate Governance Committee’s recommendation, and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in the Board’s decision.
If a nominee who was not already serving as a director is not elected at an annual meeting, under Delaware law that nominee would not become a director and would not serve on the Board as a “holdover director.” Both nominees for election as directors at the 2023 annual meeting are currently serving on the Board.
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NOMINATIONS FOR DIRECTORS |
The Corporate Governance Committee screens candidates and recommends candidates for nomination to the full Board. In seeking and evaluating director candidates, the committee considers individuals in accordance with the criteria described above under “Director Criteria, Qualifications and Experience.” Director candidates may be recommended by Board members, a third-party search firm, or shareholders.
The committee will consider director candidates proposed by shareholders and will evaluate them using the same criteria as candidates recommended by other sources. A shareholder who wishes to recommend a director candidate for consideration by the committee may do so by submitting the name and qualifications of the prospective candidate in writing to the following address: ZimVie Inc., Attention: Office of the Corporate Secretary, 10225 Westmoor Drive, Westminster, CO 80021. Any such submission should also describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable nominee for the Board of Directors, as well as other information set forth in our Corporate Governance Guidelines.
A shareholder who wishes to nominate an individual for election as a director, rather than recommend the individual as a candidate to the Corporate Governance Committee, must comply with the advance notice requirements set forth in our amended and restated bylaws. See “What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2024 annual meeting of shareholders?” on page 75 for more information.
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COMMUNICATIONS WITH DIRECTORS |
Shareholders or other interested parties may contact our directors by writing to them either individually or as a group or partial group (such as all independent directors), ZimVie Inc., Attention: Office of the Corporate Secretary, 10225 Westmoor Drive, Westminster, CO 80021. If you wish your communication to be treated confidentially, please write the word “CONFIDENTIAL” prominently on the envelope and address it to the director by name so that it can be forwarded without being opened. Communications addressed to multiple recipients, such as to “Board of Directors,” “Audit Committee,” “Independent Directors,” etc. will necessarily have to be opened and copied by the Office of the Corporate Secretary in order to forward them, and hence cannot be treated confidentially.
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BOARD MEETINGS, ATTENDANCE, AND EXECUTIVE SESSIONS |
Our Board meets on a regularly scheduled basis to review significant developments affecting us and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. Members of senior management attend meetings of the Board and its committees to report on and discuss their areas of responsibility. Directors are expected to attend Board meetings, meetings of committees on which they serve and shareholder meetings. Directors are expected to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.
Each regularly scheduled Board meeting begins with a session between the CEO and the independent directors. This provides a platform for discussions outside the presence of the non-Board management attendees, as well as an opportunity for the independent directors to go into executive session (without management) if requested by any director. The independent directors may meet in executive session, without management, at any time, and are scheduled for such independent executive sessions at each regularly scheduled Board meeting. Our independent, non-executive Chair presides at these executive sessions.
During 2022, the Board held four meetings and the standing committees of the Board held a total of 19 meetings. All directors attended 75% or more of the meetings of the Board and committees on which they served.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS |
PROCEDURES FOR APPROVAL OF RELATED PERSON TRANSACTIONS
On an annual basis, each of our directors and executive officers is obligated to complete a director and officer questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, has an interest. Under our Audit Committee’s charter, which is available on our website at www.zimvie.com, our Audit Committee must review and approve all transactions between us and a related person (as defined in Item 404 of Regulation S-K) for which review or approval is required by applicable law or required to be disclosed in our financial statements or SEC filings. The Audit Committee may not approve a related-person transaction unless (1) it is in or not inconsistent with our best interests and (2) where applicable, the terms of such transaction are at least as favorable to us as could be obtained from an unrelated third party.
Under our Code of Business Conduct and Ethics, which is available on our website at www.zimvie.com, and related policies and procedures, actual or potential conflicts of interest involving any other employee must be disclosed to and resolved by our Human Resources Department or Healthcare Compliance Department.
AGREEMENTS WITH ZIMMER BIOMET
On March 1, 2022, Zimmer Biomet completed the previously announced separation of its spine and dental businesses through the distribution by Zimmer Biomet of 80.3% of the outstanding shares of common stock of ZimVie to Zimmer Biomet shareholders at the close of business on the record date, February 15, 2022. The distribution was made in the amount of one share of ZimVie common stock for every ten shares of Zimmer Biomet common stock owned by Zimmer Biomet shareholders at the close of business on the record date.
On March 1, 2022, we entered into definitive agreements with Zimmer Biomet and its subsidiaries that, among other things, set forth the terms and conditions of the separation and the distribution. The agreements, which set forth the principles and actions taken or to be taken in connection with the separation and the distribution and provide a framework for Zimmer Biomet’s relationship with us from and after the separation and the distribution, include a Separation and Distribution Agreement (the “Separation Agreement”), a Tax Matters Agreement (the “Tax Matters Agreement”), an Employee Matters Agreement (the “Employee Matters Agreement”), a Transition Services Agreement (the “Transition Services Agreement”), an Intellectual Property Matters Agreement (the “Intellectual Property Matters
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Agreement”), a Transitional Trademark License Agreement (the “Transitional Trademark License Agreement”), a Transition Manufacturing and Supply Agreement (the “Transition Manufacturing and Supply Agreement”), a Reverse Transition Manufacturing and Supply Agreement (the “Reverse Transition Manufacturing and Supply Agreement”), and a Shareholder and Registration Rights Agreement (the “Shareholder and Registration Rights Agreement”), each dated as of March 1, 2022. Additionally, we previously entered into a Credit Agreement, dated as of December 17, 2021 (the “Credit Agreement”), with JP Morgan Chase Bank, N.A., as administrative agent and syndication agent, and the lenders and issuing banks named therein. We also entered into a series of interim operating model agreements.
The descriptions included below of the Separation Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Transition Services Agreement, the Intellectual Property Matters Agreement, the Transitional Trademark License Agreement, the Transition Manufacturing and Supply Agreement, the Reverse Transition Manufacturing and Supply Agreement, the Shareholder and Registration Rights Agreement, the Credit Agreement, and the interim operating model agreements do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements.
Separation and Distribution Agreement
The Separation Agreement sets forth our agreements with Zimmer Biomet regarding the principal actions taken in connection with the separation and the distribution. It also sets forth other agreements that govern aspects of our relationship with Zimmer Biomet following the separation and the distribution. The Separation Agreement provides for, among other things, (1) the assets to be transferred, the liabilities to be assumed and the contracts to be assigned to each of us and Zimmer Biomet as part of the separation, (2) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the ZimVie businesses with us and financial responsibility for the obligations and liabilities of Zimmer Biomet’s remaining businesses with Zimmer Biomet, (3) procedures with respect to claims subject to indemnification and related matters and governing our and Zimmer Biomet’s obligations and allocations of liabilities with respect to ongoing litigation matters and (4) the allocation between us and Zimmer Biomet of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the distribution.
The Separation Agreement also provides that, in order to obtain certain requisite governmental approvals, or for other business reasons, following the distribution date, Zimmer Biomet and certain of its affiliates will continue to operate certain activities relating to the ZimVie businesses in certain jurisdictions until the requisite approvals have been received or the occurrence of all other actions permitting the legal transfer of such activities, and we will receive, to the greatest extent possible, all of the economic benefits and burdens of such activities.
Tax Matters Agreement
The Tax Matters Agreement governs the respective rights, responsibilities and obligations of us and Zimmer Biomet after the distribution with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, tax elections, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters.
The Tax Matters Agreement also imposes certain restrictions on us and our subsidiaries (including, among others, restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the distribution and certain related transactions. The Tax Matters Agreement provides special rules that allocate tax liabilities in the event the distribution, together with certain related transactions, does not qualify as tax-free. In general, under the Tax Matters Agreement, each party is expected to be responsible for any taxes imposed on Zimmer Biomet or us, as the case may be, that arise from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Internal Revenue Code of 1986, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the Tax Matters Agreement. However, if such failure was the result of any acquisition of our shares or assets, or of any of our representations, statements or undertakings being incorrect, incomplete or breached, we generally will be responsible for all taxes imposed as a result of such acquisition or breach.
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Employee Matters Agreement
The Employee Matters Agreement allocates liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The Employee Matters Agreement governs certain compensation and employee benefits obligations with respect to the current and former employees and non-employee directors of each party. The Employee Matters Agreement provides that, except as otherwise specified, Zimmer Biomet is generally responsible for liabilities associated with employees who will remain employed by Zimmer Biomet and former employees whose last employment was with Zimmer Biomet’s businesses, and we are generally responsible for liabilities associated with employees who are or will be employed by us and former employees whose last employment was with the ZimVie businesses. The Employee Matters Agreement provided for the conversion of the outstanding awards granted under Zimmer Biomet’s equity compensation programs into adjusted awards relating to shares of Zimmer Biomet and/or ZimVie common stock in a manner intended to preserve the aggregate intrinsic value of the original awards. The adjusted awards are subject to substantially similar terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original Zimmer Biomet awards immediately before the separation.
Transition Services Agreement
Pursuant to the Transition Services Agreement, we and Zimmer Biomet will provide certain services to one another, on an interim, transitional basis following the separation and the distribution. The services to be provided will include certain regulatory services, commercial services, operational services, tax services, clinical affairs services, information technology services, finance and accounting services and human resource and employee benefits services. The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services. The Transition Services Agreement terminates on the expiration of the term of the last service provided thereunder, which will generally be no later than March 31, 2025. Subject to certain exceptions in the case of willful misconduct or fraud, the liability of each of Zimmer Biomet and us under the Transition Services Agreement for the services it provides will be limited to the aggregate service fees paid to it in the immediately preceding one-year period.
Intellectual Property Matters Agreement
Pursuant to the Intellectual Property Matters Agreement, Zimmer Biomet granted to us a non-exclusive, perpetual, royalty-free, fully paid-up, irrevocable, non-sublicensable license to use certain intellectual property rights retained by Zimmer Biomet, except that we will be permitted to sublicense our rights in connection with activities relating to the ZimVie businesses but not for independent use by third parties. We also granted back to Zimmer Biomet a non-exclusive, perpetual, royalty-free, fully paid-up, irrevocable, non-sublicensable license to continue to use all intellectual property rights owned by or transferred to us, except that Zimmer Biomet will be permitted to sublicense its rights in connection with activities relating to Zimmer Biomet’s and its affiliates’ retained businesses but not for independent use by third parties.
Transitional Trademark License Agreement
Pursuant to the Transitional Trademark License Agreement, Zimmer Biomet granted to us a non-exclusive, royalty-free, non-transferable, non-assignable, and worldwide license to use certain Zimmer Biomet trademarks, corporate names and domain names for a transitional period following the distribution. The license allows us to continue using certain of Zimmer Biomet’s trademarks in order to provide sufficient time for us to rebrand or phase out our use of the licensed marks. Zimmer Biomet will also redirect certain licensed domain names to new domain names provided by us for a specific period of time. We agreed to use commercially reasonable efforts to remove and cease using Zimmer Biomet’s trademarks on any promotional or other publicly available materials, and will generally discontinue such use as soon as reasonably practicable.
Transition Manufacturing and Supply Agreement and Reverse Transition Manufacturing and Supply Agreement
Pursuant to the Transition Manufacturing and Supply Agreement and the Reverse Transition Manufacturing and Supply Agreement, we or Zimmer Inc., a wholly-owned subsidiary of Zimmer Biomet, as the case may be, will manufacture or cause to be manufactured certain products for the other party, on an interim, transitional basis. Pursuant to such agreements, we or Zimmer, Inc., as the case may be, will be required to purchase certain minimum amounts of products
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from the other party. The Transition Manufacturing and Supply Agreement and the Reverse Transition Manufacturing and Supply Agreement will terminate on the expiration of the term of the last product manufactured by us or Zimmer, Inc., as the case may be, pursuant to such agreements, which will generally be no later than March 1, 2027.
Shareholder and Registration Rights Agreement
Pursuant to the Shareholder and Registration Rights Agreement, we agreed, upon the request of Zimmer Biomet, to use reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of ZimVie common stock retained by Zimmer Biomet. In addition, Zimmer Biomet agreed to vote any shares of ZimVie common stock that it retained after the separation and the distribution in proportion to the votes cast by our other shareholders.
Credit Agreement
Our Credit Agreement provides for revolving loans of up to $175.0 million (the “Revolver”) and term loan borrowings of up to $595.0 million. On February 28, 2022, we borrowed the entire $595.0 million of available term loan borrowings (the “Original Term Loan Borrowing”) and repaid $34.0 million of the Original Term Loan Borrowing on March 1, 2022. Approximately $540.6 million of the proceeds from such indebtedness was transferred to Zimmer Biomet on or prior to the distribution. As of December 31, 2022, $536.5 million was outstanding on the Original Term Loan Borrowing, and there were no outstanding borrowings under the Revolver.
Interim Operating Model Agreements
We and Zimmer Biomet entered into a series of interim operating model agreements pursuant to which Zimmer Biomet and certain of its affiliates that held licenses, permits and other rights in connection with marketing, import and/or distribution of ZimVie products in various jurisdictions prior to the distribution continue to market, import and distribute such products until such time as the relevant licenses and permits are transferred to ZimVie or our affiliates, while permitting ZimVie (or Zimmer Biomet, as applicable) to recognize revenue relating to the sale of its respective products, to the extent practicable. Under such interim operating model agreements and in accordance with the Separation Agreement, the relevant Zimmer Biomet entity will continue operations in the affected market on behalf of ZimVie, with ZimVie receiving all of the economic benefits and burdens of such activities. ZimVie began receiving these economic benefits as of March 1, 2022. Based on the terms of the interim operating model agreements, ZimVie determined it is the principal under this arrangement when: ZimVie holds all risks and rewards of ownership inclusive of risk of loss, market risk and benefits related to the inventory; ZimVie has latitude in pricing; ZimVie has the ability to direct Zimmer Biomet regarding decisions over inventory; and ZimVie is responsible for all credit and collections risks and losses associated with the related receivables. ZimVie is the principal in the majority of the interim operating model agreements and recognizes those sales on a gross basis. In limited jurisdictions, ZimVie is not the principal and recognizes revenue on a net basis. Upon exit of certain interim operating model agreements, we initially expected to pay approximately $10 million for the purchase of accounts receivable and inventory from Zimmer Biomet. Through December 31, 2022, we paid Zimmer Biomet $7.8 million related to the exit of certain interim operating model agreements, and there are no additional payments expected.
Termination of Related Party Status
As of February 1, 2023, Zimmer Biomet had sold all of its 19.7% ownership in ZimVie and is no longer considered a related party.
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Compensation Risk Assessment
At the request of the Compensation Committee, Exequity LLP (“Exequity”), the committee’s compensation consultant, conducted a qualitative review of the potential risks associated with our executive compensation program in 2022. The components of our executive compensation program are part of our global compensation structure, and the majority of the compensation policies or practices that apply to other levels of our employees or to any of our subsidiaries or divisions are included in our executive compensation program. Exequity found that our executive compensation program is in alignment with current market practices, contains an appropriate balance of risk versus rewards, and incorporates appropriate risk mitigating factors. Exequity found no design features in our executive compensation practices that pose a significant concern from the perspective of motivating senior officers to knowingly expose us to excessive enterprise risk. We believe that our compensation policies and practices do not encourage excessive risk-taking and are not reasonably likely to have a material adverse effect on us.
Corporate Governance Committee
David King, Chair
Vinit Asar
Sally Crawford
Richard Kuntz, M.D., M.Sc.
Karen Matusinec
Our Corporate Governance Committee identifies and makes recommendations to our Board regarding candidates for directorships, oversees the Board’s corporate governance policies and practices, and assists the Board in its oversight with respect to matters that involve our image, reputation, and standing as a responsible corporate citizen. In its oversight of director matters and corporate governance policies and practices, the Corporate Governance Committee’s duties include:
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developing and recommending to the Board criteria for selection of non-management directors; |
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recommending director nominees to the Board for election at the next meeting of shareholders at which directors are to be elected or to fill any vacancies or newly created directorships that may occur between such meetings; |
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recommending directors for appointment to Board committees and the chairs thereof; |
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analyzing information relevant to the Board’s determination as to whether a director is independent; |
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overseeing the annual self-evaluation process for the Board and its committees; |
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periodically reviewing the Board’s leadership structure and recommending any proposed changes to the Board for approval; |
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monitoring emerging corporate governance trends and recommending to the Board any proposed changes in our corporate governance policies; |
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periodically reassessing the Board’s Corporate Governance Guidelines and recommending any proposed changes to the Board for approval; and |
|
● |
|
periodically reviewing, in cooperation with the Compensation Committee, the form and amount of non-employee director compensation and recommending any proposed changes to the Board for approval. |
In assisting our Board of Directors in its oversight with respect to matters that involve our image, reputation and standing as a responsible corporate citizen, the Corporate Governance Committee reviews and considers, among other items, the following from time to time as it deems appropriate:
|
● |
|
current and emerging political, social, environmental, corporate citizenship and public policy issues and trends that may affect our business activities, performance, reputation or public image; and |
|
● |
|
shareholder proposals submitted for inclusion in our proxy materials that relate to public policy or social responsibility issues. |
Our Board has determined that each member of the Corporate Governance Committee is “independent” as defined under the rules of Nasdaq.
21
CORPORATE GOVERNANCE
Retainers
We pay non-employee directors quarterly, on the last day of March, June, September and December. During 2022, we paid non-employee directors an annual retainer of $70,000, subject to mandatory deferral requirements as described below, and we paid our non-executive Chair of the Board an additional annual retainer of $75,000. We paid our Audit Committee chair an additional annual retainer of $20,000, we paid our Compensation Committee chair an additional annual retainer of $15,000, and we paid each of the chairs of our other standing Board committees additional annual retainers of $10,000. Accordingly, we paid the following amounts during 2022:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 ($) |
|
|
June 30 ($) |
|
|
September 30 ($) |
|
|
December 31 ($) |
|
|
Total ($) |
|
Non-executive Chair annual retainer |
|
|
18,750 |
|
|
|
18,750 |
|
|
|
18,750 |
|
|
|
18,750 |
|
|
|
75,000 |
|
Director annual retainer |
|
|
17,500 |
|
|
|
17,500 |
|
|
|
17,500 |
|
|
|
17,500 |
|
|
|
70,000 |
|
Audit Committee chair annual retainer |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
5,000 |
|
|
|
20,000 |
|
Compensation Committee chair annual retainer |
|
|
3,750 |
|
|
|
3,750 |
|
|
|
3,750 |
|
|
|
3,750 |
|
|
|
15,000 |
|
Other standing committees chair annual retainer |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
2,500 |
|
|
|
10,000 |
|
Directors who commence service on the Board, or who commence service as a standing committee chair or as non-executive Chair, are paid applicable quarterly fees beginning with the quarter during which they commence such service. Similarly, directors who terminate service on the Board or terminate service as a standing committee chair or as non-executive Chair are paid applicable quarterly fees through the quarter during which such service terminated.
Equity-Based Compensation and Mandatory Deferrals
In 2022, we made the annual award of 500 DSUs to each non-employee director on April 1, 2022. Beginning in 2023, we will award each non-employee director who is elected or reelected at the annual meeting of shareholders, or, who is a continuing non-employee director at that time, 500 DSUs as of the date of the annual meeting with an initial value based on the price of our common stock on that date. We require that these annual DSU awards be credited to a deferred compensation account under the provisions of the Deferred Compensation Plan for Non-Employee Directors. DSUs represent an unfunded, unsecured right to receive shares of our common stock or the equivalent value in cash, and the value of DSUs varies directly with the price of our common stock. We also require that 50% of a director’s annual retainer be deferred and credited to his or her deferred compensation account in the form of DSUs with an initial value equal to the amount of fees deferred until the director holds a total of at least 5,000 DSUs.
Non-employee directors may elect to defer receipt of compensation in excess of their mandatory deferral and annual DSU award. Elective deferrals are credited to the director’s deferred compensation account in the form of either treasury units, dollar units or DSUs with an initial value equal to the amount of fees deferred. The value of treasury units and dollar units does not change after the date of deferral. Amounts deferred as treasury units are credited with interest at a rate based on the six-month U.S. Treasury bill discount rate for the preceding year. Amounts deferred as dollar units are credited with interest at a rate based on the rate of return of our invested cash during the preceding year. If we pay cash dividends on our common stock, amounts deferred as DSUs will be credited with additional DSUs equal to the number of shares of our common stock that could have been purchased if we paid cash dividends on the DSUs held in directors’ deferred compensation accounts and such cash was reinvested in our common stock. These additional DSUs will be subject to mandatory deferral.
All treasury units, dollar units and DSUs are immediately vested and payable following termination of the non-employee director’s service on the Board. We settle annual DSU awards and mandatory deferral DSUs in shares of our common stock. We pay the value of treasury units, dollar units and elective deferral DSUs in cash. Non-employee directors may elect to receive the cash payment in a lump sum or in not more than four annual installments.
In 2022, we made the annual award to each non-employee director of RSUs with an initial value of $185,000, and the additional annual award to the non-executive Chair of the Board of RSUs with an initial value of $65,000, on April 1, 2022, in each case with the number of RSUs based on the average of the high and low selling prices of our common stock on that date. Beginning in 2023, we will make these awards as of the date of the annual meeting, with the number of RSUs based on the average of the high and low selling prices of our common stock on that date. These awards are
24
EXECUTIVE COMPENSATION
|
COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Discussion and Analysis (“CD&A”) section of this proxy statement explains the type and amount of compensation provided to ZimVie’s named executive officers (“NEOs”) in 2022 both prior to and following our spinoff, as well as the principles and processes that the Compensation Committee (referred to as the “committee” in this CD&A) has established and follows in determining NEO compensation.
On March 1, 2022, ZimVie became an independent, publicly traded company as a result of the spinoff from our former parent company, Zimmer Biomet (see Proxy Statement Summary on page 1 for further details about the spinoff).
As part of the preparation for the spinoff, executive compensation decisions were determined by Zimmer Biomet’s CEO and Human Resources personnel in consultation with the Compensation and Management Development Committee of the Zimmer Biomet Board of Directors. Because we operated as part of Zimmer Biomet until the spinoff, our initial compensation and benefits programs largely replicated programs put in place by Zimmer Biomet and pre-spinoff compensation decisions reflected Zimmer Biomet’s compensation philosophy and approach to setting compensation.
For 2022, our compensation program consisted primarily of base salary, target annual cash incentive opportunities, and target long-term equity-based incentives. Because of the timing of the spinoff, the target grant date fair values of our 2022 annual equity awards were determined by Zimmer Biomet, consistent with the offer letters each of our NEOs executed with Zimmer Biomet in 2021. Our annual incentive plan payouts for 2022 reflect our performance during the full year, including both pre- and post-spinoff periods.
As a newly independent company, we expect our executive compensation philosophy, program, and approach to setting compensation to evolve to align with our long-term strategy and the unique characteristics of our company as compared to Zimmer Biomet. While this CD&A describes the 2022 program, we have also previewed changes made to our program for 2023, which will be our first full year as an independent public company. For example, for 2022 only, given the timing of the spinoff, the committee approved annual equity awards that were time-based only. Beginning in 2023 and in future years, we expect the committee will approve an equal mix (based on grant date fair value) of performance-based and time-based equity awards as part of our long-term incentive (“LTI”) program. See “Anticipated LTI Program for 2023” below.
For 2022, our NEOs were:
|
|
|
2022 NEOs |
NEO |
|
Title |
Vafa Jamali |
|
President and Chief Executive Officer |
Richard Heppenstall |
|
Executive Vice President, Chief Financial Officer and Treasurer |
Rebecca Whitney |
|
Senior Vice President and President — Global Spine |
Indraneel Kanaglekar |
|
Senior Vice President and President — Global Dental |
David Harmon(1) |
|
Former Senior Vice President, Chief Human Resources Officer |
(1) |
Mr. Harmon separated from the company on January 13, 2023. |
30
EXECUTIVE COMPENSATION
|
COMPENSATION PHILOSOPHY AND ELEMENTS |
|
Our Executive Compensation Philosophy |
Our executive compensation program is designed to achieve the following fundamental objectives:
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● |
|
attract, retain and motivate a highly qualified and effective senior leadership team; |
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● |
|
focus executives’ attention on specific financial, operational and strategic objectives; |
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● |
|
create a direct relationship between pay and performance; |
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● |
|
align executives’ interests with the long-term interests of our shareholders; |
|
● |
|
recognize company and individual performance; and |
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● |
|
reflect the value of each executive’s position in the market and within the company. |
As noted above, initial executive compensation decisions for 2022 were made by Zimmer Biomet because we operated as part of Zimmer Biomet until the spinoff, and our initial compensation and benefits programs largely replicated programs put in place by Zimmer Biomet.
Following the spinoff, it is the committee’s intention to establish target compensation for our NEOs consistent, to the extent possible, with comparable positions in our peer group. The committee targets total direct compensation (including base salary, target annual cash incentive opportunities and target long-term equity-based incentives) at market competitive levels. Target compensation for individual executives may vary based on a variety of factors, such as experience and time in the position, the nature of the executive’s responsibilities, criticality of the role and difficulty of replacement, internal equity, retention concerns, individual performance and expected future contributions, readiness for promotion to a higher level, and, in the case of externally recruited executives, compensation earned at a prior employer.
The committee gives specific consideration to the weighting of fixed and at-risk components of pay relative to the peer group. The committee seeks to provide a total pay opportunity that is competitive with our closest peer group and industry competitors, but which also places a greater emphasis on at-risk equity-based compensation.
|
Elements of Executive Compensation – 2022 |
The following table describes the elements of target direct compensation for 2022. Our compensation program uses a mix of fixed and variable compensation elements and provides alignment with both short- and long-term business goals through annual incentive and LTI opportunities. We also offer retirement plans and benefits that are generally available to all employees, and we provide a limited range of perquisites.
For 2022 only, due to the timing of the spinoff, the committee awarded time-based equity awards consisting of nonqualified stock options and RSUs until we could evaluate the best way to implement a performance-based LTI program. See “Anticipated LTI Program for 2023” below for a discussion of our anticipated long-term incentive plan design for 2023, including the introduction of performance-based RSUs (“PRSUs”) with a three-year performance period.
33
EXECUTIVE COMPENSATION
The committee believes using adjusted metrics is important when setting performance targets. Using only GAAP metrics could result in performance targets that incorporate certain items outside of a management team’s control and reduce comparability and could also result in performance targets that are misaligned with the long-term interests of the company and shareholders. We believe our shareholders recognize that adjusted metrics are indicators of core operational performance. We also understand that our shareholders commonly make adjustments to inform their own views of historical and future expectations for underlying operational performance. Our disclosures showing our adjustments to GAAP earnings help guide shareholders’ own evaluation of the company’s performance. Many companies disclose non-GAAP metrics when reporting financial results, which we believe is reflective of shareholders’ interest in, and understanding of, both GAAP and non-GAAP results.
We provide thorough disclosure of the adjustments made to our GAAP financials. Shareholders are therefore able to see the adjustments we make for the purposes of their analysis. However, the committee does not believe that GAAP metrics are as appropriate for purposes of our compensation program, as it believes adjusted results better reflect core operating results.
See Appendix A for details on each adjustment as well as a reconciliation of net income (loss) to adjusted EBITDA.
(5) |
Our bonus constant currency cash flow metric is determined by adjusting adjusted EBITDA as detailed in the reconciliation provided in Appendix A. The committee believes these adjustments result in a cash flow metric that more closely tracks the efficient use of cash. See Appendix A for a reconciliation of adjusted EBITDA to our bonus cash flow metric. |
The committee established the following cultural goals for the NEOs as part of the EAIP for 2022:
|
● |
|
Demonstrate expected behaviors based on ZimVie values (Curiosity, Authenticity, Accountability, and a Growth Mindset) |
|
● |
|
Ensure 85%+ of all hiring slates include a diverse candidate |
|
● |
|
Engage in career opportunity discussions with direct reports at least twice annually |
|
● |
|
Document retention / development / succession plans for critical direct reports and for high potential team members at the level below |
|
● |
|
Increase the employee engagement survey score related to Communication / Connectivity |
|
● |
|
Complete an equity review within the NEO’s business / function (program, policies, total rewards, promotions) |
After reviewing the progress made in 2022 with respect to these cultural goals, the committee determined that the goals were fully achieved for 2022; as such, the payout associated with the cultural goals was 100% for each of the NEOs, subject to adjustment for financial performance achievement (i.e., the payout associated with the cultural goals was reduced from 100% to 72%, in line with financial performance achievement).
Once the potential payout amounts under the EAIP were computed based on our financial performance and achievement of cultural goals as described above, the committee considered each NEO’s individual performance during 2022 to determine the actual cash incentive payment amounts. Based on its assessment of an NEO’s individual performance, the committee could increase the NEO’s payout by up to 15% or decrease the NEO’s payout by up to 100%.
The committee considered each NEO’s achievement of established goals and objectives, his or her contributions to our performance and other leadership attributes and accomplishments. The goals set for each NEO for 2022 reflected our status as a new public company and the wide range of responsibilities that are attributed to each NEO, and included goals pertaining to corporate strategy; growth drivers; new product launches; standing up key processes, capabilities, and personnel; completing scheduled transition services agreement exit milestones on time and within budget; and corporate compliance and regulatory compliance, including product quality and safety; among other areas.
38
EXECUTIVE COMPENSATION
Equity Grant Value Determination
Because of the timing of the spinoff, the target grant date fair value of our 2022 annual equity awards were determined by Zimmer Biomet, consistent with the offer letters each of our NEOs executed with Zimmer Biomet in 2021, as set forth below:
|
|
|
|
|
2022 Annual Equity Awards |
|
NEO |
|
Grant Date Fair Value of Target 2022 Annual LTI Award |
|
Vafa Jamali |
|
|
$ 3,000,012 |
|
Richard Heppenstall |
|
|
$ 1,000,012 |
|
Rebecca Whitney |
|
|
$ 600,022 |
|
Indraneel Kanaglekar |
|
|
$ 600,022 |
|
David Harmon |
|
|
$ 500,012 |
|
The committee considered these target grant date fair values in connection with its determination of each NEO’s total compensation for 2022.
Equity Award Types
The 2022 annual equity awards granted to the NEOs included an equal mix (based on grant date fair value) of stock options and RSUs that vest ratably over three years. The committee determined it was appropriate to award time-based equity awards following our spinoff in 2022, our first partial year as an independent public company, until we could evaluate the best way to implement a performance-based LTI program. See “Anticipated LTI Program for 2023” below for a discussion of our anticipated LTI program design for 2023, including the introduction of PRSUs.
|
Special, One-Time Spinoff-Related Awards |
Founders Grants to NEOs (and Other Eligible Employees) in Recognition of the Spinoff
To recognize the significant event that ZimVie’s spinoff into a new public company represented, the committee decided to award Founders grants to executives and key employees. In order to promote executive and employee retention, the committee determined that the Founders grants would take the form of RSUs that will cliff vest on the third anniversary of their date of grant. To determine the appropriate grant date fair value for the Founders grants, the committee reviewed information about initial equity grants made by similarly-sized companies when they went public during the past several years and applied its judgment in determining the value of grants to be made to the NEOs. Ultimately, the committee determined that, as a one-time award, making the grant date fair value of the Founders grants equal to the grant date fair value of the regular annual LTI awards (as set forth above) for each NEO was appropriate.
Make-Whole Grant to CEO Pursuant to the Terms of His Zimmer Biomet Offer Letter
In recognition of forgone equity compensation from his prior employer in connection with Mr. Jamali’s change of employment to join Zimmer Biomet, his revised offer letter with Zimmer Biomet dated January 31, 2021 provided that the Zimmer Biomet Board would recommend that the ZimVie Board approve a one-time long-term incentive grant with an aggregate grant date fair value of approximately $3,000,000, with fifty percent (50%) of the grant value in ZimVie time-vested RSUs vesting ratably over three years, and fifty
40
EXECUTIVE COMPENSATION
percent (50%) of the grant value in ZimVie stock options vesting ratably over three years. Following the spinoff, the committee approved the make-whole ZimVie RSU and stock option awards recommended by the Zimmer Biomet Board pursuant to the terms of Mr. Jamali’s offer letter.
|
ANTICIPATED LTI PROGRAM FOR 2023 |
For 2023, our first full year as an independent public company, we anticipate that our annual LTI grant to NEOs and other senior leadership team members will consist of an equal mix (based on grant date fair value) of PRSUs with a three-year performance period and time-based RSUs that will vest ratably over three years. We also anticipate that the 2023 PRSU plan design will measure performance based 60% on three-year cumulative constant currency revenue growth and 40% on three-year cumulative adjusted EBITDA margin, metrics that we believe directly relate to shareholder value creation.
|
Employment and Change in Control Severance Agreements |
We do not have employment agreements with our NEOs; however, we have entered into change in control severance agreements with them. These agreements are intended to maintain continuity of management, particularly in the context of a transaction in which we undergo a change in control.
These agreements are “double triggered,” which means that an executive is only entitled to severance payments if:
|
● |
|
we experience a change in control as defined in the agreement; and |
|
● |
|
the executive’s employment is terminated in a qualifying termination. |
The committee believes that it is appropriate to provide the NEOs with the specified severance in the event that their employment is terminated in connection with a change in control or their position is modified in such a way as to diminish their compensation, authority or responsibilities. These agreements contain no excise tax gross-up provisions. See “Change in Control Arrangements” in the narrative discussion following the Potential Payments upon Termination of Employment table for a more detailed description of the material terms of these agreements.
|
Severance Benefits (Unrelated to a Change in Control) |
We maintain an Executive Severance Plan applicable to certain members of our executive leadership team, which currently consists of our executive officers and certain other members of senior management. Under the plan, following a termination by us of a participant’s employment, unless his or her employment is terminated for misconduct or any of the other reasons specified in the plan, a participant will be eligible to receive a lump-sum severance amount equal to two times (for Mr. Jamali) or one times (for other participants) the sum of (1) his or her annualized base salary in effect when the termination occurs and (2) his or her target annual bonus amount in effect when the termination occurs.
In addition, if a participant’s employment is terminated on or after January 1 but prior to the payment date for bonuses related to the previous calendar year under the EAIP, and the participant was eligible to participate in the EAIP immediately prior to the separation and is entitled to severance benefits under the Executive Severance Plan, the participant’s severance benefit will be increased by the value of the bonus he or she would have received under the EAIP, if any, had he or she remained employed on the payment date.
Participants eligible to receive severance benefits under the Executive Severance Plan and who are eligible to elect COBRA will also be eligible to receive a lump-sum amount equal to the then-current monthly COBRA premium (for medical and dental insurance only) in effect the day prior to the separation date,
41
EXECUTIVE COMPENSATION
multiplied by 24 for Mr. Jamali and by 12 for other participants. Eligible participants will also be offered outplacement services with a value not to exceed $25,000, or an equivalent cash benefit in the plan administrator’s discretion.
Similar to our broad-based severance plan, to receive benefits under the Executive Severance Plan, a participant must sign a general release of claims and continue to be bound by the terms of his or her non-competition agreement with us. If a participant violates or breaches any term of the plan or the general release or any restrictive covenant agreement with us, or if facts are later disclosed or discovered that could have supported the participant’s termination for cause and would have rendered the participant ineligible to receive severance benefits under the plan, then the participant will forfeit any and all rights to benefits under the plan and, to the extent benefits have already been paid, must repay the full amount within 15 days of written notice from us.
Mr. Harmon received benefits under the Executive Severance Plan upon his separation from the company on January 13, 2023. See the Potential Payments upon Termination of Employment table for details of the amounts Mr. Harmon received.
During 2022, NEOs were eligible to participate in the following plans:
|
● |
|
our deferred compensation plan (“DCP”). |
We established the 401(k) plan and the DCP in connection with the spinoff to maintain levels of benefits consistent with those of our former parent company. The DCP provides executives with the opportunity to defer each year, on a pre-tax basis, up to 50% of base salary and up to 95% of annual incentive awards.
We offer retirement benefit plans in an effort to remain competitive with market practices, retain talented employees, assist employees in preparing for retirement, provide income to employees following retirement and, in the case of the DCP, provide benefits to eligible employees that are comparable, as a percentage of compensation, to benefits provided to employees whose compensation is not subject to limits under U.S. law. We believe that the total retirement benefits we provide are comparable to the retirement benefits provided by other life sciences companies. Additionally, the cost of providing retirement benefits generally affects decisions regarding the types and amounts of other compensation and benefits that we may offer our employee population as a whole, but the provision of, or an NEO’s accumulated benefit under, our retirement plans generally does not affect decisions regarding the types or amounts of other compensation paid to that NEO in a given year. Our DCP is discussed in greater detail in the narrative following the Nonqualified Deferred Compensation in 2022 table.
NEOs may participate in our Supplemental Individual Disability Insurance Plan. This plan is funded from our general assets, long-term disability insurance and individual disability insurance policies for which we pay. The plan provides disability benefits, as a percentage of total compensation, that are comparable to benefits provided to employees whose compensation is not limited for purposes of determining benefits payable under our base long-term disability insurance plan.
We provide executives with a limited range of perquisites or other benefits not generally available to all salaried employees. For 2022, these included the DCP, an executive physical program, and the Supplemental Individual Disability Insurance Plan discussed above.
42
EXECUTIVE COMPENSATION
|
THE COMMITTEE’S PROCESSES AND ANALYSES |
Role of Committee and Input from Management. As noted above, as part of the preparation for the spinoff, executive compensation decisions were determined by Zimmer Biomet’s CEO and Human Resources personnel in consultation with the Compensation and Management Development Committee of the Zimmer Biomet Board of Directors. Because we operated as part of Zimmer Biomet until the spinoff, our initial compensation and benefits programs largely replicated programs put in place by Zimmer Biomet and pre-spinoff compensation decisions reflected Zimmer Biomet’s compensation philosophy and approach to setting compensation.
Since the spinoff, the committee has assumed responsibility for determining our executive compensation strategies, structure, policies and programs and specifically approves compensation actions relating to our NEOs. It does so with the goals of motivating our NEOs to achieve our strategic business goals and objectives and enhance long-term shareholder value. The committee considers the interests of shareholders and overall company performance in establishing compensation for our NEOs. The committee references national surveys and publicly-available executive officer compensation data for similar companies and uses those as reference points when making compensation decisions with respect to our NEOs.
When setting compensation for our executives, the committee receives input from management and from Exequity, the committee’s executive compensation consulting firm. Management assists the committee in establishing NEO compensation by providing information on company and individual performance, market data, and business needs, strategy and objectives. The committee also considers our CEO’s recommendations regarding adjustments to NEO compensation (other than his own, with respect to which he is not present for discussions, recommendations, or determinations).
The committee (which is made up of all independent members of the Board) reviews our CEO’s performance and determines his compensation, taking into consideration his achievement of specified goals and objectives and the company’s performance. The committee receives input and recommendations with respect to our CEO’s compensation from Exequity.
The committee also reviews and approves actions related to other aspects of compensation that affect employees below the senior executive level, including compensation philosophy, annual incentive plan design and performance goals, equity award design and performance goals, equity value ranges and share pools.
Use of Peer Group Data. The committee reviews compensation data for a peer group of publicly traded companies, including other life sciences companies and companies with whom we compete for business and for executive talent, as a market reference point for executive compensation levels, equity usage and incentive plan design, industry trend analysis, and for performance comparisons. The peer group data is one of several inputs the committee considers when making compensation determinations.
Following the spinoff, the committee was assisted by Exequity in reviewing potential peer companies to use in evaluating NEO pay. In determining potential peer companies, the committee generally looked for companies within the same or similar industries with revenues reasonably comparable to those of the company and market capitalizations within the range of then-current projections for the company.
43
EXECUTIVE COMPENSATION
|
GOVERNANCE FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM |
|
Equity Incentive Grant Practices |
In general, the committee intends to approve annual equity-based awards to NEOs at approximately the same time each year, with a grant date typically in March or April. In 2022, the committee established a grant date shortly following our spinoff in March for annual equity grants to all eligible employees and a grant date in early April for the special one-time Founders equity grants to all eligible employees in recognition and celebration of our spinoff into a new public company. The committee also established a grant date in early April for the make-whole equity award to Mr. Jamali pursuant to the terms of the revised offer letter dated January 31, 2021 by and between Zimmer Biomet and Mr. Jamali in recognition of a potential equity loss related to his change in employment to join Zimmer Biomet.
In general, the committee approves target grant values for equity awards prior to the grant date. On the grant date, those values are converted to a number of stock options, RSUs, or PRSUs, as applicable, based on:
|
● |
|
the average of the high and the low selling prices of our common stock on the grant date; and |
|
● |
|
the same valuation methodology we use to determine the accounting expense of the grants under ASC 718. |
In 2022, the committee delegated authority to our CEO to grant a limited number of off-cycle awards to non-executive level employees for purposes of attracting new employees, retaining key employees, providing special recognition, and otherwise as the CEO may determine in his discretion to reward employee performance. The aggregate grant date fair value underlying all such grants by our CEO during 2022 was approximately $480,000. He subsequently reports any such grants to the committee. These grants are generally effective on the first trading day of the month following the later of the CEO’s approval of the grant or the new hire’s start date.
|
Executive Stock Ownership Guidelines |
Our NEOs must meet stock ownership guidelines set by the committee, as shown in the table below. The committee oversees compliance with these guidelines and periodically reviews the guidelines.
|
|
|
|
|
Executive Stock Ownership Guidelines |
|
Level |
|
Value of Shares or Units to be Owned as a Multiple of Base Salary |
|
CEO |
|
|
5x |
|
CFO |
|
|
3x |
|
Other NEOs |
|
|
2x |
|
NEOs have a period of five years to reach the guideline level of ownership. The committee counts the value of long shares and time-based RSUs toward these guidelines. The committee does not count the value of unearned PRSUs or stock options, whether vested or unvested, toward these guidelines. NEOs must hold 100% of shares acquired through option exercises or vesting of RSUs or PRSUs (other than to pay option exercise costs and/or cover any required tax withholding obligation) until the minimum ownership requirements have been met. All NEOs who are currently our employees are in compliance with the guidelines or are within the time period prior to required compliance. We have approved procedures by which every executive officer must obtain clearance prior to selling any shares of our common stock, in part to ensure no executive falls out of compliance with the guidelines.
45
EXECUTIVE COMPENSATION
|
Compensation Recovery (Clawback) Policy |
In order to further align management’s interests with the interests of shareholders and support good governance practices, the Board maintains a robust compensation recovery policy (commonly known as clawback policy) applicable to all incentive-based compensation granted to or earned by our Section 16 officers. In accordance with the policy, in the event we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws, we will recover, reasonably promptly, the amount of erroneously awarded compensation that was received by a covered executive during the three completed fiscal years immediately preceding the required restatement date (the “lookback period”). The amount of erroneously awarded compensation is the excess of the amount of incentive-based compensation received by the covered executive during the lookback period over the amount of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts, computed without regard to any taxes paid.
We will recover erroneously awarded compensation in a reasonable and prompt manner using any lawful method, which may include, without limitation: (1) requiring reimbursement of erroneously awarded cash compensation previously paid; (2) seeking recovery of any shares of ZimVie common stock which were erroneously awarded compensation; (3) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based award; (4) offsetting the recouped amount from any compensation we otherwise owe to the covered executive; (5) cancelling outstanding equity awards; and (6) requiring a covered executive to forfeit any unpaid, vested or unvested, incentive-based compensation.
The terms of our compensation recovery policy are in line with the SEC’s rules and Nasdaq’s proposed listing standards, but the committee is monitoring further developments with respect to compensation recovery policies and will recommend to the Board any changes to the current policy that may be necessary or appropriate in light of the new listing standards once they are finalized.
In addition to the above-described compensation recovery policy, our equity incentive plan and related award agreements contain provisions that permit the committee, in its discretion, to require a participant to forfeit his or her right to any unvested portion of an award and, to the extent that any portion of an award has previously vested, to return to us the shares of common stock covered by the award or any cash proceeds the participant received upon the sale of such shares, in the event that the participant engages in activity that is deemed detrimental to our interests, including, but not limited to, breach of restrictive covenants or violations of our Code of Business Conduct and Ethics or other policies, procedures or standards.
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Prohibition on Hedging and Pledging |
Our Stock Trading Policy prohibits all members of our Board, all executive officers, all employees at or above a director level and certain other designated employees (as well as such individuals’ family members, others living in their home and any entities that such individuals influence or control) from the following:
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purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of ZimVie securities that such person holds, directly or indirectly, whether or not the ZimVie securities were acquired as part of his or her compensation; |
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engaging in short sales of ZimVie securities; and |
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holding ZimVie securities in a margin account or otherwise pledging ZimVie securities as collateral for a loan. |
The prohibition on hedging included in our Stock Trading Policy does not preclude covered persons from engaging in general portfolio diversification or investing in broad-based index funds.
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EXECUTIVE COMPENSATION
based on actual performance through the date of the change in control. In addition, Mr. Jamali will receive a cash amount equal to the unvested portion, if any, of our matching contributions (and attributable earnings) credited to him under our savings plan, a lump-sum payment equal to two times the annual premium value for life insurance coverage (to the extent we are unable to provide such life insurance coverage for two years post-termination) and a lump-sum payment equal to two years of COBRA premiums for medical and dental insurance in effect immediately prior to his termination. Mr. Jamali will also receive reasonable outplacement services for up to six months post-termination (with a value not to exceed $25,000). To receive the severance benefits provided under the agreement, Mr. Jamali will be required to sign a general release of any claims against us and must enter into or affirm a non-compete agreement.
Change in Control Severance Agreements with Other Executive Officers
We also have entered into Change in Control Severance Agreements with our other NEOs.
These agreements provide for benefits only upon the occurrence of both a change in control during the term of the agreements and either (i) an involuntary termination of employment without “cause” (as defined in the agreements) or (ii) a voluntary termination of employment with “good reason” (as defined in the agreements). If both triggers occur, the NEO will receive a lump sum payment equal to two times the sum of his or her base salary and target annual incentive award. In addition, the NEO will receive a payout of any unpaid incentive compensation allocated or awarded for the completed calendar year preceding the date of termination and a pro rata portion to the date of termination of the aggregate value of all contingent incentive compensation awards for the current calendar year (assuming for this purpose that all performance conditions for such awards have been met).
These agreements also provide that if prior to a change in control, the NEO’s employment is terminated without cause at the direction of a person who has entered into an agreement with us, the consummation of which would constitute a change in control, or by the NEO for good reason where the circumstance or event which constitutes good reason occurs at the direction of such person, the NEO will receive a lump-sum severance payment equal to two times the sum of his or her base salary and the amount of the largest aggregate annual bonus paid to him or her with respect to the three years immediately prior to the year in which the notice of termination is given. In addition, in the circumstances described in the preceding sentence, the NEO will receive a payout of any unpaid incentive compensation allocated or awarded for the completed calendar year preceding the date of termination, provided that the performance conditions applicable to such incentive compensation are met, and an amount equal to a pro rata portion to the date of termination of the average annual award paid to the NEO under our incentive compensation plans during the three years immediately prior to the year in which the notice of termination was given.
If both triggers occur under these agreements, the agreements provide that, unless otherwise provided for under a written award agreement, (i) all outstanding stock options granted to the NEO will become immediately vested and exercisable, (ii) all time-based restrictions on restricted shares and RSUs will immediately lapse, and (iii) with respect to PRSUs, the number of shares or units that will be earned will be the greater of (a) the target number, or (b) the number that would have been earned based on actual performance through the date of the change in control. In addition, the NEO will receive a cash amount equal to the unvested portion, if any, of our matching contributions (and attributable earnings) credited to him or her under our savings plan, a lump-sum payment equal to two times the annual premium value for life insurance coverage (to the extent we are unable to provide such life insurance coverage for two years post-termination) and a lump sum amount equal to two years of COBRA premiums for medical and dental insurance in effect immediately prior to his or her termination. The NEO will also receive reasonable outplacement services for up to six months post-termination (with a value not to exceed $25,000). To receive the severance benefits provided under the agreements, the NEO will be required to sign a general release of any claims against us and must enter into or affirm a non-compete agreement.
None of the change in control severance agreements includes any tax gross-up provisions.
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APPROVAL OF THE AMENDED 2022 STOCK INCENTIVE PLAN
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Shareholder feedback on our executive compensation program, which feedback confirmed the belief that equity-based incentives are an important tool to drive the long-term performance of the company and align the interests of executives with those of shareholders. |
Based on these considerations, an additional 3 million shares are being proposed to be made available for issuance under the Stock Incentive Plan, which the Compensation Committee believes represents an appropriate increase at this time.
Considering that awards under the Stock Incentive Plan are subject to the discretion of the Compensation Committee, we cannot calculate the amount and timing of subsequent dilution that may ultimately result from such awards. It also is not possible to predict with complete accuracy the number of years over which the shares available for future grants, including the additional shares to be made available pursuant to the amendments to the Stock Incentive Plan, will be utilized.
The Compensation Committee believes that the ability to provide equity compensation to our executives and other employees has been, and will continue to be, essential to our ability to continue to attract, retain and motivate talented employees. The Compensation Committee believes that equity-based compensation is a key feature of a competitive compensation program. Further, equity-based compensation awards help align our employees’ interests with those of our shareholders.
Administration
Our Compensation Committee or any designated subcommittee thereof has the authority to administer the Stock Incentive Plan, including the authority to select the individuals who receive awards, the form of those awards and all terms and conditions of the awards. The Compensation Committee will also certify the level of attainment of performance targets, as and if applicable to awards under the Stock Incentive Plan.
Eligibility; Forms of Awards
Awards under the Stock Incentive Plan may be granted only to employees and other individuals providing services to ZimVie, including subsidiaries and affiliates. As of March 13, 2023, there were approximately 2,700 employees and an indeterminate number of other service providers who were eligible to receive awards under the Stock Incentive Plan. Incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, RSUs, performance units and performance shares may be granted under the Stock Incentive Plan. The closing sale price of our common stock on March 13, 2023 was $5.34 per share.
Shares Authorized
Currently, the maximum aggregate number of shares of our common stock that may be issued under the Stock Incentive Plan is 3 million, excluding shares subject to issuance pursuant to awards of Zimmer Biomet stock options, RSUs or PRSUs that were converted to ZimVie stock options, RSUs or PRSUs in connection with the spinoff which were issued under the Stock Incentive Plan but were not counted against the foregoing limitation. If the amended Stock Incentive Plan is approved by shareholders, the 3 million share maximum would be increased by 3 million shares to 6 million shares (the “Share Authorization”).
The Stock Incentive Plan contains a limit on the number of shares of common stock available for grant in the form of incentive stock options of an amount equal to the Share Authorization. In addition, no individual participant may be granted, in any single calendar year during the term of the Stock Incentive Plan, (1) stock options and/or SARs to purchase more than 2,500,000 shares of common stock and (ii) restricted stock, RSUs, performance units and/or performance shares representing more than 1,500,000 shares of common stock, provided that shares issuable pursuant to awards of Zimmer Biomet awards that were converted into ZimVie awards are not included in applying these limitations.
Duration; Amendment; Termination
Unless earlier discontinued by action of our Board, the Stock Incentive Plan will expire on May 1, 2033, and no further awards may be granted under the Stock Incentive Plan after the end of the term; however, awards previously granted thereunder may extend beyond such date. The Board may amend or suspend the Stock Incentive Plan at any time and from time to time; provided, however, that, except in connection with a corporate transaction involving the company
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APPROVAL OF THE AMENDED 2022 STOCK INCENTIVE PLAN
(including any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding awards may not be amended, without shareholder approval, to reduce the exercise price of outstanding options or SARs or to cancel outstanding options or SARs in exchange for cash, other awards, or options or SARs with an exercise price that is less than the exercise price of the original options or SARs; and provided, further, that the Board shall submit for shareholder approval any amendment (other than an amendment pursuant to the adjustment provisions described above) required to be submitted for shareholder approval by law, regulation or applicable stock exchange requirements or that otherwise would: (1) increase the maximum stock award levels described above; (2) reduce the price at which stock options may be granted to below fair market value on the date of grant; (3) extend the term of the Stock Incentive Plan; or (4) change the class of persons eligible to be participants.
Stock Options and Stock Appreciation Rights
Stock options awarded under the Stock Incentive Plan may be either incentive stock options or nonqualified stock options. Options will expire no later than 10 years after the date of grant and, subject to certain exceptions specified in the Stock Incentive Plan, may not be exercised prior to one year following the date of grant. The exercise price of stock options may not be less than the fair market value of our common stock on the date of grant. The Compensation Committee may establish other vesting or performance requirements which must be met prior to the exercise of the stock options. Stock options may be granted in tandem with SARs.
Restricted Stock and RSUs
The Compensation Committee may also grant shares of restricted stock or RSUs that are subject to the continued service of the award recipient and may also be subject to the attainment of performance criteria at the discretion of the Compensation Committee. Generally, if the award recipient’s service terminates prior to the completion of the specified term of service or the attainment of the specified performance criteria, the awards will lapse.
Subject to certain exceptions specified in the Stock Incentive Plan, an award will not vest during a period less than one year following the date of the award. During the restriction period, unless the Compensation Committee determines otherwise, an award recipient who holds restricted stock will be entitled to vote the shares and to receive cash dividends, if any are declared. Cash dividends paid with respect to restricted stock will be retained by us during the restriction period and will be subject to the same restrictions as the underlying restricted stock. An award recipient who holds RSUs will have none of the rights of a shareholder until the restriction period has ended and shares of common stock have been issued.
Long-Term Performance Awards
The Compensation Committee may grant performance units or performance shares under the Stock Incentive Plan. Performance units entitle the award recipient to receive a specified dollar value, variable under conditions specified in the award, if the performance objectives specified in the award are achieved and other terms and conditions are satisfied. Performance shares entitle the award recipient to receive a specified number of shares of common stock, or the equivalent cash value, if the objectives specified in the award are achieved and other terms are satisfied.
Performance Criteria
Awards of performance units and performance shares will be, and any other type of award (except incentive stock options) in the discretion of the Compensation Committee may be, contingent upon achievement of performance criteria. The Compensation Committee will determine the specific targets for the selected performance criteria. Following the applicable performance period, the Compensation Committee will determine the extent to which the criteria have been achieved and the corresponding level to which vesting requirements have been satisfied and will certify these determinations in writing.
Adjustments
The number, class and price of stock options and other awards are subject to appropriate adjustment in the event of certain changes in our common stock, including stock dividends, stock splits, recapitalizations, reorganizations, corporate separation or division, consolidations, split-ups, combinations or exchanges of shares and similar transactions.
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APPROVAL OF THE AMENDED 2022 STOCK INCENTIVE PLAN
Change in Control
In the event an award recipient’s service with us terminates pursuant to a qualifying termination (as defined in the Stock Incentive Plan) during the three-year period following a change in control (as defined in the Stock Incentive Plan): (1) all of the award recipient’s outstanding options will become immediately fully vested and exercisable and (2) all time-based restrictions imposed under awards of restricted stock and RSUs will immediately lapse.
If the company undergoes a change in control during the award period applicable to an award that is subject to the achievement of performance criteria, the number of shares or units deemed earned will be the greater of (1) the target number of shares or units specified in the award agreement or (2) the number of shares or units that would have been earned by applying the performance criteria specified in the award agreement to the company’s actual performance from the beginning of the applicable award period to the date of the change in control.
Award Recipients Based Outside the U.S.
The Stock Incentive Plan provides that the Compensation Committee may modify the terms and conditions of awards granted to individuals who are based outside the U.S. in order to comply with provisions of laws in other countries in which the Company operates.
U.S. Federal Income Tax Consequences
The U.S. federal income tax consequences arising with respect to awards granted under the Stock Incentive Plan will depend on the type of the award. The following provides only a general description of the application of federal income tax laws to certain awards under the Stock Incentive Plan. This discussion is intended for the information of shareholders considering how to vote at the meeting and not as tax guidance to employees, as the consequences may vary with the types of awards made, the method of payment or settlement and other factors. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local or foreign tax laws. You should review Appendix B, which includes the Stock Incentive Plan as proposed to be amended.
From the employees’ standpoint, as a general rule, ordinary income will be recognized at the time of payment of cash or delivery of actual shares of common stock (for example, upon exercise of nonqualified stock options). Future appreciation on shares of common stock held beyond the ordinary income recognition event will be taxable at the long-term or short-term capital gains rates when the shares of common stock are sold (depending on how long the shares were held). We, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the employee, and we will not be entitled to any tax deduction in respect of capital gain income recognized by the employee.
Exceptions to these general rules may arise under the following circumstances:
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if shares of common stock transferred in exchange for performance of services, when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment-, service-, or performance-related condition, ordinary income taxation and our tax deduction will be delayed until the risk of forfeiture lapses (unless the employee makes a special election to ignore the risk of forfeiture); |
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if an employee is granted an option that qualifies as an “incentive stock option,” no ordinary income will be recognized, and we will not be entitled to any tax deduction, if (a) shares of common stock acquired upon exercise of such option are held more than the longer of one year from the date of exercise and two years from the date of grant and (b) at all times during the period beginning on the date of the granting of the option and ending on the day three months before the date of exercise, the grantee remained an employee of us, one of our subsidiaries or a corporation “issuing or assuming a stock option in a transaction to which Code Section 424(a) applies”; and |
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an award may be taxable to the employee at 20 percentage points above ordinary income tax rates at the time it becomes vested, plus interest at the underpayment rate plus one percentage point, even if that is prior to the delivery of the cash or common stock in settlement of the award, if the award constitutes “deferred compensation” under Code Section 409A, and the requirements of Code Section 409A are not satisfied. |
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ADDITIONAL INFORMATION
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
1. Why am I receiving these materials?
We have made this proxy statement available to you on the Internet or, upon your request, have delivered a printed version of this proxy statement to you by mail, in connection with the solicitation of proxies by our Board of Directors for use at our 2023 annual meeting of shareholders to be held on Friday, May 12, 2023 at 8:00 a.m. Mountain Time, and at any postponement(s) or adjournment(s) thereof. You are receiving this proxy statement because you owned shares of ZimVie common stock at the close of business on March 13, 2023, and that entitles you to vote at the meeting. By use of a proxy, you can vote whether or not you attend the meeting. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.
2. What am I voting on?
There are five proposals scheduled to be voted on at the annual meeting:
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Election of two Class I directors (Proposal 1); |
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Ratification of the appointment of PwC as our independent registered public accounting firm for 2023 (Proposal 2); |
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Advisory Say on Pay Proposal (Proposal 3); |
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Advisory Say on Frequency Proposal (Proposal 4); and |
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Approval of the amended 2022 Stock Incentive Plan (Proposal 5). |
3. How does the Board recommend that I vote?
The Board recommends that you vote your shares:
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“FOR” the election of each of the nominees to the Board (Proposal 1); |
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“FOR” ratification of the appointment of PwC as our independent registered public accounting firm for 2023 (Proposal 2); |
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“FOR” the Say on Pay proposal (Proposal 3); |
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For the option of “1 YEAR” on the Say on Frequency proposal (Proposal 4); and |
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“FOR” the approval of the amended 2022 Stock Incentive Plan (Proposal 5). |
4. How many votes do I have?
You will have one vote for every share of ZimVie common stock that you owned at the close of business on March 13, 2023.
5. How many shares are entitled to vote?
There were 26,364,548 shares of ZimVie common stock outstanding as of March 13, 2023 and entitled to vote. Each share is entitled to one vote.
6. What is the quorum requirement for the annual meeting?
The holders of a majority of the outstanding shares entitled to vote at the meeting must be present or represented by proxy at the meeting for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, if you attend and vote during the meeting or have voted before the meeting via the Internet, by telephone, or by properly submitting a proxy card or vote instruction form by mail. If a quorum is not present, the meeting will be adjourned until a quorum is obtained.
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ADDITIONAL INFORMATION
12. If I am a beneficial owner, how do I vote?
There are four ways to vote:
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In person. If you wish to vote in person at the annual meeting, you must obtain a legal proxy from the record holder of your shares. Please contact that organization for instructions regarding obtaining a legal proxy. |
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Via the Internet before the meeting. You may vote by proxy via the Internet by following the instructions provided in the Notice or vote instruction form. |
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By Telephone before the meeting. If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the toll-free number found on the vote instruction form. |
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By Mail before the meeting. If you request printed copies of the proxy materials by mail, you may vote by proxy by filling out the vote instruction form and sending it back in the envelope provided. |
13. Is my vote confidential?
Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed, except:
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as necessary to meet applicable legal requirements; |
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to allow for the tabulation and certification of votes; and |
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to facilitate a successful proxy solicitation. |
Occasionally, shareholders provide written comments on their proxy cards, which may be forwarded to management and the Board.
14. Can I change my vote?
Yes. At any time before your proxy is voted, you may change your vote by:
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revoking it by written notice to our Corporate Secretary at ZimVie Inc., 10225 Westmoor Drive, Westminster, Colorado 80021; |
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delivering a later-dated proxy (including a telephone or Internet vote) by the applicable deadline; or |
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voting during the meeting. |
15. How are proxies voted?
All shares represented by valid proxies received prior to the annual meeting will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder’s instructions.
16. What happens if a nominee for director declines the nomination or is unable to serve?
If that happens, the persons named as proxies may vote for a substitute nominee designated by the Board to fill the vacancy, or, if no substitute has been nominated, for the remaining nominees, leaving a vacancy, or the Board may reduce its size. The Board has no reason to believe that either of the nominees will be unable or decline to serve if elected.
17. What happens if I do not give specific voting instructions?
It depends on how your shares are held:
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Shareholders of Record. In the following situations, the proxy holders will vote your shares in the manner recommended by the Board on proposals presented in this proxy statement and as the proxy holders may determine in their judgment and discretion with respect to any other matters properly presented for a vote at the annual meeting: |
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if, when voting online at www.ProxyVote.com or via mobile.proxyvote.com, you select the “Submit” button without voting on each item individually; |
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if, when voting via the telephone, you elect not to vote on matters individually; and |
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if you sign and return a proxy card without giving specific voting instructions. |
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Beneficial Owners. If you do not provide the record holder of your shares with specific voting instructions, your record holder may vote on the ratification of the appointment of PwC as our independent registered public accounting firm for 2023 (Proposal 2). However, your record holder cannot vote your shares without specific instructions on the other matters – the election of directors (Proposal 1), the Say on Pay proposal (Proposal 3), |
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ADDITIONAL INFORMATION
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the Say on Frequency proposal (Proposal 4), and the amended 2022 Stock Incentive Plan approval proposal (Proposal 5). If your record holder does not receive instructions from you on how to vote your shares on Proposals 1, 3, 4, and 5, your record holder will inform the inspector of election that it does not have the authority to vote on those proposals with respect to your shares. |
This is generally referred to as a “broker non-vote.” Broker non-votes will not be counted in determining the outcome of the vote for any of the proposals.
18. Who will serve as the inspector of election?
A representative from Broadridge Financial Solutions will serve as the independent inspector of election.
19. How can I find out the results of the annual meeting?
Preliminary voting results will be announced at the meeting. The final voting results will be tallied by the inspector of election and published in a Current Report on Form 8-K, which we are required to file with the SEC within four business days following the annual meeting.
20. Who is paying for the cost of this proxy solicitation?
We are paying the costs of the solicitation of proxies. We have retained Alliance Advisors LLC to assist in soliciting proxies for a fee of $20,000 plus out-of-pocket expenses. We must also pay brokerage firms and other persons representing beneficial owners of shares held in street name certain fees associated with:
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forwarding the Notice to beneficial owners; |
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forwarding printed proxy materials by mail to beneficial owners who specifically request them; and |
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obtaining beneficial owners’ voting instructions. |
In addition to soliciting proxies by mail, certain of our directors, officers and employees, without additional compensation, may solicit proxies personally or by telephone, facsimile or email on our behalf.
21. Are there any requirements for attending the annual meeting?
Attendance at the annual meeting is limited to shareholders. Registration will begin at 7:30 a.m. Mountain Time on the date of the meeting, and each shareholder may be asked to present valid picture identification such as a driver’s license or a passport and proof of stock ownership as of March 13, 2023. The use of cell phones, smartphones, pagers, recording and photographic equipment and/or computers is not permitted in the meeting room.
22. Is there a list of shareholders entitled to vote at the annual meeting?
A list of shareholders entitled to vote will be available for ten (10) days prior to the meeting, between the hours of 9 a.m. and 5 p.m. Mountain Time, at our offices at 10225 Westmoor Drive, Westminster, Colorado 80021. If you would like to view the shareholder list, please contact our Corporate Secretary to schedule an appointment.
23. What is “householding”?
“Householding” is a procedure under which we are delivering a single copy of this proxy statement and our 2022 Annual Report to multiple shareholders who share the same address unless we have received contrary instructions from one or more of the shareholders. This procedure reduces our printing and mailing costs. Upon request, we will deliver promptly a separate copy of this proxy statement and our 2022 Annual Report to any shareholder at a shared address to which we delivered a single copy of these documents. To receive a separate copy of this proxy statement or the 2022 Annual Report, or to notify us that you wish to receive separate copies in the future, or a single copy if you are currently receiving multiple copies, please contact our Corporate Secretary at ZimVie Inc., 10225 Westmoor Drive, Westminster, Colorado 80021 or by telephone at (303) 443-7500. Shareholders who hold shares in “street name” may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.
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APPENDIX B
ZIMVIE INC.
2022 STOCK INCENTIVE PLAN
(As Proposed to Be Amended on May 12, 2023)
1. General:
(a) Establishment of Plan. The ZimVie Inc. 2022 Stock Incentive Plan (the “Plan”) is herebywas originally established effective as of March 1, 2022 (the “Initial Effective Date”). The Plan, as amended, will become effective on May 12, 2023 (the “Amendment Effective Date”) upon the affirmative vote of a majority of votes cast at the 2023 annual meeting of stockholders.
(b) Purpose. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of service providers of the Company to those of the Company’s stockholders and by providing persons who provide services to the Company with long-term incentives for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of such persons who will be largely responsible for the long-term performance, growth and financial success of the Company.
2. Definitions: For purposes of this Plan:
(a) “Affiliate” means any entity in which the Issuer has, directly or indirectly, an ownership interest of at least 2050%.
(b) “Associated Option” shall have the meaning set forth in Section 7.
(c) “Award” means an award of options, stock appreciation rights, performance shares, performance units, restricted stock, or restricted stock units, or Other Stock-Based Awards granted under this Plan, including substitute or assumed awards granted under Section 20 and awards assumed as of the Initial Effective Date under Section 21.
(d) “Board” or “Board of Directors” means the Board of Directors of the Issuer.
(e) “Change in Control” shall have the meaning set forth in Section 15(d).
(f) “Committee” shall have the meaning set forth in Section 4.
(g) “Current Portion” shall have the meaning set forth in Section 8(a).
(h) “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, including rules, regulations and guidance promulgated thereunder and successor provisions and rules and regulations thereto.
(i) “Common Stock” means the Issuer’s common stock.
(j) “Company” means the Issuer (ZimVie Inc.) and its Subsidiaries and Affiliates.
(k) “Deferred Portion” shall have the meaning set forth in Section 8(a).
(l) “Disability” means total disability as defined by the Company’s group long-term disability insurance policy applicable to participants.
(m) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(n) “Fair Market Value” means the average of the high and low sale prices of a share of Common Stock on the Nasdaq Stock Market on the date of measurement or on any date as determined by the Committee and, if there were no trades on such date, on the day on which a trade occurred next preceding such date.
(o) “Issuer” means ZimVie Inc, a Delaware corporation.
(p) “Other Stock-Based Awards” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Section 10.
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APPENDIX B
(q) “Performance Criteria” shall have the meaning set forth in Section 6(a).
(r) “Plan” means this ZimVie Inc. 2022 Stock Incentive Plan, as amended.
(s) “Prior Plan” means the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan, as amended.
(t) “Qualifying Termination” shall have the meaning set forth in Section 15(e).
(u) “Regulations” shall have the meaning set forth in Section 4(c).
(v) “Restriction Period” shall have the meaning set forth in Section 9(b)(2).
(w) “Retirement” shall mean termination of the employment of an employee with the Company other than termination by the Company for willful misconduct or activity deemed detrimental to the interests of the Company on or after (i) the employee’s 65th birthday or, (ii) the employee’s 60th birthday if the employee has completed 5 years of service with the Company, or (iii) the employee’s 55th birthday if the employee has completed 10 years of service with the Company. For purposes of this Section 2(vw) and all other purposes of this Plan, Retirement shall also mean involuntary termination of employment of an employee with the Company for anya reason (other than the employee’s death, resignation, or termination by the Company for willful misconduct or activity deemed detrimental to the interests of the Company), where, on termination, the employee’s attained age (expressed as a whole number) plus completed years of service (expressed as a whole number) plus one (1) equals at least 70 and the employee has completed 10 years of service with the Company and, where applicable, the employee has executed a general release, a covenant not to compete and/or a covenant not to solicit. within the time required by the Company. Retirement shall also include terminations of employment due to Disability, as defined in Section 2(l). For purposes of this Plan, an employee’s service with the Company’s former parent, Zimmer Biomet Holdings, Inc., and its subsidiaries and affiliates before March 1, 2022 shall be included as service with the Company, provided that the employee was employed by Zimmer Biomet Holdings, Inc. (or a subsidiary or affiliate) on February 28, 2022 and has been continuously employed by the Company since March 1, 2022. For the avoidance of doubt, the Retirement provisions of the Plan do not apply to service providers who are not employees.
(x) “Section 409A of the Code” shall mean Section 409A of the Code and the regulations and guidance promulgated thereunder.
(y) “Share” means a share of Common Stock of the Company.
(y)(z) “Subcommittee” shall have the meaning set forth in Section 4(b).
(z)(aa) “Subsidiary” shall mean any corporation which at the time qualifies as a subsidiary of the Issuer under the definition of “subsidiary corporation” in Section 424 of the Code.
(aa)(bb) “Tax Date” shall have the meaning set forth in Section 14(a).
(bb)(cc) “Withholding Tax” shall have the meaning set forth in Section 14(c).
3. Shares of Common Stock Subject to the Plan:
(a) Shares Authorized; Share Counting. Subject to the other provisions of this Section 3, the total number of sShares available for grant as Awards pursuant to this Plan shall be 36,000,000. (the “Share Authorization”). Solely for the purpose of applying the foregoing limitation and subject to the replenishment provisions of Section 3(bc) below:
(1) each Award granted under this Plan shall reduce the number of sShares available for grant by one sShare for every one sShare granted;
(2) if Awards are granted in tandem, so that only one of the Awards may actually be exercised, only the Award that results in the greater reduction in the number of sShares available for grant shall result in a reduction of the sShares so available, and the other Award shall be disregarded; and
(3) Substitute or assumed Awards made under Section 20 and Awards assumed as of the Initial Effective Date under Section 21 shall not be included in applying these limitations.
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APPENDIX B
(a) Shares Again Available.
(1) In the event all or any portion of an Award terminates or expires or is cancelled or forfeited during the term of this Plan without being exercised or fully vested or is settled for cash (collectively, “cancelled awards”), then the shares underlying such cancelled award shall be restored to the Plan on a one-for-one basis and may again be used for Awards under the Plan.
(b) Minimum Vesting Requirements for Awards. Except with respect to a maximum of five percent (5%) of the Share Authorization (the “Five Percent Carve-Out”), Awards shall provide for a vesting period of at least one year. Notwithstanding the foregoing, the Committee may, consistent with the terms of the Plan, permit acceleration of vesting of an Award in the event of (1) death; (2) Disability; (3) Retirement; (4) termination of service following a Change in Control; (5) involuntary termination of service for a reason other than death, resignation, or termination by the Company for willful misconduct or activity deemed detrimental to the interest of the Company (for example, termination of service pursuant to a reduction in force or sale or spin-off of assets or a business unit); or (6) as otherwise permitted under the Plan.
(c) Share Usage.
(1) Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission prior to the issuance of Shares for Awards not involving Shares, shall be available again for grant under this Plan. To the extent a Share that was counted against the Five Percent Carve-Out is added back to the Share Authorization pursuant to this Section, then such Share shall also be added back to and be available for grant pursuant to the Five Percent Carve-Out. To the extent permitted by applicable law or stock exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Affiliate shall not be counted against Shares available for grant pursuant to the Plan.
(2) Notwithstanding anything to the contrary contained herein:
(A) shares tendered or withheld in payment of the exercise of stock options or stock appreciation rights shall not be added to the aggregate Plan limit described above;
(B) shares that the Company retains or withholds or causes participants to surrender to satisfy Tax-Related Items in accordance with Section 14 shall not be added to the aggregate Plan limit described above;
(C) shares that are repurchased by the Company using option exercise proceeds shall not be added to the aggregate Plan limit described above; and
(A)(D) if a stock appreciation right included in an option in accordance with Section 7(b)(12) is exercised, the number of shares covered by the option or portion thereof which is surrendered on exercise of the stock appreciation right shall be considered issued pursuant to the Plan and shall count against the aggregate Plan limit described above, regardless of whether or not any shares are actually issued to the participant upon exercise of the stock appreciation right.
(c)(d) Individual Limitation. No individual participant may be granted, in any single calendar year during the term of this Plan, stock options and/or stock appreciation rights to purchase more than 9002,500,000 shares of Common StockShares. No individual participant may be granted, in any single calendar year during the term of this Plan, restricted stock, restricted stock units, performance units, and/or performance shares representing more than 4501,500,000 shares of Common Stock.Shares. Substitute or assumed Awards made under Section 20 and Awards assumed as of the Initial Effective Date under Section 21 shall not be included in applying these limitations.
(d)(e) Maximum Number of Incentive Stock Options. The number of shares of Common StockShares with respect to which incentive stock options may be granted shall not exceed 1,000,000 sharesthe Share Authorization during the term of this Plan.
(e)(f) Adjustment. The limitations under Sections 3(a), (c) and (d) are subject to adjustment in number and kind pursuant to Section 13.
(f)(g) Treasury or Market Purchased Shares. Common Stock issued hereunder may be authorized and unissued sShares or issued sShares acquired by the Company on the market or otherwise.
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APPENDIX B
(g)(h) Effect of Plans Operated by Acquired Companies. If a company acquired by the Company or with which the Company combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common StockShares authorized for grant under the Plan. Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees of the Company prior to such acquisition or combination.
4. Administration: The Plan shall be administered under the supervision of the Board of Directors, which may exercise its powers, to the extent herein provided, through the agency of its Compensation Committee (the “Committee”), which shall be appointed by the Board of Directors. In addition, Board of Directors or the Committee may delegate in writing any or all of its authority hereunder to one or more other committees or subcommittees, and the initial grants to be made at the time of the spin-off of the Issuer’s stock from Zimmer Biomet Holdings, Inc. may be made by the Compensation and Management Development Committee of the Board of Directors of Zimmer Biomet Holdings, Inc..
(a) Composition of Committee. The Committee shall consist of not less than two (2) members of the Board who are intended to meet the definition of “non-employee directors” under the provisions of the Exchange Act or rules or regulations promulgated thereunder.
(b) Delegation and Administration. The Committee may delegate to one or more separate committees (any such committee a “Subcommittee”) composed of one or more directors of the Issuer (who may, but need not be, members of the Committee) the ability to grant Awards with respect to participants who are not executive officers of the Company under the provisions of the Exchange Act or rules or regulations promulgated thereunder, and such actions shall be treated for all purposes as if taken by the Committee. Any action by any such Subcommittee within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such Subcommittee. The Committee may delegate the administration of the Plan to an officer or officers of the Issuer, and such administrator(s) may have the authority to execute and distribute agreements or other documents evidencing or relating to Awards granted by the Committee under this Plan, to maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards, to process or oversee the issuance of shares of Common StockShares upon the exercise, vesting and/or settlement of an Award, to interpret the terms of Awards and to take such other actions as the Committee may specify, provided that in no case shall any such administrator be authorized to grant Awards under the Plan. Any action by any such administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such administrator, provided that the actions and interpretations of any such administrator shall be subject to review and approval, disapproval or modification by the Committee.
(c) Regulations. The Committee, from time to time, may adopt rules and regulations (“Regulations”) for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the terms of the Plan, as the Committee shall deem appropriate. The interpretation and construction of any provision of the Plan by the Committee shall, unless otherwise determined by the Board of Directors, be final and conclusive.
(d) Records and Actions. The Committee shall maintain a written record of its proceedings. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the Committee.
5. Eligibility: Awards may be granted only to service providers of the Company, including Subsidiaries and Affiliates which become such after the Initial Effective Date. Any director who is not an employee of the Company shall be ineligible to receive an Award under the Plan. The adoption of this Plan shall not be deemed to give any service providers any right to an Award, except to the extent and upon such terms and conditions as may be determined by the Committee.
6. Performance Criteria: Awards under Section 8 of this Plan shall be, and any other type of Award (other than incentive stock options) in the discretion of the Committee may be, contingent upon achievement of Performance Criteria.
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APPENDIX B
(a) Available Criteria. For purposes of this Plan, the term “Performance Criteria” means a measure of performance relating to one or more specified criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line of business, project, geographical region, Affiliate or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee in the Award. Such specified criteria may include, but are not limited to, the following: net sales; revenue; assets; liabilities; gross profit; operating profit; net earnings; earnings per share; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or other items; profit margin (gross, operating or net); cash flow, net cash flow or free cash flow; acquisition integration synergies (measurable savings and efficiencies resulting from integration); acquisition integration milestone achievements; stock price performance; total shareholder return; costs or expenses; debt, net debt, borrowing levels, leverage ratios or credit ratings; market share or customer acquisition, expansion or retention; financial return ratios (including return on equity, return on assets or net assets, return on capital or invested capital and return on operating profit); acquisitions, divestitures, joint ventures, strategic alliances, spin-offs, split-ups and similar transactions; reorganizations, recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; or any other performance criteria determined by the Committee.
(b) Adjustments. The Committee may, at any time, adjust any evaluation of performance under a Performance Criteria to exclude the effects of any of the following items or events that occurs or otherwise impacts reported results during a performance period: (1) asset write-downs, (2) litigation or claim judgments or settlements, (3) changes in tax law, accounting principles or other such laws or provisions affecting reported results, (4) accruals and expenses associated with reorganization, restructuring and/or transformation programs, (5) acquisition and integration expenses and purchase accounting, and (6(6) currency exchange rate fluctuations, and (7) any other items or events disclosed in management’s discussion and analysis of financial condition and results of operations appearing in the Issuer’s annual report to stockholders for the applicable year. Notwithstanding satisfaction or completion of any Performance Criteria, to the extent specified at the time of grant of an Award, the number of sShares, stock options, stock appreciation rights, performance shares, performance units, restricted stock, or restricted stock units or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Criteria may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine.
(c) Establishment and Achievement of Targets. The Committee shall establish the specific targets for the selected Performance Criteria. These targets may be set at a specific level or may be expressed as relative to the comparable measure at comparison companies or a defined index. In cases where Performance Criteria are established, the Committee shall determine the extent to which the criteria have been achieved and the corresponding level to which vesting requirements have been satisfied or other restrictions are to be removed from the Award or the extent to which a participant’s right to receive an Award should lapse in cases where the Performance Criteria have not been met, and shall certify these determinations in writing. The Committee may provide for the determination of the attainment of such targets in installments where it deems appropriate.
7. Stock Options: Stock options under the Plan shall consist of incentive stock options under Section 422 of the Code or nonqualified stock options (options not intended to qualify as incentive stock options), as the Committee shall determine. In addition, the Committee may grant stock appreciation rights in conjunction with an option, as set forth in Section 7(b)(12).
Each option shall be subject to the following terms and conditions:
(a) Grant of Options. The Committee shall (1) select the employees of the Company to whom options may from time to time be granted, (2) determine whether incentive stock options or nonqualified stock options are to be granted, (3) determine the number of sShares to be covered by each option so granted, (4) determine the terms and conditions (not inconsistent with the Plan) of any option granted hereunder (including but not limited to restrictions upon the options, conditions of their exercise (including as to nonqualified stock options, subject to any Performance Criteria), or restrictions on the shares of Common StockShares issuable upon exercise thereof), (5) determine whether nonqualified stock options or incentive stock options granted under the Plan shall include stock appreciation rights and, if so, the Committee shall determine the terms and conditions thereof in accordance with Section 7(b)(12) hereof and (6) prescribe the form of the instruments necessary or advisable in the administration of options.
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APPENDIX B
(b) Terms and Conditions of Option. Any option granted under the Plan shall be evidenced by a Stock Option Agreement entered into by the Company and the optionee, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan, and in the case of an incentive stock option not inconsistent with the provisions of the Code applicable to incentive stock options, as the Committee shall prescribe:
(1) Number of Shares Subject to an Option. The Stock Option Agreement shall specify the number of shares of Common StockShares subject to the Agreement.
(2) Option Price. The purchase price per share of Common StockShare purchasable under an option will be determined by the Committee but will be not less than the Fair Market Value of a share of Common StockShare on the date of the grant of the option, except as provided in Sections 19, 20 or 21.
(3) Option Period. The period of each option shall be fixed by the Committee, but no option shall be exercisable after the expiration of ten years from the date the option is granted.
(4) Condition. Unless the Committee determines otherwise,Except to the extent an Award is counted against the Five Percent Carve-Out or as otherwise provided in Section 3(b), each optionee, as a condition of the grant of an option, shall remain in the continuous service to the Company for at least one year from the date of the granting of such option, and no option shall be exercisable until after the completion of such one year period of service by the optionee.
(5) Exercise of Option. The Committee shall determine the time or times at which an option may be exercised in whole or in part during the option period. An option will be deemed exercised when the Company receives written or electronic notice of exercise (in accordance with the Stock Option Agreement) from the person entitled to exercise the option and payment in full of the purchase price and Tax-Related Items (as defined in Section 14 hereof). Payment in full may be made (i) by certified or bank check, (ii) by wire transfer, (iii) by payment through a broker under a cashless exercise program implemented by the Company in connection with the Plan, (iv) in shares of Common StockShares owned by the optionee having a Fair Market Value at the date of exercise equal to such purchase price, provided that payment in shares of Common StockShares will not be permitted unless at least 100 shares of Common StockShares are required and delivered for such purpose, (v) in any combination of the foregoing, or (vi) by any other method that the Committee approves. At its discretion, the Committee may modify or suspend any method for the exercise of stock options, including any of the methods specified in the previous sentence. Delivery of sShares for exercising an option shall be made either through the physical delivery of sShares or through an appropriate certification or attestation of valid ownership. Shares of Common Stock used to exercise an option shall have been held by the optionee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the option. No sShares shall be issued until full payment therefor has been made. An optionee shall have the rights of a stockholder only with respect to sShares of stock that have been recorded on the Company’s books on behalf of the optionee or for which certificates have been issued to the optionee.
Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole discretion, allow the exercise of a lapsed grant if the Committee determines that: (i) the lapse was solely the result of the Company’s inability to execute the exercise of an option Award due to conditions beyond the Company’s control and (ii) the optionee made valid and reasonable efforts to exercise the Award, provided that in no event will the exercise of a lapsed grant be permitted if it would cause the grant to be subject to Section 409A of the Code or to be extended for purposes of Section 409A of the Code. In the event the Committee makes such a determination, the Company shall allow the exercise to occur as promptly as possible following its receipt of exercise instructions subsequent to such determination.
(6) Nontransferability of Options. An option or stock appreciation right granted under the Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, and may be exercised, during the optionee’s lifetime, only by the optionee; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability.
Notwithstanding the foregoing, the Committee may set forth in a Stock Option Agreement at the time of grant or thereafter, that the options (other than incentive stock options) may be transferred to members of the optionee’s immediate family and/or to one or more trusts solely for the benefit of such immediate family members. For this purpose, immediate family means the optionee’s spouse, parents, children, stepchildren, grandchildren and legal dependents. Any transfer of options under this provision will not be effective until notice of such transfer is delivered to the Company.
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APPENDIX B
(7) Termination of Service Other than by Retirement or Death. IfUnless otherwise determined by the Committee, if an optionee shall cease to provide services to the Company for any reason (other than termination of service by reason of Retirement or death) after the optionee shall have been continuously providing services for one year after the granting of the option, or in other circumstances as otherwise determined by the Committee,), the option shall be exercisable only to the extent that the optionee was otherwise entitled to exercise it at the time of such cessation of service with the Company, unless otherwise determined by the Committee.. The option shall remain exercisable for three months after such cessation of service (or, if earlier, the end of the option period), unless the Committee determines otherwise. The Plan does not confer upon any optionee any right with respect to continuation of employment or service by the Company.
(8) Retirement of Optionee. IfUnless otherwise determined by the Committee, if an optionee shall cease to be employed by the Company by reason of Retirement after the optionee shall have been continuously employed by the Company for a period of at least one year after the granting of the option, or as otherwise determined by the Committee, all remaining unexercised portion(s) of the option shall immediately vest and become exercisable by the optionee and shall remain exercisable for the remainder of the option period set forth therein, except that, in the case of an incentive stock option, the option shall remainbe exercisable as an incentive stock option for only three months following Retirement (or, if earlier, the end of the option period).
(9) Death of Optionee. Except as otherwise provided in Section 7(b)(14),) or determined by the Committee, in the event of the optionee’s death (i) while in the employ or service of the Company or (ii) after cessation of employment due to Retirement, the option shall be fully exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time following such death until the option expires. InUnless otherwise determined by the Committee, in the event of the optionee’s death after cessation of employment or service for any reason other than Retirement, the option shall be exercisable by the executors, administrators, legatees or distributees of the optionee’s estate, as the case may be, at any time during the twelve month period following such death. Notwithstanding the foregoing, unless the Committee determines otherwise, in no event shall an option be exercisable unless the optionee shall have been continuously providing service to the Company for a period of at least one year after the option grant, and no option shall be exercisable after the expiration of the option period set forth in the Stock Option Agreement. In the event any option is exercised by the executors, administrators, legatees or distributees of the estate of a deceased optionee, the Company shall be under no obligation to issue stock thereunder unless and until the Company is satisfied that the person or persons exercising the option are the duly appointed legal representatives of the deceased optionee’s estate or the proper legatees or distributees thereof.
(10) No Deferral Feature. No option or stock appreciation right granted under this Plan shall include any feature for the deferral of compensation other than, in the case of an option, the deferral of recognition of income until the later of exercise or disposition of the option under Section 83 of the Code, or the time the stock acquired pursuant to the exercise of the option first becomes substantially vested (as defined in regulations interpreting Section 83 of the Code), or, in the case of a stock appreciation right, the deferral of recognition of income until the exercise of the stock appreciation right.
(11) Reserved.
(12) Stock Appreciation Rights. In the case of any option granted under the Plan, either at the time of grant or by amendment of such option at any time after such grant, there may be included a stock appreciation right which shall be subject to such terms and conditions, not inconsistent with the Plan, as the Committee shall impose, including the following:
(A) A stock appreciation right shall be exercisable to the extent, and only to the extent, that the option in which it is included is at the time exercisable, and may be exercised within such period only at such time or times as may be determined by the Committee (and in no event after expiration of ten years from the date the option was granted);
(B) A stock appreciation right shall entitle the optionee (or any person entitled to act under the provisions of Section 7(b)(9)) to surrender unexercised the option in which the stock appreciation right is included (or any portion of such option) to the Company and to receive from the Company in exchange therefor that number of sShares having an aggregate value equal to (or, in the discretion of the Committee, less than) the excess of the value of one sShare (provided such value does not exceed such multiple of the option price per sShare as may be specified by the Committee) over the option price per sShare specified in such option (as determined by the Committee in accordance with Section 7(b)(2)) times the number of sShares called for by the option, or portion
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APPENDIX B
thereof, which is so surrendered. The Committee shall be entitled to cause the Company to settle its obligation, arising out of the exercise of a stock appreciation right, by the payment of cash equal to the aggregate value of the sShares the Company would otherwise be obligated to deliver or partly by the payment of cash and partly by the delivery of shares. Any such election shall be made within 30 business days after the receipt by the Committee of written or electronic notice of the exercise of the stock appreciation right. The value of a shareShares. The value of a Share for this purpose shall be the Fair Market Value thereof on the last business day preceding the date of the election to exercise of the stock appreciation right;
(C) No fractional sShares shall be delivered under this Section 7(b)(12) but in lieu thereof a cash adjustment shall be made;
(D) If a stock appreciation right included in an option is exercised, such option shall be deemed to have been exercised to the extent of the number of sShares called for by the option or portion thereof which is surrendered on exercise of the stock appreciation right and no new option may be granted covering such sShares under this Plan; and
(E) If an option which includes a stock appreciation right is exercised, such stock appreciation right shall be deemed to have been canceled to the extent of the number of sShares called for by the option or portion thereof is exercised and no new stock appreciation rights may be granted covering such sShares under this Plan.
(13) Incentive Stock Options. Incentive stock options may only be granted to employees of the Issuer and its Subsidiaries and parent corporations, as defined in Section 424 of the Code. In the case of any incentive stock option granted under the Plan, the aggregate Fair Market Value of the shares of Common StockShares (determined at the time of grant of each option) with respect to which incentive stock options granted under the Plan and any other plan of the Issuer or its parent or a Subsidiary which are exercisable for the first time by an employee during any calendar year shall not exceed $100,000 or such other amount as may be required by the Code.
(14) Rights of Transferee. Notwithstanding anything to the contrary herein, if an option has been transferred in accordance with Section 7(b)(6), the option shall be exercisable solely by the transferee. The option shall remain subject to the provisions of the Plan, including that it will be exercisable only to the extent that the optionee or optionee’s estate would have been entitled to exercise it if the optionee had not transferred the option. In the event of the death of the optionee prior to the expiration of the right to exercise the transferred option, the period during which the option shall be exercisable will terminate on the date one year following the date of the optionee’s death. In the event of the death of the transferee prior to the expiration of the right to exercise the option, the period during which the option shall be exercisable by the executors, administrators, legatees and distributees of the transferee’s estate, as the case may be, will terminate on the date one year following the date of the transferee’s death. In no event will the option be exercisable after the expiration of the option period set forth in the Stock Option Agreement. The option shall be subject to such other rules as the Committee shall determine.
(15) No Reload. Options shall not be granted under this Plan in consideration for and shall not be conditioned upon the delivery of shares of Common StockShares in payment of the option price and/or tax withholding obligation under any other employee stock option.
8. Long-term Performance Awards: Long-term performance awards under the Plan shall consist of the conditional grant of a specified number of performance units or performance shares. The conditional grant of a performance unit to a participant will entitle the participant to receive a specified dollar value, variable under conditions specified in the Award, if the Performance Criteria specified in the Award are achieved and the other terms and conditions thereof are satisfied. The conditional grant of a performance share to a participant will entitle the participant to receive a specified number of shares of Common StockShares, or the equivalent cash value, as determined by the Committee, if the Performance Criteria specified in the Award are achieved and the other terms and conditions thereof are satisfied. Each Award shall be subject to the following terms and conditions:
(a) Grant of Awards. The Committee shall (1) select the service providers of the Company to whom Awards under this Section 8 may from time to time be granted, (2) determine the number of performance units or performance shares covered by each Award, (3) determine the terms and conditions of each performance unit or performance share awarded and the award period and performance objectives with respect to each Award, (4) determine the extent to which a participant may elect to defer payment of a percentage of an Award (the “Deferred Portion”) pursuant to the terms of a deferred compensation plan of the Company, (5) determine whether payment with respect to the portion of an
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APPENDIX B
Award which has not been deferred (the “Current Portion”) and the payment with respect to the Deferred Portion of an Award shall be made entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock, (6) determine whether the Award is to be made independently of or in conjunction with a nonqualified stock option granted under the Plan, and (7) prescribe the form of the instruments necessary or advisable in the administration of the Awards.
(b) Terms and Conditions of Award. Any Award conditionally granting performance units or performance shares to a participant shall be evidenced by a Performance Unit Agreement or Performance Share Agreement, as applicable, entered into by the Company and the participant, in such form as the Committee shall approve, which agreement shall contain in substance the following terms and conditions applicable to the Award and such additional terms and conditions as the Committee shall prescribe:
(1) Number and Value of Performance Units. The Performance Unit Agreement shall specify the number of performance units conditionally granted to the participant. The Performance Unit Agreement shall specify, as applicable, the threshold, target and maximum dollar values of each performance unit and corresponding performance objectives as provided under Section 8(b)(5)..
(2) Number and Value of Performance Shares. The Performance Share Agreement shall specify the number of performance shares conditionally granted to the participant. The Performance Share Agreement shall specify that each Performance Share will have a value equal to one (1) share of Common StockShare.
(3) Award Periods. For each Award, the Committee shall designate an award period with a duration to be determined by the Committee in its discretion, but in no event less than three calendar years, within which specified performance objectives are to be attained. There may be several award periods in existence at any one time and the duration of performance objectives may differ from each other.
(4) Condition. EachExcept to the extent an Award is counted against the Five Percent Carve-Out or as otherwise provided in Section 3(b), each participant, as a condition of the award of performance units or performance shares, shall remain in the continuous service of the Company for at least one year after the date of the making of such Award, and no Award shall be payable until after the completion of such one year of service by the participant, except as otherwise determined by the Committee.
(5) Performance Objectives. The Committee shall select the Performance Criteria and specific targets for each award period.
(6) Determination and Payment of Performance Units or Performance Shares Earned. As soon as practicable after the end of an award period, the Committee shall determine the extent to which Awards have been earned on the basis of actual performance in relation to the Performance Criteria as set forth in the Performance Unit Agreement or Performance Share Agreement and certify these results in writing. The Performance Unit Agreement or Performance Share Agreement shall specify that asAs soon as practicable after the end of each award period, the Committee shall determine whether the conditions of Sections 8(b)(4) and 8(b)(5) hereof have been met and, if so, shall ascertain the amount payable or sShares which should be distributed to the participant in respect of the performance units or performance shares. As promptly as practicable after it has determined that an amount is payable or should be distributed in respect of an Award, and within 75 days after the end of the award period, the Committee shall cause the Current Portion of such Award to be paid or distributed to the participant or the participant’s beneficiaries, as the case may be, in the Committee’s discretion, either entirely in cash, entirely in Common Stock or partially in cash and partially in Common Stock. Payment of any Deferred Portion of an Award shall be determined by the terms of the Company deferred compensation plan under which the deferral was elected.
In making payment in the form of Common Stock hereunder, the cash equivalent of such Common Stock shall be determined by the Fair Market Value of the Common Stock on the day the Committee designates the performance units shall be payable.
(7) Nontransferability of Awards and Designation of Beneficiaries. No Award under this Section of the Plan shall be transferable by the participant other than by will or by the laws of descent and distribution, except that a participant may designate a beneficiary pursuant to the provisions hereof to the extent permitted by the Committee and valid under applicable law. If any participant or the participant’s beneficiary shall attempt to assign the participant’s rights under the Plan in violation of the provisions thereof, the Company’s obligation to make any further payments to such participant or the participant’s beneficiaries shall forthwith terminate.
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APPENDIX B
To the extent permitted by the Committee and valid under applicable law, a participant may name one or more beneficiaries to receive any payment of an Award to which the participant may be entitled under the Plan in the event of the participant’s death, on a form to be provided by the Committee. A participant may change the participant’s beneficiary designation from time to time in the same manner. If no designated beneficiary is living on the date on which any payment becomes payable to a participant’s beneficiary, or if no beneficiary has been specified by the participant, such payment will be payable to the participant’s estate.
(8) Retirement and Termination of Service Other Than by Death. In the event of the Retirement prior to the end of an award period of a participant who has satisfied the one year employment requirement of Section 8(b)(4) with respect to an Award prior to Retirement, or as otherwise determined by the Committee, the participant, or his estate, shall be entitled to a payment of such Award at the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that unless otherwise determined by the Committee, the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such Award as the number of months of the award period which have elapsed since the first day of the calendar year in which the Award was made to the end of the month in which the participant’s Retirement occurs, bears to the total number of months in the award period, subject to the attainment of performance objectives associated with the Award as certified by the Committee. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited.
Subject to Section 8(b)(6) hereof, the Performance Unit Agreement or Performance Share Agreement shall specify that the right to receive the performance units or performance shares granted to such participant shall be conditional and shall be canceled, forfeited and surrendered if the participant’s continuous service with the Company shall terminate for any reason, other than the participant’s death or Retirement, prior to the end of the award period, or as otherwise determined by the Committee.
(9) Reserved.
(10) Death of Participant. In the event of the death prior to the end of an award period of a participant who has satisfied the one year service requirement with respect to an Award under this Section 8 prior to the date of death, or as otherwise determined by the Committee, the participant’s beneficiaries or estate, as the case may be, shall be entitled to a payment of such Award upon the end of the award period, pursuant to the terms of the Plan and the participant’s Performance Unit Agreement or Performance Share Agreement, provided, however, that unless otherwise determined by the Committee, the participant shall be deemed to have earned that proportion (to the nearest whole unit or share) of the value of the performance units or performance shares granted to the participant under such Award as the number of months of the award period which have elapsed since the first day of the calendar year in which the Award was made to the end of the month in which the participant’s death occurs, bears to the total number of months in the award period. The participant’s right to receive any remaining performance units or performance shares shall be canceled and forfeited.
(11) The Committee may, in its discretion, waive, in whole or in part, such cancellation and forfeiture of any performance units or performance shares as provided for in Section 8(b)(8) and Section 8(b)(10) hereof.
9. Restricted Stock and Restricted Stock Units: An Award of restricted stock under the Plan shall consist of a grant of shares of Common Stock of the IssuerShares, the grant, issuance, retention and/or vesting of which is subject to the terms and conditions hereinafter provided. An Award of a restricted stock unit to a participant will entitle the participant to receive a specified number of shares of Common StockShares or cash, as determined by the Committee, if the objectives specified in the Award, if any, are achieved and the other terms and conditions thereof are satisfied. Each Award shall be subject to the following terms and conditions:
(a) Grant of Awards: The Committee shall (i) select the service providers to whom restricted stock or restricted stock units may from time to time be granted, (ii) determine the number of sShares to be covered by each Award granted, (iii) determine the terms and conditions (not inconsistent with the Plan) of any Award granted hereunder, and (iv) prescribe the form of the agreement, legend or other instrument necessary or advisable in the administration of Awards under the Plan.
(b) Terms and Conditions of Awards: Any Award granted under this Section 9 shall be evidenced by a Restricted Stock Agreement or Restricted Stock Unit Agreement entered into by the Issuer and the participant, in such form as the Committee shall approve, which agreement shall be subject to the following terms and conditions and shall contain such additional terms and conditions not inconsistent with the Plan as the Committee shall prescribe:
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APPENDIX B
(1) Number of Shares Subject to an Award: The agreement shall specify the number of shares of Common StockShares or the number of restricted stock units subject to the Award.
(2) Restriction Period: The period of restriction applicable to each Award (the “Restriction Period”) shall be established by the Committee but may not be less than one year, unless the Committee determines otherwise. The Restriction Period applicable to each Award shall commence on the award date.
(3) Condition: EachExcept to the extent an Award is counted against the Five Percent Carve-Out or as otherwise provided in Section 3(b), each participant, as a condition of the grant of an Award, shall remain in the continuous service to the Company for at least one year from the date of the granting of such Award, or as otherwise determined by the Committee, and the participant’s right to any sShares of restricted stock or restricted stock units covered by such an Award shall be forfeited if the participant does not provide continuous service to the Company for at least one year from the date of the granting of the Award, except as otherwise determined by the Committee.
(4) Restriction Criteria: The Committee shall establish the criteria upon which the Restriction Period shall be based. Restrictions shall be based upon either or both of (i) the continued service of the participant or (ii) the attainment of one or more Performance Criteria.
(c) Terms and Conditions of Restrictions and Forfeitures: The restricted stock or restricted stock units awarded pursuant to the Plan shall be subject to the following restrictions and conditions:
(1) During the Restriction Period, the participant will not be permitted to sell, transfer, pledge or assign the Award made under this Section 9.
(2) Except as provided in Section 9(c)(1), or as the Committee may otherwise determine, a participant holding restricted stock shall have all of the rights of a stockholder of the Issuer, including the right to vote the sShares and receive dividends and other distributions, provided that cash dividends paid with respect to restricted stock that is subject to the satisfaction of targets for Performance Criteria shall be retained by the Company during the Restriction Period and shall be subject to the same restrictions as the underlying restricted stock. In addition, distributions in the form of stock shall be subject to the same restrictions as the underlying restricted stock. A participant holding restricted stock units shall have none of the rights of a stockholder of the Issuer during the Restriction Period.
(3) Unless the Committee shall expressly otherwise provide in the agreement relating to an Award made under this Section 9, in the event of a participant’s Retirement or death prior to the end of the Restriction Period for a participant who has satisfied the one year service requirement of Section 9(b)(3), all time-based restrictions imposed under such Award shall immediately lapse, but such Award shall continue to be subject to the satisfaction of any targets for Performance Criteria set forth in the agreement relating to such Award.
(4) Unless the Committee shall expressly otherwise provide in the agreement relating to an Award made under this Section 9, if during the Restriction Period a participant terminates service with the Company for any reason other than Retirement or death, the sShares covered by a restricted stock Award that are not already vested shall be canceled and forfeited and will be deemed to be reacquired by the Issuer and any restricted stock units still subject to restriction shall be forfeited by the participant.
(5) In cases of special circumstances as determined by the Committee, the Committee may, in its sole discretion when it finds that such an action would be in the best interests of the Company, accelerate or waive in whole or in part any or all remaining time-based restrictions with respect to all or part of a participant’s restricted stock or restricted stock units.
(6) In the event that the participant fails promptly to pay or make satisfactory arrangements as to the Tax-Related Items as provided in Section 14, (i) all sShares of restricted stock still subject to restriction shall be forfeited by the participant and will be deemed to be reacquired by the Company; and (ii) all restricted stock units still subject to restriction shall be forfeited by the participant.
(7) A participant may, at any time prior to the expiration of the Restriction Period, waive all rights to receive all or some of the sShares covered by or corresponding to an Award by delivering to the Company a written or electronic notice of such waiver.
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APPENDIX B
(8) Notwithstanding the other provisions of this Section 9, subject to applicable law, the Committee may adopt rules which would permit a gift by a participant holding restricted stock or the benefits of a restricted stock unit, to members of the participant’s immediate family (spouse, parents, children, stepchildren, grandchildren or legal dependents) or to a trust whose beneficiary or beneficiaries shall be either such a person or persons or the participant.
(9) Any attempt to dispose of an Award under this Section 9 in a manner contrary to the restrictions shall be ineffective.
10. Other Stock-Based Awards
(a) Other Stock-Based Awards. The Committee may grant to eligible service providers other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted shares of Common StockShares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual sShares to participants, or payment in cash or otherwise of amounts based on the value of sShares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
(b) Value of Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in terms of shares of Common StockShares or units based on shares of Common StockShares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the participant will depend on the extent to which the performance goals are met.
(c) Payment of Other Stock-Based Awards. Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or shares of Common StockShares, as the Committee determines.
(d) Condition: Except to the extent an Award is counted against the Five Percent Carve-Out or as otherwise provided in Section 3(b), each participant, as a condition of the grant of an Other Stock-Based Award, shall remain in the continuous service to the Company for at least one year from the date of the granting of such Award, and the participant’s right to any payment in cash or Shares with respect to such an Award shall be forfeited if the participant does not provide continuous service to the Company for at least one year from the date of the granting of the Award.
11. Forfeiture of Awards; Recapture of Benefits:
(a) Breach of Restrictive Covenants; Violation of Code or Policies. The Committee may, in its discretion, provide in an agreement evidencing any Award that (1) in the event that the participant engages, within a specified period after termination of service, in certain activity specified by the Committee that is deemed detrimental to the interests of the Company (including, but not limited to, the breach of any non-solicitation and/or non-compete agreements with the Company), and/or (2) in the event that the participant engages in conduct (which may include a failure to act) that is deemed detrimental to the interests of the Company (including, but not limited to, that which results in a violation of the Company’s Code of Business Conduct and Ethics, policies, procedures or other standards), the Committee may, in its discretion, require the participant to forfeit his or her right to any unvested portion of the Award and, to the extent that any portion of the Award has previously vested, the Committee may require the participant to return to the Company the shares of Common StockShares covered by the Award or any cash proceeds the participant received upon the sale of such sShares or, in the case of stock appreciation rights, performance units or restricted stock units that are settled in cash, an amount of cash, equal to the amount of any gain realized upon the exercise of or lapsing of restrictions on any Award that occurred within a specified time period.
(b) Other Bases for Forfeiture, Recovery or Other Actions. Awards and any compensation or benefits associated therewith shall be subject to repayment or forfeiture as may be required to comply with (i) any applicable listing standards of a national securities exchange adopted in accordance with Section 10D of the Exchange Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder; (ii) the securities, exchange control and other laws of any other jurisdiction; and (iii) any policies adopted by the Company to implement such requirements, all to the extent determined by the Company in its discretion to be applicable to a participant. Any agreement evidencing an Award may be unilaterally amended by the Committee to comply with any such compensation recovery policy.
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APPENDIX B
12. Determination of Breach of Conditions: The determination of the Committee as to whether an event has occurred resulting in a forfeiture or a termination of an Award or any reduction of the Company’s obligations in accordance with the provisions of the Plan shall be conclusive.
13. Adjustment of and Changes in the Common Stock:
(a) Effect of Outstanding Awards. The existence of outstanding Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company or any issuance of Common Stock or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. Further, except as expressly provided herein or by the Committee, (i) the issuance by the Company of Common Stock or any class of securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations to the Company convertible into such shares or other securities, (ii) the payment of a dividend in property other than shares of Common StockShares, or (iii) the occurrence of any similar transaction, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common StockShares subject to stock options or other Awards theretofore granted or the purchase price per sShare, unless the Committee shall determine, in its sole discretion, that an adjustment is necessary or appropriate.
(b) Adjustments. If the outstanding Common Stock or other securities of the Company, or both, for which an Award is then exercisable or as to which an Award is to be settled shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, extraordinary dividend of cash and/or assets, recapitalization, reorganization, corporate separation or division (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash dividend) or any similar event affecting the Common Stock or other securities of the Company, the Committee shall appropriately and equitably adjust the number and kind of sShares or other securities which are subject to this Plan or subject to any Awards theretofore granted, and the exercise or settlement prices of such Awards, so as to maintain the proportionate number of shares of Common StockShares or other securities without changing the aggregate exercise or settlement price.
(c) Fractional Shares. In the event any adjustment in stock options or stock appreciation rights pursuant to this Section 13 would result in a fraction of a share, the Company reserves the right to round up or down to the nearest whole share, subject to applicable law.
(d) Assumption of Awards. Any other provision hereof to the contrary notwithstanding (except for Section 13(a)), in the event the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the assumption of outstanding Awards by the surviving corporation or its parent, for their continuation by the Company (if it is the surviving corporation), for accelerated vesting and accelerated expiration, or for settlement in cash.
14. Taxes:
(a) Each participant shall, no later than the Tax Date (as defined below), pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Tax-Related Items (as defined below) with respect to an Award, and the Company shall, to the extent permitted by law, have the right to deduct such amount from any payment of any kind otherwise due to the participant. Specifically, the Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may require or permit a participant to satisfy any tax withholding obligations with respect to such Tax-Related Items, in whole or in part, by (without limitation) (i) paying cash, (ii) using proceeds from the sale of shares of Common StockShares delivered pursuant to the exercise or settlement of the Award, (iii) electing to have the Company withhold otherwise deliverable cash or shares of Common StockShares having a fair market value equal to the amount required to be withheld under applicable tax laws, subject to applicable accounting guidance, or (iv) delivering to the Company already-owned shares of Common StockShares having a Fair Market Value equal to the amount required to be withheld under applicable tax laws, subject to applicable accounting guidance. The Fair Market Value of the Common Stock to be withheld or delivered will be determined based on such methodology that the Company deems to be reasonable and in accordance with applicable law.
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APPENDIX B
(b) The Company shall also have the right to retain or sell without notice, or to demand surrender of, shares of Common StockShares in value sufficient to cover the amount of any Tax-Related Items, and to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Tax-Related Items, remitting any balance to the participant. For purposes of this paragraph, the value of shares of Common StockShares so retained or surrendered shall be the average of the high and low sales prices per sShare on the Nasdaq Stock Market on the date that the amount of the Tax-Related Items is to be determined (the “Tax Date”) and the value of shares of Common StockShares so sold shall be the actual net sales price per sShare (after deduction of commissions) received by the Company.
(c) Notwithstanding the foregoing, if the stock options have been transferred, the optionee shall provide the Company with funds sufficient to pay such Tax-Related Items. If such optionee does not satisfy the optionee’s tax payment obligation and the stock options have been transferred, the transferee may provide the funds sufficient to enable the Company to pay such taxes. However, if the stock options have been transferred, the Company shall have no right to retain or sell without notice, or to demand surrender from the transferee of, shares of Common StockShares in order to pay such Tax-Related Items.
(d) The term “Tax-Related Items” means the required (i) U.S. federal, state and local withholding amount applicable to the participant, including federal, state and local income taxes, Federal Insurance Contribution Act taxes, social insurance contributions, payroll tax, payment on account and any other governmental impost or levy, and (ii) any non-U.S. income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items that are applicable (or deemed applicable) to the participant as a result of participation in the Plan.
15. Change in Control.
(a) Unless the Committee shall otherwise expressly provide in the agreement relating to an Award, inIn the event a participant’s service with the Company terminates pursuant to a Qualifying Termination (as defined below) during the three (3) year period following a Change in Control of the Issuer (as defined below):
(1) all outstanding options shall become immediately fully vested and exercisable (to the extent not yet vested and exercisable as of the date of the Qualifying Termination); and
(2) all time-based restrictions imposed under all outstanding Awards of restricted stock and restricted stock units shall immediately lapse.
(b) Unless the Committee shall otherwise expressly provide in the agreement relating to an Award, ifIf the Company undergoes a Change in Control during the award period applicable to an Award that is subject to the satisfaction of any targets for Performance Criteria, the number of sShares or units deemed earned shall be the greater of (i) the target number of sShares or units specified in the participant’s Award agreement or (ii) the number of sShares or units that would have been earned by applying the Performance Criteria specified in the Award agreement to the Company’s actual performance from the beginning of the applicable award period to the date of the Change in Control.
(c) In addition, in the event of a Change in Control of the Issuer, the Committee may:
(1) determine that outstanding options shall be assumed by, or replaced with comparable options by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and that outstanding Awards shall be converted to similar awards of the surviving corporation (or a parent or subsidiary of the surviving corporation), or
(2) take such other actions with respect to outstanding options and other Awards as the Committee deems appropriate; provided, however, that such actions are compliant with Section 409A of the Code, to the extent applicable.
(c) Reserved.
(d) For purposes of this Plan, a Change in Control shall be deemed to have occurred on the earliest of the following dates:
(1) The date any person (as defined in Section 14(d)(3) of the Exchange Act) shall have become the direct or indirect beneficial owner of twenty percent (20%) or more of the then outstanding common sharesShares of the Issuer;
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APPENDIX B
(2) The date a merger or consolidation of the Issuer with any other corporation is consummated, other than (i) a merger or consolidation which would result in the voting securities of the Issuer outstanding immediately prior thereto continuing to represent at least 75% of the combined voting power of the voting securities of the Issuer or the surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Issuer in which no Person acquires more than 50% of the combined voting power of the Issuer’s then outstanding securities;
(3) The date the stockholders of the Issuer approve a plan of complete liquidation of the Issuer or an agreement for the sale or disposition by the Issuer of all or substantially all of the Issuer’s assets; or
(4) The date there shall have been a change in a majority of the Board of Directors within a two (2) year period beginning after the Initial Effective Date, unless the nomination for election by the Issuer’s stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the two (2) year period.
(e) For purposes of this Plan provision, a Qualifying Termination shall be deemed to have occurred under the following circumstances:
(1) A Company-initiated termination for reasons other than the participant’s death, Disability, resignation without good cause, willful misconduct or activity deemed detrimental to the interests of the Company, or
(2) Only in the case of a participant who is an employee, a resignation by the employee with good cause, which includes (i) a substantial adverse alteration in the nature or status of the employee’s responsibilities, (ii) a reduction in the employee’s base salary or levels of entitlement or participation under any incentive plan, award program or employee benefit program without the substitution or implementation of an alternative arrangement of substantially equal value, or (iii) the Company requiring the employee to relocate to a work location more than fifty (50) miles from the employee’s work location prior to the Change in Control; provided that good cause shall exist only if (x) the employee provides written notice of the existence of the condition that would give rise to good cause within 90 days after the initial existence of such condition, (y) the Company fails to correct any such breach within 30 days after receipt of such notice and (z) the employee resigns from his employment effective within 30 days after the expiration of such 30-day period;
provided that in a termination under (1) or (2) above, as applicable, the participant executes a separation agreement general release of claims (which may include a non-solicitation and/or non-compete agreement as determined by the Company) within the time required by the Company (but in no event later than 60 days following termination).
16. Amendment of the Plan: The Board of Directors may amend or suspend this Plan at any time and from time to time; provided, however, that, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other Awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights without stockholder approval; and provided, further, that the Board of Directors shall submit for stockholder approval any amendment (other than an amendment pursuant to the adjustment provisions of Section 13) required to be submitted for stockholder approval by law, regulation or applicable stock exchange requirements or that otherwise would:
(a) increase the limitations in Section 3;
(b) reduce the price at which stock options may be granted to below Fair Market Value on the date of grant;
(c) extend the term of this Plan; or
(d) change the class of persons eligible to be participants.
In addition, no such amendment or alteration shall be made which would impair the rights of any participant, without such participant’s consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment has been adequately compensated.
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APPENDIX B
17. Miscellaneous:
(a) By accepting any benefits under the Plan, each participant and each person claiming under or through such participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken or to be taken or made under the Plan by the Company, the Board, the Committee or any other committee appointed by the Board.
(b) No participant or any person claiming under or through him shall have any right or interest, whether vested or otherwise, in the Plan or in any Award, contingent or otherwise, unless and until all of the terms, conditions and provisions of the Plan and the Agreement that affect such participant or such other person shall have been complied with.
(c) Neither the adoption of the Plan nor its operation shall in any way affect the rights and powers of the Company to dismiss or discharge any employee at any time.
18. Term of the Plan: The Plan shall expire on Marchy 1, 20323, unless suspended or discontinued earlier by action of the Board of Directors. The expiration of the Plan, however, shall not affect the rights of participants under Awards theretofore granted to them, and all Awards shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.
19. Participants Based Outside of the United States: Notwithstanding any provision of the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company operates or has service providers, the Committee, in its sole discretion, shall have the power and authority to (i) determine which individuals outside the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of Awards granted to participants who reside outside the United States, (iii) establish subplans, modified option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (iv) take any action before or after an Award is granted that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals, as determined by the Committee. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures and subplans with provisions that limit or modify rights on eligibility to receive an Award under the Plan or on death, Disability, Retirement or other termination of service, available methods of exercise or settlement of an Award, payment of income, social insurance contributions and payroll taxes, the shifting of employer tax or social insurance contribution liability to the participant, the withholding procedures and handling of any sShare certificates or other indicia of ownership. Notwithstanding the foregoing, the Committee may not take any actions hereunder and no Awards shall be granted that would violate applicable laws.
20. Grants in Connection with Corporate Transactions and Otherwise: Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to assume the equity-based awards or make substitute Awards under this Plan to an employee of another corporation who becomes an employee of the Company by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for an award granted by such corporation, or (ii) limit the right of the Company to grant options or make other awards outside of this Plan. The terms and conditions of any substitute or assumed Awards may vary from the terms and conditions required by the Plan. Any substitute or assumed Awards that are made pursuant to this Section 20 shall not count against the limitations provided under Section 3.
21. Awards Assumed as of the Initial Effective Date:
(a) On the Initial Effective Date, the Issuer will assumeassumed from Zimmer Biomet Holdings, Inc. all Awards granted under the Prior Plan that awere outstanding immediately before the Initial Effective Date with respect to the Company’s employees (the “Prior Awards”). Except as described below, the terms of the Prior Plan and the Prior Award agreements in effect pursuant to the Prior Plan will continue to govern the Prior Awards. However, as a result of the assumption, the Prior Awards will bewere converted into Awards with respect to the Common Stock of the Issuer, and the number of shares, the exercise price (as applicable) and other terms will bewere adjusted to reflect the spin-off of the Issuer from Zimmer Biomet Holdings, Inc.. On and after the spin-off date, references in the Prior Award agreements to Zimmer Biomet Holdings, Inc. will mean the Issuer. Any sShares of the Issuer’s Common Stock that are subject to issuance pursuant to the Prior Awards will be issued under this Plan but will not be counted against the limitations provided under Section 3. The Committee will administer the Prior Awards, as converted into Common Stock of the Issuer.
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APPENDIX B
(b) As an alternative, notwithstanding the above, the Committee may determine, as a result of certain laws, rules or regulations in countries outside the United States, not to have the Issuer assume certain Prior Awards.
22. Governing Law: The validity, construction, interpretation and effect of the Plan and agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Colorado, U.S.A. without giving effect to the conflict of laws provisions thereof. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration.
23. Unfunded Plan: Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate or earmark any cash or other property which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation or earmarking, nor shall the Company or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.
24. Compliance with Other Laws and Regulations: This Plan, the grant and exercise of Awards hereunder, and the obligation of the Issuer to sell, issue or deliver shares of Common StockShares under such Awards, shall be subject to all applicable federal, state and local laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Issuer shall not be required to register in a participant’s name or deliver any shares of Common StockShares prior to the completion of any registration or qualification of such sShares under any federal, state or local law or any ruling or regulation of any government body which the Committee shall determine to be necessary or advisable. To the extent the Issuer is unable to or the Committee deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Issuer’s counsel to be necessary to the lawful issuance and sale of any shares of Common StockShares hereunder, the Issuer shall be relieved of any liability with respect to the failure to issue or sell such sShares as to which such requisite authority shall not have been obtained. No stock option shall be exercisable and no shares of Common StockShares shall be issued and/or transferable under any other Award unless a registration statement with respect to the sShares underlying such stock option is effective and current or the Issuer has determined that such registration is unnecessary.
25. Liability of Issuer: The Issuer shall not be liable to a participant or other persons as to (a) the non-issuance or sale of shares of Common StockShares as to which the Issuer has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Issuer’s counsel to be necessary to the lawful issuance and sale of any sShares hereunder; and (b) any tax consequence expected, but not realized, by any participant or other person due to the receipt, exercise or settlement of any Award granted hereunder.
26. Compliance with Section 409A of the Code: Notwithstanding any provision of the Plan to the contrary, to the extent Section 409A of the Code is or is likely to become applicable to the participant, the intent of the Company is that payments and benefits under this Plan shall be exempt from, or shall comply with, Section 409A of the Code to the extent subject thereto, and accordingly, to the maximum extent permitted, this Plan and any Awards granted under the Plan shall be interpreted and administered to be in compliance therewith. Notwithstanding anything contained in this Plan to the contrary, a participant shall not be considered to have terminated employment with the Company for purposes of any paymentsno payment that constitutes deferred compensation under this Plan which are subject to Section 409A of the Code untilthat would otherwise be made under the Plan upon a Participant’s termination of employment will be made or provided on such termination unless the participant would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate and distinct payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six (6) month period immediately following the participant’s separation from service shall instead be paid on the first business day after the date that is six (6) months following the participant’s separation from service (or, if earlier, the participant’s date of death). Further, notwithstanding anything contained in this Plan to the contrary, to the extent required under Section 409A of the Code in order to make payment of an Award that constitutes deferred compensation under Section 409A of the Code under this Plan upon a Change in Control, the applicable transaction or event described in Section 15(d) must qualify as a change in the ownership or effective control of the Company or as a change in the ownership of a substantial portion of the assets of the Company pursuant to Section 409A(a)(2)(A)(v) of the Code. The
B-17
Pay vs Performance Disclosure Unit_pure in Millions |
12 Months Ended |
Dec. 31, 2022
USD ($)
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Pay vs Performance Disclosure [Table] |
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Pay vs Performance [Table Text Block] |
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between compensation actually paid (as defined in Item 402(v)) and performance.
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Summary Compensation Table Total for Principal Executive Officer (PEO) (1)(2) (b) |
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Compensation Actually Paid to PEO (3)
(c) |
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Average Summary Compensation Table Total for Non-PEO NEOs (1)(4)
(d) |
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Average Compensation Actually Paid to Non-PEO NEOs (5)
(e) |
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Value of Initial Fixed $100 Investment Based On: |
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Consolidated Constant Currency Third-Party Net Sales (8) (in millions) (i) |
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Total Shareholder Return (6) (f) |
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Peer Group Total Shareholder Return (6)(7)
(g) |
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2022 |
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$10,411,213 |
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$277,678 |
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$1,969,330 |
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$593,868 |
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$37 |
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$83 |
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($64) |
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$941 |
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(1) |
The PEO for 2022 was Vafa Jamali and the non-PEO NEOs for 2022 were Richard Heppenstall, Indraneel Kanaglekar Rebecca Whitney, and David Harmon. |
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(2) |
The dollar amount reported in column (b) is the amount of total compensation reported for Mr. Jamali in the “Total” column of the 2022 Summary Compensation Table. Refer to “2022 Summary Compensation Table.”
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(3) |
The dollar amount reported in column (c) represents the amount of “compensation actually paid” to Mr. Jamali, as computed in a ccordance with Item 402(v) of Regulation S-K. The dollar amount does not reflect the actual amount of compensation earned by or paid to Mr. Jamali during 2022. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Jamali’s total compensation for 2022 to determine the compensation actually paid: |
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Summary Compensation Table Total for PEO |
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Change in the Actuarial Present Value of Pension Benefits (b) |
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Compensation Actually Paid to PEO |
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2022 |
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$10,411,213 |
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($9,000,054) |
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($1,133,481) |
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$0 |
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$0 |
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$277,678 |
| (a) The equity award adjustments include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in 2022 that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of 2022 (from the company’s spinoff date on 3/1/2022) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of 2022; (iii) for awards that are granted and vest in the same applicable year (in this case, 2022 only), the fair value as of the vesting date; (iv) for awards granted in prior years that vest in 2022, the amount equal to the change as of the vesting date (from the company’s spinoff date on 3/1/2022) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during 2022, a deduction for the amount equal to the fair value as of the c ompany’s spinoff date on 3/1/2022; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in 2022 prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant, other than grant date fair values were determined using a Black-Scholes option-pricing model, while subsequent fair values were determined using a binomial “lattice” model. The amounts deducted or added in calculating the equity award adjustments are as follows:
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Year End Fair Value of Equity Awards Granted During the Covered Year |
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Change in Fair Value of Outstanding and Unvested Equity Awards |
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Fair Value of Awards Granted and Vesting in the Same Year |
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Fair Value of Awards Granted in Prior Years Vesting During the Covered Year |
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Fair Value of Awards Granted in Prior Years that Fail to Meet Applicable Vesting Conditions During the Covered Year |
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Total Equity Award Adjustments |
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2022 |
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$3,319,312 |
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($4,452,793) |
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$0 |
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$0 |
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$0 |
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($1,133,481) |
| (b) Since the company does not provide any qualified or non-qualified defined benefit pension plans or other post-employment defined benefit plans to executives, no adjustments relating to defined benefit and pension plans (as applicable) were made to total compensation to determine compensation actually paid.
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(4) |
The dollar amount reported in column (d) represents the average of the amounts reported for the Non-PEO NEOs as a group in the “Total” column of the 2022 Summary Compensation Table for 2022.
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(5) |
The dollar amount reported in column (e) represents the average amount of “compensation actually paid” to the Non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amount does not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs as a group during 2022. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the Non-PEO NEOs as a group in 2022 to determine the compensation actually paid, using the same methodology described above in footnote (3): |
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Reported Summary Compensation Table Total for Non-PEO NEOs |
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Change in the Actuarial Present Value of Pension Benefits (b) |
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Average Compensation Actually Paid to Non-PEO NEOs |
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2022 |
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$1,969,330 |
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($1,350,036) |
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($25,426) |
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$0 |
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$0 |
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$593,868 |
| (a) The amounts deducted or added in calculating the equity award adjustments are as follows:
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Year End Fair Value of Equity Awards Granted During the Covered Year |
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Change in Fair Value of Outstanding and Unvested Equity Awards |
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Fair Value of Awards Granted and Vesting in the Same Year |
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Fair Value of Awards Granted in Prior Years Vesting During the Covered Year |
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Fair Value of Awards Granted in Prior Years that Fail to Meet Applicable Vesting Conditions During the Covered Year |
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Total Equity Award Adjustments |
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2022 |
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$504,695 |
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($442,146) |
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$0 |
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($87,975) |
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$0 |
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($25,426) |
| (b) Since the company does not provide any qualified or non-qualified defined benefit pension plans or other post-employment defined benefit plans to , no adjustments relating to defined benefit and pension plans (as applicable) were made to total compensation to determine compensation actually paid.
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(6) |
TSR, in the case of both the company and the peer group, reflects the cumulative return of $100 as if invested on March 1, 2022, the date of our spinoff, including reinvestment of any dividends. |
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(7) |
The peer group is the S&P 600 Healthcare Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
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The company believes consolidated constant currency third-party net sales is the financial performance measure most closely linked to the calculation of compensation actually paid in 2022. Consolidated constant currency third-party net sales is a non-GAAP financial measure. See Appendix A for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure.
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Company Selected Measure Name |
Consolidated constant currency third-party net sales
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Named Executive Officers, Footnote [Text Block] |
The PEO for 2022 was Vafa Jamali and the non-PEO NEOs for 2022 were Richard Heppenstall, Indraneel Kanaglekar Rebecca Whitney, and David Harmon.
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Peer Group Issuers, Footnote [Text Block] |
The peer group is the S&P 600 Healthcare Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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PEO Total Compensation Amount |
$ 10,411,213
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PEO Actually Paid Compensation Amount |
$ 277,678
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Adjustment To PEO Compensation, Footnote [Text Block] |
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(3) |
The dollar amount reported in column (c) represents the amount of “compensation actually paid” to Mr. Jamali, as computed in a ccordance with Item 402(v) of Regulation S-K. The dollar amount does not reflect the actual amount of compensation earned by or paid to Mr. Jamali during 2022. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Jamali’s total compensation for 2022 to determine the compensation actually paid: |
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Summary Compensation Table Total for PEO |
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Change in the Actuarial Present Value of Pension Benefits (b) |
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Compensation Actually Paid to PEO |
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2022 |
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$10,411,213 |
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($9,000,054) |
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($1,133,481) |
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$0 |
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$0 |
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$277,678 |
| (a) The equity award adjustments include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in 2022 that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of 2022 (from the company’s spinoff date on 3/1/2022) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of 2022; (iii) for awards that are granted and vest in the same applicable year (in this case, 2022 only), the fair value as of the vesting date; (iv) for awards granted in prior years that vest in 2022, the amount equal to the change as of the vesting date (from the company’s spinoff date on 3/1/2022) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during 2022, a deduction for the amount equal to the fair value as of the c ompany’s spinoff date on 3/1/2022; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in 2022 prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant, other than grant date fair values were determined using a Black-Scholes option-pricing model, while subsequent fair values were determined using a binomial “lattice” model. The amounts deducted or added in calculating the equity award adjustments are as follows:
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Year End Fair Value of Equity Awards Granted During the Covered Year |
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Change in Fair Value of Outstanding and Unvested Equity Awards |
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Fair Value of Awards Granted and Vesting in the Same Year |
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Fair Value of Awards Granted in Prior Years Vesting During the Covered Year |
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Fair Value of Awards Granted in Prior Years that Fail to Meet Applicable Vesting Conditions During the Covered Year |
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Total Equity Award Adjustments |
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2022 |
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$3,319,312 |
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($4,452,793) |
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$0 |
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$0 |
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$0 |
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($1,133,481) |
| (b) Since the company does not provide any qualified or non-qualified defined benefit pension plans or other post-employment defined benefit plans to executives, no adjustments relating to defined benefit and pension plans (as applicable) were made to total compensation to determine compensation actually paid.
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Non-PEO NEO Average Total Compensation Amount |
$ 1,969,330
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Non-PEO NEO Average Compensation Actually Paid Amount |
$ 593,868
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Adjustment to Non-PEO NEO Compensation Footnote [Text Block] |
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(4) |
The dollar amount reported in column (d) represents the average of the amounts reported for the Non-PEO NEOs as a group in the “Total” column of the 2022 Summary Compensation Table for 2022.
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(5) |
The dollar amount reported in column (e) represents the average amount of “compensation actually paid” to the Non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amount does not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs as a group during 2022. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the Non-PEO NEOs as a group in 2022 to determine the compensation actually paid, using the same methodology described above in footnote (3): |
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Reported Summary Compensation Table Total for Non-PEO NEOs |
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Change in the Actuarial Present Value of Pension Benefits (b) |
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Average Compensation Actually Paid to Non-PEO NEOs |
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2022 |
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$1,969,330 |
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($1,350,036) |
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($25,426) |
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$0 |
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$0 |
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$593,868 |
| (a) The amounts deducted or added in calculating the equity award adjustments are as follows:
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Year End Fair Value of Equity Awards Granted During the Covered Year |
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Change in Fair Value of Outstanding and Unvested Equity Awards |
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Fair Value of Awards Granted and Vesting in the Same Year |
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Fair Value of Awards Granted in Prior Years Vesting During the Covered Year |
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Fair Value of Awards Granted in Prior Years that Fail to Meet Applicable Vesting Conditions During the Covered Year |
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Total Equity Award Adjustments |
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2022 |
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$504,695 |
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($442,146) |
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$0 |
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($87,975) |
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$0 |
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($25,426) |
| (b) Since the company does not provide any qualified or non-qualified defined benefit pension plans or other post-employment defined benefit plans to , no adjustments relating to defined benefit and pension plans (as applicable) were made to total compensation to determine compensation actually paid.
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Tabular List [Table Text Block] |
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• |
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Consolidated Constant Currency Third-Party Net Sales (the Company-Selected Measure) |
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• |
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Bonus Constant Currency Cash Flow Metric |
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Total Shareholder Return Amount |
$ 37
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Peer Group Total Shareholder Return Amount |
83
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Net Income (Loss) |
$ (64,000,000)
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Company Selected Measure Amount |
941
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PEO Name |
Vafa Jamali
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Measure [Axis]: 1 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Consolidated Constant Currency Third-Party Net Sales (the Company-Selected Measure)
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Measure [Axis]: 2 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Adjusted EBITDA
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Measure [Axis]: 3 |
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Pay vs Performance Disclosure [Table] |
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Measure Name |
Bonus Constant Currency Cash Flow Metric
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PEO [Member] | Total Net Adjustments For Equity Awards [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
$ (1,133,481)
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PEO [Member] | Year-end Fair Value Of Awards Granted In The Current Fiscal Year [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
3,319,312
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PEO [Member] | Change In Fair Value Of Outstanding And Unvested Awards Granted In Prior Fiscal Years [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(4,452,793)
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PEO [Member] | Change In Fair Value As Of Vesting Date Of Prior Year Awards Vested During Current Year [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
0
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PEO [Member] | Adjustments For Equity Awards Failed To Meet Performance Conditions [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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PEO [Member] | Reported Value of Equity Awards [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(9,000,054)
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PEO [Member] | Equity Award Adjustments [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(1,133,481)
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PEO [Member] | Reported Change in the Actuarial Present Value of Pension Benefits [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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PEO [Member] | Pension Benefit Adjustments [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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PEO [Member] | Fair Value of Awards Granted and Vesting in the Same Year [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
0
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Non-PEO NEO [Member] | Total Net Adjustments For Equity Awards [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
(25,426)
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Non-PEO NEO [Member] | Year-end Fair Value Of Awards Granted In The Current Fiscal Year [Member] |
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Pay vs Performance Disclosure [Table] |
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Adjustment to Compensation Amount |
504,695
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Non-PEO NEO [Member] | Change In Fair Value Of Outstanding And Unvested Awards Granted In Prior Fiscal Years [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(442,146)
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Non-PEO NEO [Member] | Change In Fair Value As Of Vesting Date Of Prior Year Awards Vested During Current Year [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(87,975)
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Non-PEO NEO [Member] | Adjustments For Equity Awards Failed To Meet Performance Conditions [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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Non-PEO NEO [Member] | Reported Value of Equity Awards [Member] |
|
Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(1,350,036)
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Non-PEO NEO [Member] | Equity Award Adjustments [Member] |
|
Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
(25,426)
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Non-PEO NEO [Member] | Reported Change in the Actuarial Present Value of Pension Benefits [Member] |
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Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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Non-PEO NEO [Member] | Pension Benefit Adjustments [Member] |
|
Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
0
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Non-PEO NEO [Member] | Fair Value of Awards Granted and Vesting in the Same Year [Member] |
|
Pay vs Performance Disclosure [Table] |
|
Adjustment to Compensation Amount |
$ 0
|