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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
 
 
Filed by the Registrant ☑
Filed by a party other than the Registrant ☐
CHECK THE APPROPRIATE BOX:
 
Preliminary Proxy Statement
 
Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Under
§240.14a-12
ZimVie Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY):
 
No fee required
 
Fee paid previously with preliminary materials
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11
 
 
 


LOGO

Notice of 2024 Annual Meeting of Shareholders and ProxyStatement


LOGO

 

 

VISION

 

Everyone deserves to feel better, healthier, and stronger.

 
We create solutions for people to enjoy and experience life.

 

MISSION

 

Advancing clinical technology foundational to restoring daily life.

 

 CORE VALUES
     

CURIOSITY

 

We seek to understand first, then pursue innovations aimed at providing solutions for our organization, customers, and the patients we serve.

 

AUTHENTICITY

 

We are honest and transparent in how we communicate with our team members, healthcare professionals, and the patients they serve.

  

ACCOUNTABILITY

 

We are tireless and consistent in our innovation, our service, and our commitment to patients, healthcare professionals, and each other.

  

GROWTH MINDSET

 

We seek opportunity, are energized by taking risks, and embrace challenges that drive our personal and professional growth.

 

 

CAUTIONARY NOTE REGARDING

FORWARD-LOOKING STATEMENTS

 

The statements included in this proxy statement, including in the “Letter to Our Shareholders” and in the section titled “Executive Compensation – Compensation Discussion and Analysis – Executive Summary,” regarding future financial performance, results of operations, expectations, plans, strategies, goals, priorities and other statements that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are based upon current beliefs, expectations and assumptions and are subject to significant risks, uncertainties and changes in circumstances that could cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks, uncertainties and changes in circumstances that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”). Readers of this proxy statement are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


LETTER TO OUR SHAREHOLDERS

ZimVie Inc.

4555 Riverside Drive

Palm Beach Gardens, Florida 33410

www.zimvie.com

March 29, 2024

Dear Fellow Shareholders:

On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2024 annual meeting of shareholders of ZimVie Inc. to be held at 8 a.m. Mountain Time on May 15, 2024 at the Westin Denver International Airport, 8300 Peña Boulevard, Denver, Colorado 80249.

In 2023, our team made a great deal of progress executing our corporate strategy while keeping our Mission at the forefront. It was a year intensely focused on a few critical areas—optimizing our operations, reshaping our portfolio of innovation, and driving toward our transformation as a business. Notwithstanding the anticipated external and internal headwinds, the year was marked by a steady cadence of innovation, improved inventory and collections management, new partnerships, and significant regulatory and clinical milestones.

Most significantly, we advanced our transformational plans to become a pure-play Dental company. We are confident about the value this will deliver to our customers and to you, our shareholders.

The accompanying Notice of Annual Meeting of Shareholders and proxy statement describe the matters to be acted upon at our 2024 annual meeting. We are sending many of our shareholders a notice regarding the availability of this proxy statement, our 2023 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.

On behalf of all of us at ZimVie, I thank you for your support and for sharing our Vision that everyone should enjoy and experience life.

 

Sincerely,
LOGO
Vafa Jamali
President, Chief Executive Officer and Director


LOGO       TABLE OF CONTENTS

 

 
i       NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
   i    Voting
1-4       PROXY STATEMENT SUMMARY
   1    Voting Matters and Board Recommendations
     4    Shareholder Engagement
5-23       CORPORATE GOVERNANCE
   5    Proposal 1 — Election of Class II Directors
   6    Director Nominees and Continuing Directors
   9    Our Board of Directors and Corporate Governance Framework
   9    Director Criteria, Qualifications and Experience
   10    Board Leadership Structure
   11    Board’s Role in Risk Oversight
   12    Policies on Corporate Governance
   12    Limit on Other Directorships
   12    Board Self-Evaluation Process
   13    Director Independence
   13    Majority Vote Standard for Election of Directors
   13    Nominations for Directors
   14    Communications with Directors
   14    Board Meetings, Attendance, and Executive Sessions
   14    Certain Relationships and Related Person Transactions
   17    Committees of the Board
     21    Compensation of Non-Employee Directors
24-26       AUDIT COMMITTEE MATTERS
   24    Proposal 2 — Ratification of the Appointment of the Independent Registered Public Accounting Firm
   24    Responsibilities of the Audit Committee
   25    Activities of the Audit Committee in 2023
   25    Audit Committee Pre-Approval of Services of Independent Registered Public Accounting Firm
   26    Audit and Non-Audit Fees
     26    Audit Committee Report
27-61       EXECUTIVE COMPENSATION
   27    Proposal 3 — Advisory Vote to Approve Named Executive Officer Compensation
   28    Compensation Discussion and Analysis
   28    Executive Summary
   29    Key Executive Compensation Program Practices
   30    Compensation Philosophy and Elements
   32    Compensation Mix
   32    Base Salary
   33    Cash Incentives
   36    Equity Incentives
   38    Other Compensation
   40    The Committee’s Processes and Analyses
   42    Governance Features of Our Executive Compensation Program
   44    Compensation Committee Report
   45    2023 Summary Compensation Table
   47    Grants of Plan-Based Awards in 2023
   48    Outstanding Equity Awards at 2023 Fiscal Year-End
   49    Option Exercises and Stock Vested in 2023
   50    Nonqualified Deferred Compensation in 2023
   51    Potential Payments upon Termination of Employment
   53    Change in Control Severance Arrangements
   55    Executive Severance Plan
   55    Confidentiality, Non-Competition and Non-Solicitation Agreements
   56    Pay Versus Performance
   59    2023 CEO Pay Ratio
     61    Equity Compensation Plan Information
62-63       OWNERSHIP OF OUR STOCK
   62    Security Ownership of Directors and Executive Officers
     63    Security Ownership of Certain Beneficial Owners
64-68       ADDITIONAL INFORMATION
   64    Questions and Answers about the Annual Meeting and Voting
   68    Delinquent Section 16(a) Reports
   68    Other Matters
   68    Annual Report and Form 10-K
     68    Incorporation by Reference
A1-A6    A-1    Appendix A — Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
 

 


LOGO

ZIMVIE INC.

4555 Riverside Drive

Palm Beach Gardens, Florida 33410

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF ZIMVIE INC.

To Be Held May 15, 2024

 

TIME AND DATE

8 a.m. Mountain Time on May 15, 2024

PLACE

Westin Denver International Airport

8300 Peña Boulevard

Denver, Colorado 80249

ITEMS OF BUSINESS

    Elect two Class II directors to serve until the 2026 annual meeting of shareholders
    Ratify the appointment of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for 2024
    Approve, on a non-binding advisory basis, named executive officer compensation (“Say on Pay”)
    Transact such other business as may properly come before the meeting and any postponement(s) or adjournment(s) thereof

RECORD DATE

March 18, 2024

By Order of the Board of Directors

 

LOGO

Heather Kidwell

Senior Vice President, Chief Legal, Compliance and

Human Resources Officer and Corporate Secretary

March 29, 2024

 

VOTING

 

Your Vote Is Important. Even if you plan to attend the annual meeting, we urge you to review the proxy statement and vote your shares as soon as possible.

 

 
VOTE IN ADVANCE OF THE MEETING:
   

 INTERNET

 

LOGO

   Visit www.proxyvote.com
   

 TELEPHONE

 

LOGO

   Call 1-800-690-6903
   

 MAIL

LOGO

   Mark, sign, date and promptly mail your proxy card or voting instruction form

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on May 15, 2024:

 

This Notice of Annual Meeting, the proxy statement and the 2023 Annual Report are available at www.proxyvote.com.

 

 

i


PROXY STATEMENT SUMMARY

We are providing this proxy statement in connection with the solicitation of proxies by our Board of Directors for use at our 2024 annual meeting of shareholders to be held on May 15, 2024. The Notice of Annual Meeting of Shareholders and related proxy materials, or a Notice of Internet Availability, were first sent to shareholders on or about April 2, 2024. This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information you should consider, and we urge you to read the entire proxy statement, as well as our 2023 Annual Report, before voting.

 

VOTING MATTERS AND BOARD RECOMMENDATIONS

 

      Voting Matter   Board Vote
Recommendation
   See
Page
Proposal 1    Election of directors   FOR

Each Nominee

  

5

Proposal 2    Ratification of the appointment of PwC as our independent registered public accounting firm for 2024   FOR   

24

Proposal 3    Advisory vote to approve named executive officer compensation   FOR   

27

 

1


PROXY STATEMENT SUMMARY

 

 Proposal 1 – Election of Class II Directors
 Our Board recommends a vote FOR each nominee

Our Directors and Director Nominees

The following table provides summary information about each director nominee and continuing director. We currently have two directors in Class I, two directors in Class II and two directors in Class III. Our classified Board has a sunset provision; beginning in 2026, all directors will be elected for one-year terms.

 

 Name

 Principal Occupation

  Age  

Director

Since

  Independent  

Other

Public

Boards

  Committee Memberships
  Audit   Compensation   Corporate
Governance
  Quality,
Regulatory
& Technology
 Class II Director Nominees                                 

 Sally Crawford

 Former Chief Operating Officer, Healthsource, Inc.

 

  70   2022     1     Chair    

 Karen Matusinec

 Former Senior Vice President, Treasurer, McDonald’s Corporation

 

  57   2022       Chair      

 Class III Directors – Terms Expiring in 2025

 

                                

 Vafa Jamali

 President and Chief Executive Officer, ZimVie

 

  54   2021                      

 David King

 Chair of the Board of ZimVie and Former Chairman and Chief Executive Officer, Labcorp

 

  67   2022     1       Chair  

 Class I Directors – Terms Expiring in 2026

 

                                

 Vinit Asar

 Executive Chairman of the Board, Hanger, Inc.

 

  58   2022             Chair

 Richard Kuntz, M.D., M.Sc.

 Former Senior Vice President, Chief Medical and Scientific Officer, Medtronic plc

 

  66   2022     3        

 

2


PROXY STATEMENT SUMMARY

 

Corporate Governance Strengths

 

Board Composition

   Diverse Board with effective mix of skills, experiences, and perspectives
   Effective annual Board and Board committee evaluation process
   Majority voting and director resignation policy in uncontested director elections

 

Board Structure and Independence

   100% independent directors, except CEO
   Independent Chair of the Board
   100% independent Board committees
   Independent directors regularly meet without management present
   Robust Code of Business Conduct and Ethics applicable to directors, officers, and other team members

Board Oversight and Stock Ownership

   Robust succession planning and risk oversight
   Rigorous stock ownership guidelines for directors and executives
   Directors and executives prohibited from hedging and pledging our stock
   Independent director equity-based compensation not paid out until cessation of service

 

Shareholder Rights and Accountability

   Sunset provision on classified Board; beginning in 2026, all directors will be elected for one-year terms
   Single class voting structure (one share, one vote)
X    No supermajority voting requirements
X    No poison pill
 

 

 

 

 Proposal 2 – Ratification of the Appointment of PwC
 Our Board recommends a vote FOR this proposal
   PwC’s report contained in our 2023 Annual Report is unqualified
   Audit and audit-related fees represent 90% of total fees paid to PwC for 2023

 

3


PROXY STATEMENT SUMMARY

 

 Proposal 3 – Advisory Vote to Approve Named Executive Officer Compensation
 Our Board recommends a vote FOR this proposal

 

Executive Compensation Objectives and Practices
     
   

What We Do

 

What We Don’t Do

Competitive

Compensation

Program

 

  Significant portion of target annual compensation is delivered in the form of variable compensation tied to performance

  Reinforce and reward behaviors that support our business objectives

  Use of an independent compensation consultant reporting directly to the Compensation Committee

 

X   No individual employment agreements with our executive officers

Pay for

Performance

 

  Align executive compensation with the execution of our business strategy and the creation of long-term shareholder value

 

X   While we emphasize “at risk” pay tied to performance, our program does not encourage excessive risk-taking by management

X   No guaranteed incentive awards for executive officers

Strong

Compensation

Policies

 

  Robust share retention and ownership guidelines

  “Double-trigger” change in control severance agreements; our unvested equity compensation awards also have a double-trigger accelerated vesting provision

  Clawback policy tied to financial restatements

  Non-competition agreement required for equity award eligibility

  Annual say-on-pay vote

 

X   No discounting, reloading or repricing of equity awards without shareholder approval

X   Prohibition on executives pledging ZimVie shares or hedging against the economic risk of ownership

X   No excise tax “gross-ups” in our change in control severance agreements

X   Limited executive perquisites

 

SHAREHOLDER ENGAGEMENT

We welcome and have active engagement with our shareholders, and we regularly share the perspectives of our shareholders with our Board. Our senior management holds quarterly conference calls with investors and analysts to discuss and answer questions concerning our business and financial results. In 2023, we were able to speak with dozens of current and prospective investors through our participation in investor conferences and many one-on-one meetings held virtually or in person. We also seek to engage with shareholders and analysts through our website, other virtual meetings and calls, and the use of various media to convey key investment messages. Shareholders may communicate directly with our Board via the procedures described under “Communications with Directors” on page 14.

 

4


CORPORATE GOVERNANCE

At ZimVie, the way we conduct our business is critically important. We are committed to effective corporate governance, adhere to the highest ethical standards, and act as a responsible member of our communities.

Our business is managed under the direction of our Board of Directors. The Board has responsibility for establishing broad corporate policies and for our overall performance.

 

 

Proposal 1 – Election of Class II Directors

 

Our amended and restated certificate of incorporation provides that, until the annual shareholder meeting to be held in 2026, our Board of Directors will be divided into three classes, as nearly equal in number as possible. We currently have two directors in Class I, two directors in Class II and two directors in Class III. The directors designated as Class I directors have terms expiring at the 2026 annual meeting of shareholders. The directors designated as Class II directors have terms expiring at the 2024 annual meeting, and are up for re-election for a two-year term. The directors designated as Class III directors have terms expiring at the 2025 annual meeting of shareholders, and will be up for re-election at that meeting for a one-year term. Commencing with the 2026 annual meeting of shareholders, all directors will be elected annually and for a term of office to expire at the next annual meeting of shareholders, and our Board of Directors will thereafter no longer be divided into three classes.

 

The Class II directors whose terms expire at the 2024 annual meeting are Sally Crawford and Karen Matusinec. Based upon the recommendation of the Corporate Governance Committee, the Board has nominated each of these two directors for election at the 2024 annual meeting to hold office until the 2026 annual meeting and the election of their successors. Each of the nominees currently is serving as our director. Each nominee agreed to be named in this proxy statement and to serve, if elected. The nominees are expected to attend the 2024 annual meeting.

 

Proxies cannot be voted for a greater number of persons than two, which is the number of nominees named in this proxy statement.

 

Unless otherwise instructed, the persons named as proxies will vote all proxies received for the election of each of the nominees.

 

We provide below biographical information for each director nominee and each continuing director, including key experience, qualifications, and skills.

 

Our Board recommends a vote FOR each Class II nominee for director.

 

 

5


CORPORATE GOVERNANCE

 

 

DIRECTOR NOMINEES AND CONTINUING
DIRECTORS

CLASS II NOMINEES FOR DIRECTOR

 

Sally Crawford

 

LOGO  

Age 70

Director Since 2022

Board Committees

  Audit

  Compensation (Chair)

  Corporate Governance

  Quality, Regulatory and Technology

     

Ms. Crawford served as Chief Operating Officer of Healthsource, Inc., a publicly held managed care organization, from its founding in 1985 until 1997. During her tenure at Healthsource, she led the development of its operating systems and marketing strategies and supported strategic alliances with physicians, hospitals, insurers, and other healthcare companies. Since 1997, Ms. Crawford has been a healthcare consultant. Ms. Crawford earned a Bachelor of Arts from Smith College and a Master of Science from Boston University.

 

Other Public Board Memberships

   Hologic, Inc.

   Past director of Abcam PLC (until its acquisition by Danaher in December 2023)

   Past director of Insulet Corporation (until December 2021)

 

Skills and Qualifications

 

Ms. Crawford brings to the Board of Directors governance experience, operational experience and a detailed understanding of the healthcare and managed care industries that are relevant to our business.

Karen Matusinec

 

   
LOGO  

Age 57

Director Since 2022

Board Committees

   Audit (Chair)

   Compensation

   Corporate Governance

   Quality, Regulatory and Technology

     

Ms. Matusinec served as Senior Vice President, Treasurer of McDonald’s Corporation (NYSE: MCD) from October 2011 until July 2021. In that role, she had responsibility for McDonald’s global Treasury, Tax, Insurance, and Global Business Services functions. Ms. Matusinec joined McDonald’s in October 2003 and held roles with increasing responsibility before being appointed McDonald’s Vice President, Corporate Tax and serving in that role from September 2006 to September 2011. Before joining McDonald’s, she served as a tax consultant and tax auditor with Arthur Andersen and Deloitte, specializing in international tax planning, consulting, and tax accounting for large multinational companies. She began her career in corporate tax in the financial services industry with Bank One and Northwestern National Insurance Company. She earned a bachelor’s degree in accounting from University of Wisconsin-Milwaukee and a master’s degree in taxation from DePaul University. Ms. Matusinec holds a Certificate in Cybersecurity Oversight from Carnegie Mellon University Software Engineering Institute.

 

 

Skills and Qualifications

Ms. Matusinec brings to the Board of Directors significant financial expertise, senior leadership experience, a global perspective, and extensive experience in finance, capital markets, and enterprise risk management.

 

 

6


CORPORATE GOVERNANCE

 

CONTINUING CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2026

 

Vinit Asar

 

LOGO  

Age 58

Director Since 2022

Board Committees

  Audit

  Compensation

  Corporate Governance

  Quality, Regulatory and Technology (Chair)

     

Mr. Asar has served as Executive Chairman of the Board of Hanger, Inc. since May 2023 and has been a member of Hanger’s Board of Directors since May 2012. He served as Hanger’s President and Chief Executive Officer from May 2012 to May 2023. Hanger was publicly traded (NYSE: HNGR) until its acquisition by a health care investment firm in October 2022. Previously, Mr. Asar served as Hanger’s President and Chief Operating Officer from September 2011 to May 2012, and as Hanger’s Executive Vice President and Chief Growth Officer from December 2008 to September 2011. Mr. Asar joined Hanger from the Medical Device & Diagnostic sector at Johnson & Johnson (NYSE: JNJ), having worked at the Ethicon, Ethicon Endo Surgery, Cordis, and Biosense Webster franchises. During his 18-year career at Johnson & Johnson, Mr. Asar held various roles of increasing responsibility in Finance, Product Development, Manufacturing, and Marketing and Sales in the U.S. and in Europe. Mr. Asar holds a Bachelor of Science in Business Administration from Aquinas College and a Master of Business Administration from Lehigh University.

 

Other Public Board Memberships

   Hanger, Inc. (until its acquisition by a health care investment firm in October 2022)

 

Skills and Qualifications

 

Mr. Asar brings to the Board of Directors executive and public company experience as well as significant experience in the healthcare products and services industry.

Richard Kuntz, M.D., M.Sc.

 

LOGO  

Age 66

Director Since 2022

Board Committees

  Audit

  Compensation

  Corporate Governance

  Quality, Regulatory and Technology

     

Dr. Kuntz served as Senior Vice President, Chief Medical and Scientific Officer of Medtronic plc (NYSE: MDT) from August 2009 to April 2022. In that role, Dr. Kuntz was responsible for medical affairs, health policy and reimbursement, clinical research activities, and corporate technology. Prior to that, he served as Senior Vice President and President, Neuromodulation of Medtronic from October 2005 to August 2009. Before joining Medtronic, Dr. Kuntz was an interventional cardiologist and Chief of the Division of Clinical Biometrics at Brigham and Women’s Hospital and Associate Professor of Medicine and Chief Scientific Officer of the Harvard Clinical Research Institute. Dr. Kuntz served as a member of the Board of Governors of PCORI (Patient-Centered Outcomes Research Institute) from 2010 to 2018. Dr. Kuntz graduated from Miami University and received his medical degree from Case Western Reserve University School of Medicine. He completed his residency and chief residency in internal medicine at the University of Texas Southwestern Medical School, and then completed fellowships in cardiovascular diseases and interventional cardiology at the Beth Israel Hospital and Harvard Medical School, Boston. Dr. Kuntz received his Master of Science in biostatistics from the Harvard School of Public Health.

 

Other Public Board Memberships

   DiaMedica Therapeutics Inc.

   Identiv, Inc.

   Rockley Photonics Holdings Limited

 

Skills and Qualifications

 

Dr. Kuntz brings to the Board of Directors expertise in medicine and medical devices, including clinical trials, biostatistics and evidence development, as well as executive leadership, business development and mergers and acquisitions experience.

 

 

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CONTINUING CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2025

 

Vafa Jamali

 

LOGO   

Age 54

 

Director Since 2021

      

 

Mr. Jamali was appointed Chief Executive Officer (“CEO”) of ZimVie in February 2021. He was further appointed President of ZimVie in December 2021. Previously, Mr. Jamali served as the Chief Commercial Officer of Rockley Photonics, where he led commercial strategic planning for the early-stage company from October 2020 until joining ZimVie. Prior to that, Mr. Jamali served as Senior Vice President and President, Respiratory, Gastrointestinal and Informatics (“RGI”) of Medtronic plc from May 2017 until October 2020. Before leading the RGI business, he served as Senior Vice President and President, Early Technologies of Medtronic plc from January 2016 until May 2017 and prior to that he served as Vice President and General Manager, GI Solutions of Medtronic plc from January 2015 until January 2016. Before joining Medtronic, Mr. Jamali held leadership positions with Covidien plc, Cardinal Health, Inc. and Baxter International Inc. Mr. Jamali received his Bachelor of Commerce degree with distinction from the University of Alberta in Edmonton, Canada, and has completed a number of executive leadership programs, including the Harvard Executive Leadership Program in 2020.

 

Skills and Qualifications

 

Mr. Jamali’s service as our President and CEO and his past service in leadership positions with Medtronic, Covidien, Cardinal Health, and Baxter International have given him extensive experience in the medical device industry leading, growing and transforming highly regulated global enterprises. Mr. Jamali has significant experience in financial management, strategic planning, mergers and acquisitions, business integration, and enterprise risk management. His knowledge and understanding of the medical device industry in general, and our global businesses in particular, enable him to provide crucial insight to our Board into strategic, management, and operational matters. Mr. Jamali provides an essential link between management and the Board on management’s business perspectives.

David King

 

LOGO   

Age 67

 

Director Since 2022

Board Committees

   Audit

   Compensation

   Corporate Governance (Chair)

   Quality, Regulatory and Technology

      

Mr. King has been Managing Member of Kingman LLC, a strategic healthcare consulting company, since August 2020. Previously, he served as an Operating Partner at Pritzker Private Capital from August 2020 through December 2021, co-leading the firm’s activities in the healthcare sector. Prior to joining Pritzker Private Capital, Mr. King was most recently the Chief Executive Officer of Laboratory Corporation of America Holdings (“Labcorp”) (NYSE: LH), a leading global life sciences company, from January 2007 to October 2019. At Labcorp, Mr. King also served as Chairman of the Board from May 2009 to May 2020. Mr. King serves as a member of the advisory board for Duke University’s Robert J. Margolis, MD, Center for Health Policy. Mr. King previously served on the boards of Elon University and the American Clinical Laboratory Association, where he served as board chair from 2010 to 2014. Mr. King served on the board of PATH, a global nonprofit dedicated to furthering health equity, from 2013 to 2022, and served as board chair from 2018 to 2021. Mr. King also served on the board of the Emily K Center, a college-readiness center in Durham, North Carolina, founded by Mike Krzyzewski, the retired head coach of the Duke University Men’s Basketball team. Mr. King earned a bachelor’s degree, cum laude, from Princeton University and a Juris Doctor, cum laude, from the University of Pennsylvania Law School.

 

 

Other Public Board Memberships

    Privia Health Group, Inc.
    Past director of Labcorp (until May 2020)
    Past director of Cardinal Health, Inc. (until November 2018)

 

 

Skills and Qualifications

Mr. King brings to the Board of Directors extensive executive leadership experience and a deep understanding of the healthcare industry as well as public company operational expertise.

 

 

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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 dental and spine patients worldwide. We develop, manufacture, and market a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures and treat a wide range of spine pathologies. 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 2,600 team members globally, with approximately 1,100 team members focusing on sales, marketing, and key commercialization activities and approximately 140 team members focusing on research and development.

On December 15, 2023, we entered into a definitive agreement to sell our spine business. The transaction has been approved by our Board of Directors and is expected to close in the first half of 2024, subject to the satisfaction or waiver of certain closing conditions, including receipt of required regulatory approvals.

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 director skills matrix below identifies some of the key skills and experiences the Board has identified as being important to its responsibilities and reflects how the directors, individually and in the aggregate, reflect these skills.

 

     ZimVie Directors
 Skills and Experience   Asar    Crawford     Jamali     King     Kuntz     Matusinec 
 Cybersecurity Oversight                          
 Finance / Accounting / Financial Reporting /  Capital Markets                    
 Global / International Experience                  
 Government / Legal / Regulatory Experience                    
 Human Capital Experience                      
 Investor Relations Experience                  
 M&A / Business Development / Strategic  Planning Experience                
 Medical Technology / Healthcare Industry  Experience                  
 Operations Experience                    
 Other Public Company Board Experience                    
 R&D / Science / Innovation / Technology  Experience                    
 Reimbursement / Health Economics Experience                    
 Risk Management Experience                      
 Sales / Marketing / Brand Management  Experience                    
 Supply Chain / Logistics Experience                        
 Demographics                                  
Diverse (as defined by Nasdaq – based on  EEO-1 categories)                      

A check mark indicates a specific area of focus or expertise that the director brings to our Board. The matrix above does not encompass all of the knowledge, skills and experience of our directors, and the fact that a particular knowledge, skill

 

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or experience is not listed does not mean that a director does not possess it. In addition, the absence of a particular knowledge, skill or experience with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area.

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 Securities and Exchange Commission (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.

BOARD DIVERSITY MATRIX (as of March 18, 2024)

The following table summarizes certain self-identified characteristics of our directors, utilizing the categories and terms set forth in applicable Nasdaq rules and related guidance.

 

   

Total Number of Directors

    6  
   
     Female     Male  
   

Part I: Gender Identity

               
   

Directors

    2       4  
   

Part II: Demographic Background

               
   

African American or Black

               
   

Alaskan Native or Native American

               
   

Asian

            1  
   

Hispanic or Latinx

               
   

Native Hawaiian or Pacific Islander

               
   

White

    2       3  
   

Two or More Races or Ethnicities

               

 

 

BOARD LEADERSHIP STRUCTURE

Our Board of Directors is led by our non-executive Chair David King. The non-executive Chair leads the meetings and activities of the Board, while our CEO leads the management, operations and team members of ZimVie and is responsible for executing the company’s strategy. The Board believes that this leadership structure allows the Board to function efficiently and effectively and promotes a balance between independent Board oversight and day-to-day management of the company. However, the Board expects to periodically review its leadership structure and believes it should retain the flexibility to decide what is in the best interests of the company at any point in time. If the position of Chair is held by the CEO, the Board will appoint a Lead Independent Director from among its members using criteria the Board deems appropriate, and our Corporate Governance Guidelines and amended and restated bylaws provide this flexibility.

 

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Following are key duties and responsibilities of the non-executive Chair of the Board:

 

   

presides at meetings of the Board and shareholders;

   

reviews and provides input on meeting agendas for the Board and its committees;

   

reviews meeting schedules and collaborates with the CEO to ensure that there is sufficient time for discussion of agenda items;

   

provides feedback to the CEO as needed, including on the flow of information from management to the Board, and communicates regularly with the CEO between Board meetings;

   

serves as the primary liaison between the CEO and the independent directors;

   

convenes and presides at meetings of the independent directors, including executive sessions of the independent directors held in conjunction with each regularly scheduled Board meeting;

   

recommends to the CEO the retention of outside advisors who report directly to the Board when deemed appropriate;

   

consults with Board committee Chairs as needed;

   

consults with the Corporate Governance Committee concerning the members and Chairs of all Board committees;

   

makes himself available, as appropriate, for communication with shareholders; and

   

performs such other duties as may be requested by the Board.

 

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. We use a global risk assessment process coordinated by management 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.

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

 

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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 complex transactions.

 

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:

 

   

Code of Business Conduct and Ethics, which applies to all directors, officers, and other team members;

   

Code of Ethics for Chief Executive Officer and Senior Financial Officers (the “finance code of ethics”);

   

Corporate Governance Guidelines;

   

Audit Committee Charter;

   

Compensation Committee Charter;

   

Corporate Governance Committee Charter;

   

Quality, Regulatory and Technology Committee Charter;

   

Board Policy on Ratification of Independent Registered Public Accounting Firm; and

   

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/Corporate Governance section of our website.

 

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.

 

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

 

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CORPORATE GOVERNANCE

 

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.

 

DIRECTOR INDEPENDENCE

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.

 

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 2024 annual meeting are currently serving on the Board.

 

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, 4555 Riverside Drive, Palm Beach Gardens, Florida 33410. 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.

 

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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 2025 annual meeting of shareholders?” on page 67 for more information.

 

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, 4555 Riverside Drive, Palm Beach Gardens, Florida 33410. 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.

 

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 2023, the Board held 10 meetings and the standing committees of the Board held a total of 22 meetings. All directors attended 75% or more of the meetings of the Board and committees on which they served. Our Corporate Governance Guidelines provide that directors are expected to attend our annual meetings of shareholders. All directors attended the 2023 annual meeting of shareholders.

 

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.

 

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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 dental and spine 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”), a Transition Services Agreement (the “Transition Services Agreement”), an Intellectual Property Matters Agreement (the “Intellectual Property Matters Agreement”), a Transitional Trademark License Agreement (the “Transitional Trademark License Agreement”), a Transition Manufacturing and Supply Agreement (the “Transition Manufacturing and Supply Agreement”), and a Reverse Transition Manufacturing and Supply Agreement (the “Reverse Transition Manufacturing and Supply Agreement”), each dated as of March 1, 2022.

The descriptions included below of the Separation Agreement, the Tax Matters Agreement, the Transition Services Agreement, the Intellectual Property Matters Agreement, the Transitional Trademark License Agreement, the Transition Manufacturing and Supply Agreement, and the Reverse Transition Manufacturing and Supply Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements.

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.

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 transferred, the liabilities assumed and the contracts 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.

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

 

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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.

Transition Services Agreement

Pursuant to the Transition Services Agreement, we and Zimmer Biomet provided certain services to one another, on an interim, transitional basis following the separation and the distribution. The services provided 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 were generally intended to allow the providing company to recover all costs and expenses of providing such services. 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 provided will be limited to the aggregate service fees paid to it in the immediately preceding one-year period. Obligations under the Transition Services Agreement were substantially complete as of December 31, 2023.

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 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.

 

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CORPORATE GOVERNANCE

 

 

COMMITTEES OF THE BOARD

Our Board has the following standing committees: an Audit Committee, a Compensation Committee, a Corporate Governance Committee, and a Quality, Regulatory and Technology Committee. Each of the standing committees is composed entirely of independent directors. In addition, the members of the Audit Committee and the Compensation Committee meet the heightened standards of independence required by the rules of Nasdaq and the SEC. The table below shows the current membership of each standing Board committee and the number of meetings held during 2023.

STANDING COMMITTEE ASSIGNMENTS

 

Director    Audit
Committee
   Compensation
Committee
   Corporate
Governance
Committee
   Quality,
Regulatory and
Technology
Committee

Vinit Asar

            Chair

Sally Crawford

      Chair      

Vafa Jamali

                   

David King

         Chair   

Richard Kuntz, M.D., M.Sc.

           

Karen Matusinec

   Chair         

2023 Meetings

   8    6    4    4

 

 

Audit Committee

Karen Matusinec, Chair

Vinit Asar

Sally Crawford

David King

Richard Kuntz, M.D., M.Sc.

Our Audit Committee is responsible for overseeing the integrity of our financial statements, the qualifications, performance and independence of the independent registered public accounting firm, the performance of our internal audit function and our compliance with certain legal and regulatory requirements. The committee also reviews and discusses with management our information technology, data security, business continuity and cybersecurity-related risk exposures. The committee is directly responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm. The principal functions of the Audit Committee include:

 

   

reviewing and pre-approving all audit and permissible non-audit services provided to us by our independent registered public accounting firm;

   

reviewing and discussing with management and our independent registered public accounting firm the proposed scope of the annual audit and audit procedures to be performed;

   

reviewing and discussing with management and our independent registered public accounting firm our quarterly and annual financial statements prior to their public release;

   

overseeing our compliance with certain legal and regulatory requirements and ethical standards and aspects of our risk management processes; and

   

overseeing, reviewing and discussing with management our information technology, data security, business continuity and cybersecurity-related risk exposures and threats, the potential impact of those risk exposures and threats on our business, operations and reputation, and the processes management has established to assess, manage, monitor and mitigate such risk exposures and threats.

Our Board has determined that each member of the Audit Committee is “independent” as defined under the rules of Nasdaq and the SEC. Our Board of Directors has designated Karen Matusinec, David King and Vinit Asar as “audit committee financial experts” as defined by SEC rules. Shareholders should understand that this designation is an SEC disclosure requirement related to these directors’ experience and understanding with respect to certain accounting and

 

17


CORPORATE GOVERNANCE

 

auditing matters. The designation does not impose upon these directors any duties, obligations or liabilities that are greater than those that are generally imposed on them as members of the Audit Committee and the Board, and their designation as audit committee financial experts pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board of Directors.

See also the “Audit Committee Matters” section of this proxy statement for additional information about the Audit Committee’s responsibilities and actions and the Audit Committee Report.

 

 

Compensation Committee

Sally Crawford, Chair

Vinit Asar

David King

Richard Kuntz, M.D., M.Sc.

Karen Matusinec

Our Compensation Committee has the overall responsibility for approving and evaluating our executive compensation plans, policies and programs. The duties of the Compensation Committee include:

 

   

evaluating the CEO’s performance, including in light of the goals and objectives applicable to the CEO, and reviewing and discussing with the CEO the performance of our other executive officers;

   

reviewing and approving the base salary, annual and long-term incentive compensation and other compensation, perquisites or special or supplemental benefits to be paid or awarded to our CEO and other executive officers;

   

approving and authorizing the company to enter into any severance arrangements, change in control severance agreements or other compensation-related agreements with our executive officers, in each case as, when and if appropriate;

   

reviewing and making recommendations to our Board with respect to our incentive compensation and equity-based plans;

   

administering our incentive compensation and equity-based plans, including making awards under such plans;

   

monitoring compliance by our executive officers and directors with our stock ownership guidelines;

   

overseeing the process for identifying and addressing any material risks relating to our compensation policies and practices;

   

overseeing and administering our policies, plans and agreements concerning the recoupment of incentive compensation;

   

cooperating with the Corporate Governance Committee in reviewing non-employee director compensation and providing input with respect to any proposed changes in director compensation;

   

as part of periodic organization and talent planning, either as part of the full Board, or at the Board’s direction, reviewing talent and development plans relative to senior management;

   

either as part of the full Board, or at the Board’s direction, reviewing and monitoring our policies and strategies related to human capital management, including succession planning;

   

reviewing and discussing with management the Compensation Discussion and Analysis; and

   

reviewing the results of non-binding advisory votes on executive compensation and determining whether changes should be made to our executive compensation policies and programs in light of shareholder feedback.

Our Board has determined that each member of the Compensation Committee is (1) “independent” as defined under the rules of Nasdaq and (2) a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee has the authority to retain compensation consultants, outside counsel, and other advisers.

None of the members of the Compensation Committee during 2023 or as of the date of this proxy statement is or has been our officer or employee or had any relationship requiring disclosure under Item 404 of Regulation S-K of the Exchange Act. None of our executive officers served on the compensation committee or board of any company that employed any member of the Compensation Committee or the Board or otherwise under circumstances requiring disclosure under Item 404 of Regulation S-K.

The report of the Compensation Committee appears on page 44.

 

18


CORPORATE GOVERNANCE

 

 

Compensation Risk Assessment

At the request of the Compensation Committee, the committee’s compensation consultant conducted a qualitative review of the potential risks associated with our executive compensation program in 2023. 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 team members or to any of our subsidiaries or divisions are included in our executive compensation program. The consultant 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. The consultant 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:

 

   

developing and recommending to the Board criteria for selection of non-management directors;

   

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;

   

recommending directors for appointment to Board committees and the chairs thereof;

   

analyzing information relevant to the Board’s determination as to whether a director is independent;

   

overseeing the annual self-evaluation process for the Board and its committees;

   

periodically reviewing the Board’s leadership structure and recommending any proposed changes to the Board for approval;

   

monitoring emerging corporate governance trends and recommending to the Board any proposed changes in our corporate governance policies;

   

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.

 

19


CORPORATE GOVERNANCE

 

 

Quality, Regulatory and Technology Committee

Vinit Asar, Chair

Sally Crawford

David King

Richard Kuntz, M.D., M.Sc.

Karen Matusinec

Our Quality, Regulatory and Technology Committee assists the Board in its oversight of product quality and safety and our research, innovation, and technology initiatives in the context of our overall corporate strategy, goals, and objectives. In its oversight of risk management in the area of compliance, including product quality and safety, the Quality, Regulatory and Technology Committee reviews and considers, among other items, the following:

 

   

our overall quality strategy;

   

processes in place to monitor and control product quality and safety;

   

results of product quality and quality system assessments by the company and external regulators; and

   

any significant product quality issues that may arise.

In overseeing our research, innovation and technology initiatives, the Quality, Regulatory and Technology Committee reviews and considers, among other items, the following as it deems appropriate:

 

   

the strategic goals, objectives and direction of our research programs and the alignment of those programs with our portfolio of businesses and our long-term business objectives and strategic goals;

   

the relationship of our strategic research plan to our overall approach to technical and commercial innovation and technology acquisition;

   

our product development pipeline;

   

our major technology positions and strategies relative to emerging technologies, emerging concepts of therapy and healthcare, and changing market requirements;

   

the processes for identifying and prioritizing, and, as applicable, the development of, innovative technologies that arise from within and outside the company;

   

our ability to internally develop technology being, or proposed to be, developed, or to access and maintain such technology from third parties through acquisitions, licensing, collaborations, alliances, investments or otherwise; and

   

the potential impact on us in the event that technology being, or proposed to be, developed is not developed or accessed by us.

Our Board has determined that each member of the Quality, Regulatory and Technology Committee is “independent” as defined under the rules of Nasdaq.

 

20


CORPORATE GOVERNANCE

 

 

COMPENSATION OF NON-EMPLOYEE DIRECTORS

The Board believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. The key components of director compensation include annual retainers, committee chair annual fees and equity-based awards. It is the Board’s practice to provide a mix of cash and equity-based compensation to more closely align the interests of directors with our shareholders.

The following table sets forth information regarding the compensation we paid to our non-employee directors for 2023. Mr. Jamali is not included in this table because he received no additional compensation for his service as a director

2023 Director Compensation Table

 

Name   

Fees Earned or

Paid in Cash(1)

($)

    

Stock

Awards(2)

($)

    

Total

($)

 

(a)

     (b)        (c)        (h)  

Vinit Asar

     80,000        190,225        270,225  

Sally Crawford

     67,500        207,725        275,225  

David King

     155,000        255,225        410,225  

Richard Kuntz, M.D., M.Sc.

     52,500        207,725        260,225  

Karen Matusinec

     72,500        207,725        280,225  

 

(1)

Amounts include fees that were paid in cash plus fees that were voluntarily deferred at each director’s election under our Deferred Compensation Plan for Non-Employee Directors. As explained more fully below, compensation that a director elects to defer is credited to the director’s deferred compensation account as either treasury units, dollar units or deferred share units (“DSUs”), and will be paid in cash following the director’s retirement or other termination of service from the Board. Amounts do not include fees subject to mandatory deferral; as explained more fully below, fees subject to mandatory deferral are reported in the Stock Awards column.

 

(2)

Represents the grant date fair value of the stock awards determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). For these stock awards, the grant date fair value is the average of the high and low selling prices of our common stock on Nasdaq on the date of grant. All stock awards to directors are fully vested on the date of grant but are subject to mandatory deferral of settlement until the director’s termination of service from the Board, or later, as explained more fully below.

The following table sets forth the grant date fair value of annual grants of restricted stock units (“RSUs”) and DSUs awarded to each director in 2023, as well as DSUs granted during 2023 pursuant to the mandatory deferral provisions of the Deferred Compensation Plan for Non-Employee Directors.

2023 STOCK AWARDS

 

Name   

RSUs

(granted 05-12-23)

($)

    

DSUs

(granted 05-12-23)

($)

    

DSUs

(mandatory deferral)

($)

    

Total

($)

 

Vinit Asar

     185,000        5,225               190,225  

Sally Crawford

     185,000        5,225        17,500        207,725  

David King

     250,000        5,225               255,225  

Richard Kuntz, M.D., M.Sc.

     185,000        5,225        17,500        207,725  

Karen Matusinec

     185,000        5,225        17,500        207,725  

 

 

21


CORPORATE GOVERNANCE

 

 

Retainers

In 2023, we paid our non-employee directors the same retainers we paid in 2022; there were no year-over-year increases in such retainers. We pay non-employee directors quarterly, on the last day of March, June, September, and December. 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. The following table shows the amounts paid during 2023:

 

      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 2023, we awarded our non-employee directors the same equity-based compensation that we awarded in 2022; there were no year-over-year increases in such awards. We awarded each non-employee director who was reelected at the 2023 annual meeting of shareholders, or who was 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.

 

22


CORPORATE GOVERNANCE

 

In 2023, 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 the date of the 2023 annual meeting, 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. These awards are made under the Stock Plan for Non-Employee Directors. The RSUs vest immediately and are subject to mandatory deferral until the later of the third anniversary of the grant date or the director’s retirement or other termination of service from the Board. We will settle the RSUs in shares of our common stock.

 

 

Insurance, Expense Reimbursement and Director Education

We provide non-employee directors with travel accident insurance and reimburse reasonable expenses they incur for transportation, meals and lodging when on ZimVie business. We also reimburse non-employee directors for reasonable out-of-pocket expenses, including tuition costs incurred in attending director education programs.

 

23


AUDIT COMMITTEE MATTERS

 

 

Proposal 2 – Ratification of the Appointment of the Independent Registered Public Accounting Firm

The Audit Committee is directly responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm, including the review and approval of audit fees. The Audit Committee has appointed PwC to serve as our independent registered public accounting firm for 2024. We are asking shareholders to ratify this appointment as a matter of policy.

If shareholders do not ratify the selection of PwC, the Audit Committee will consider any information submitted by shareholders in connection with the selection of the independent registered public accounting firm for the next year. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes such a change would be in our best interest and the best interest of our shareholders.

PwC has served as our independent registered public accounting firm continuously since 2021.

In determining whether to reappoint PwC to serve as our independent registered public accounting firm, the Audit Committee annually considers several factors, including:

 

   

PwC’s independence and objectivity;

 

   

PwC’s capabilities considering the complexity of our global operations, including the skills and experience of the lead audit partner;

 

   

PwC’s historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee and management’s views of PwC’s overall performance;

 

   

Data related to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) inspection reports on PwC;

 

   

PwC’s knowledge of and familiarity with our business and industry and our accounting policies and practices; and

 

   

The appropriateness of PwC’s fees, taking into account the size and level of complexity of our organization and the resources necessary to perform the audit.

The members of the Audit Committee and the Board believe that the continued retention of PwC to serve as our independent registered public accounting firm is in our best interest and in the best interest of our shareholders.

Representatives of PwC attended all meetings of the Audit Committee in 2023. We expect that a representative of PwC will be present at the annual meeting. This representative will have an opportunity to make a statement and will be available to respond to appropriate questions.

Our Board recommends a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm for 2024.

 

 

RESPONSIBILITIES OF THE AUDIT COMMITTEE

The Audit Committee is responsible for overseeing the integrity of our financial statements, the qualifications, performance and independence of the independent registered public accounting firm, the performance of our internal audit function and our compliance with certain legal and regulatory requirements. The committee also reviews and discusses with management our information technology, data security, business continuity and cybersecurity-related risk exposures. The committee is directly responsible for the appointment, retention, compensation, and oversight of our independent registered public accounting firm.

Management is responsible for the financial reporting process, including the system of internal control, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States and for management’s report on internal control over financial reporting.

The independent registered public accounting firm is responsible for auditing the consolidated financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.

 

24


AUDIT COMMITTEE MATTERS

 

The committee’s responsibility is to oversee and review the financial reporting process and to review and discuss management’s report on internal control over financial reporting. Committee members are not, however, professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to such financial statements concerning compliance with laws, regulations or accounting principles generally accepted in the United States or as to the independence of the independent registered public accounting firm. The committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent registered public accounting firm.

See also “CORPORATE GOVERNANCE – Committees of the Board – Audit Committee” on page 17 for additional information regarding the Audit Committee’s functions and composition.

 

 

ACTIVITIES OF THE AUDIT COMMITTEE IN 2023

The committee held eight meetings during 2023. The meetings were designed, among other things, to facilitate and encourage communication among the committee, management, our internal audit function, and PwC. At these meetings, the committee:

 

   

discussed with PwC the overall scope and plans for its audit;

   

reviewed and discussed with management and PwC the consolidated financial statements;

   

met with internal audit and PwC, with and without management present, to discuss the results of their work;

   

reviewed and discussed the company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002;

   

discussed major financial risk exposures with management and the steps management has taken to monitor and control such exposures;

   

reviewed and discussed with management the design and operation of our corporate compliance program;

   

reviewed and discussed with management our data security, business continuity and cybersecurity-related risk exposures;

   

pre-approved audit and permitted non-audit services in accordance with the policy described below;

   

discussed with PwC the matters required to be communicated to the committee by applicable requirements of the PCAOB and the SEC;

   

discussed the auditor’s independence with PwC and made the conclusions regarding independence described below; and

   

evaluated PwC’s performance and considered factors relevant to the reappointment of PwC.

 

 

AUDIT COMMITTEE PRE-APPROVAL OF SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by our independent registered public accounting firm. The Audit Committee will consider annually and, if appropriate, pre-approve the provision of audit and permitted non-audit services. The Audit Committee will also consider on a case-by-case basis and, if appropriate, pre-approve specific services that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Chair of the Audit Committee between regular meetings. The Audit Committee Chair has the delegated authority to pre-approve such services up to a specified fee amount. These pre-approval decisions are reported to the full Audit Committee at its next scheduled meeting.

 

25


AUDIT COMMITTEE MATTERS

 

 

AUDIT AND NON-AUDIT FEES

The following table shows the fees that we paid or accrued for audit and other professional services provided by PwC for the years 2023 and 2022. All of the services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process described above or, for periods prior to the spinoff, in conformity with the Zimmer Biomet Audit Committee’s pre-approval process.

 

      2023      2022  

Audit Fees(1)

   $ 3,369,000      $ 2,949,000  

Audit-Related Fees(2)

     2,000         

Tax Fees(3)

     373,000        28,000  

All Other Fees(4)

     2,000        3,000  

Total Fees

   $ 3,746,000      $ 2,980,000  

 

(1)

This category includes the audit of our annual financial statements, the review of interim financial statements included in our quarterly reports on Form 10-Q, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

 

(2)

This category consists principally of agreed-upon procedures.

 

(3)

This category consists of tax services provided by PwC for tax compliance, tax advice and tax planning.

 

(4)

This category consists of fees for licenses to use accounting research software and other tools.

 

 

AUDIT COMMITTEE REPORT

The Audit Committee has reviewed and discussed with management and PwC the audited financial statements for the year ended December 31, 2023. The committee has discussed with PwC the matters that are required to be discussed by the applicable requirements of the PCAOB and the SEC. PwC has provided the committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding PwC’s communications with the committee concerning independence, and the committee has discussed with PwC that firm’s independence. The committee has concluded that PwC’s provision of audit and non-audit services to the company and its affiliates is compatible with PwC’s independence.

Based on the reviews and discussions described above, and subject to the limitations on the committee’s role and responsibilities as described in this proxy statement and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited consolidated financial statements for the year ended December 31, 2023 be included in our Annual Report on Form 10-K for filing with the SEC.

Audit Committee

Karen Matusinec, Chair

Vinit Asar

Sally Crawford

David King

Richard Kuntz, M.D., M.Sc.

 

26


EXECUTIVE COMPENSATION

 

 

Proposal 3 – Advisory Vote to Approve Named Executive Officer Compensation

 

The Board of Directors is committed to excellence in corporate governance and recognizes the interest our shareholders have expressed with respect to our named executive officer compensation program. As a part of this commitment, and in accordance with Section 14A of the Exchange Act, our shareholders are being asked to approve, on a non-binding, advisory basis, the compensation of our named executive officers (“NEOs”) as reported in this proxy statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our executive compensation program for our NEOs for 2023.

 

A detailed description of our executive compensation program is available in the Compensation Discussion and Analysis section of this proxy statement (“CD&A”). Our Board and Compensation Committee believe that our executive compensation program is tied to performance, aligns with shareholder interests, and merits shareholder support. Accordingly, the Board recommends that shareholders vote in favor of the following resolution:

 

“RESOLVED, that the shareholders of ZimVie Inc. approve, on an advisory basis, the compensation of the company’s named executive officers as disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules, including the CD&A, the compensation tables, and narrative disclosures.”

 

Although this vote is non-binding, the Board and the Compensation Committee value the views of our shareholders and will review the voting results. If there are significant negative votes, we will take steps to understand those concerns that influenced the vote, and consider them in making future decisions with regard to executive compensation. We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote at our 2025 annual meeting of shareholders.

 

Our Board recommends a vote FOR the advisory resolution approving NEO compensation.

 

27


EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

INTRODUCTION

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 2023, 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.

 

EXECUTIVE SUMMARY

For 2023, our compensation program consisted primarily of base salary, target annual cash incentive opportunities, and target long-term equity-based incentives. The committee approved 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.

 

2023 NEOs

For 2023, our NEOs were:

 

2023 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
Heather Kidwell    Senior Vice President, Chief Legal, Compliance and Human Resources Officer and Corporate Secretary

 

 

Recent Business and Operational Highlights

In 2023, our team made a great deal of progress executing our corporate strategy while keeping our Mission at the forefront. It was a year intensely focused on a few critical areas—optimizing our operations, reshaping our portfolio of innovation, and driving toward our transformation as a business. Notwithstanding the anticipated external and internal headwinds, the year was marked by a number of milestones.

 

   

We maintained our leadership position in premium dental implants, digital workflows, and biomaterials, in addition to launching 16 dental products in 2023.

   

We opened a state-of-the-art ZimVie medical education and training facility in Palm Beach Gardens, Florida.

   

We made strategic investments in IT and digitization to expand our eServices platform, making access to our lifechanging Dental products and doing business with us more convenient for our customers.

   

We continued to develop the motion preservation market for spine patients through advances in cervical disc replacement technology and with FDA approval for a new Mobi-C® Implant and Hybrid Clinical Study, making motion preservation a reality for more patients.

   

We held our number one position in vertebral body tethering and celebrated over 2,000 children with scoliosis being treated with The Tether Vertebral Body Tethering System.

   

We expanded our partnership with Brainlab, a pioneer in the development of digital medical technology, to include co-marketing and we received FDA clearance for the Vital Spinal Fixation System compatibility with Brainlab Spine & Trauma Navigation.

   

We paid all 2024 debt principal payments in advance as part of our ongoing initiative to reduce leverage, enabled by improvements in cash collections and reductions in inventory.

   

We advanced our Environmental, Social and Governance (ESG) strategy through a number of global initiatives, reaffirming our commitment to being a responsible and accountable employer and business.

Most significantly, we advanced our transformational plans to become a pure-play Dental company. On December 15, 2023, we entered into a definitive agreement to sell our spine business to an affiliate of H.I.G. Capital for $375 million in total consideration, comprised of $315 million in cash, subject to certain customary adjustments as set forth in the agreement, and $60 million in the form of a promissory note that will accrue interest at a rate of 10% per annum, compounded semi-annually, payable in kind. The transaction is expected to close in the first half of 2024, subject to the satisfaction or waiver of certain closing conditions, including receipt of required regulatory approvals. We are confident about the value this will deliver to our customers and to you, our shareholders.

 

28


EXECUTIVE COMPENSATION

 

KEY EXECUTIVE COMPENSATION PROGRAM PRACTICES

The committee has designed our executive compensation program and practices to align executives’ financial interests with those of our shareholders. Following is a description of key program features and practices that illustrate this alignment:

 

Pay for performance. A significant percentage of our NEOs’ total target direct compensation, 82.6% for our CEO in 2023, is at-risk and/or variable with performance, including stock price performance.

 

Emphasis on long-term equity incentives. We emphasize alignment between the interests of our NEOs and shareholders by significantly weighting NEOs’ compensation toward long-term equity awards.

 

Clawback of incentive compensation. Incentive-based compensation of executive officers under cash and equity incentive plans is subject to clawback in the event of financial restatements. In addition, equity awards are subject to clawback in the event an employee engages in conduct deemed detrimental to the interests of the company, including the breach of restrictive covenants or the violation of our Code of Business Conduct and Ethics or other policies, procedures or standards.

 

Robust stock ownership guidelines. We require executives to hold equity with a value equal to a multiple of five times salary for our CEO, three times salary for our CFO, and two times salary for each other NEO. 100% of net after-tax shares received upon vesting or exercise of awards must be retained until an executive meets the required ownership level.

 

Non-competition agreement required for equity award eligibility. We require all team members to sign a non-competition agreement as a condition of receiving an equity award. The award is subject to clawback if the agreement is breached.

 

Policy prohibiting hedging, pledging and short sales. We prohibit directors, officers and certain other team members from engaging in short sales of our stock, trading in instruments

  designed to hedge against price declines in our stock, holding our stock in margin accounts or pledging our stock as collateral for loans or other obligations.

 

No repricing or exchange of underwater stock options. Our equity incentive plan prohibits repricing or exchange of underwater stock options without shareholder approval.

 

No employment contracts. We employ our NEOs on an “at will” basis with no employment contracts.

 

Double trigger change in control benefits. We require a double trigger for change in control severance benefits and equity awards; that is, cash severance will not be paid, and the vesting of equity awards will not be accelerated, except in the event of a qualifying termination of employment in connection with a change in control.

 

No excise tax gross-ups. We have no gross-up provisions in change in control severance agreements.

 

Limited perquisites. We do not provide significant perquisites to our NEOs.

 

Maximum payout caps. We place caps on maximum payouts under our executive annual incentive plan and on the number of shares that may be earned under our performance-based equity awards.

 

Annual shareholder “say on pay” vote and ongoing shareholder engagement. We regularly engage with our shareholders to remain well-informed regarding their perspectives on current issues and to address any questions or concerns.

 

Independent advisor to the committee. The committee regularly consults with an independent compensation advisor.

 

 

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EXECUTIVE COMPENSATION

 

COMPENSATION PHILOSOPHY AND ELEMENTS

 

Our Executive Compensation Philosophy

Our executive compensation program is designed to achieve the following fundamental objectives:

 

   

attract, retain and motivate a highly qualified and effective senior leadership team;

   

focus executives’ attention on specific financial, operational and strategic objectives;

   

create a direct relationship between pay and performance;

   

align executives’ interests with the long-term interests of our shareholders;

   

recognize company and individual performance; and

   

reflect the value of each executive’s position in the market and within the company.

To accomplish these objectives, the committee annually reviews and approves our executive compensation program components and target compensation levels, as well as specific performance metrics and targets, payout ranges and actual payouts.

The committee establishes 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 – 2023

The following table describes the elements of target direct compensation for 2023. 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 team members, and we provide a limited range of perquisites.

 

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EXECUTIVE COMPENSATION

 

Element and Key Characteristics

 

  

Objectives

 

Base Salary

 

    

  Fixed compensation component; payable in cash

  Reviewed annually and adjusted when appropriate

  2023 NEO increases: 0% – 19%

  

  Provide a base level of competitive cash compensation

  Attract and retain executive talent

  Reflect market factors, as well as individual experience, performance, and level of responsibility

 

Annual Cash Incentive Opportunity

 

  Variable compensation component payable in cash based on performance against established goals and assessment of individual performance

  Target awards are based on a percentage of base salary

  Tied to financial goals in 2023 to drive total company performance, subject to downward adjustment based on cultural goals and individual performance

  Payouts for 2023 could range between 0% and 150% of target

  2023 NEO payouts: 50.3% of target for Messrs. Jamali and Heppenstall and Ms. Kidwell; 51.1% of target for Ms. Whitney; and 36.1% of target for Mr. Kanaglekar

 

  

  Motivate and reward executives for achievement of key financial measures, cultural goals, and individual objectives

  Drive specific behaviors that foster short-term and long-term growth, profitability, operating efficiency, and ZimVie’s culture

Annual LTI Award: Restricted Stock Units (“RSUs”) (50% of 2023 annual equity award)

 

  RSUs vest ratably over three years

  

  Motivate NEOs to drive the long-term performance of the company; equity value is tied directly to stock price performance

  Align NEOs’ interests with long-term shareholder value; shares received upon vesting are subject to retention requirements under stock ownership guidelines

  Attract and retain executive talent

 

Annual LTI Award: Performance-Based RSUs (“PRSUs”) (50% of 2023 annual equity award)

 

  Three-year performance period for 2023 awards:

   60% based on three-year cumulative constant currency third-party net sales

   40% based on three-year cumulative adjusted EBITDA margin

  Maximum payout of 150% of target

  Earned units vest on the third anniversary of the grant date

 

  

  Motivate NEOs to drive multi-year performance objectives that enhance shareholder value

  Align NEOs’ interests with long-term shareholder value; shares received upon vesting are subject to retention requirements under stock ownership guidelines

  Attract and retain executive talent

 

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EXECUTIVE COMPENSATION

 

COMPENSATION MIX

Our NEOs’ total direct compensation is heavily weighted toward variable compensation elements, meaning actual amounts earned will vary as a result of company and individual performance. We emphasize performance-based compensation that appropriately rewards executives for delivering results that meet or exceed multiple pre-established goals, with metrics and targets selected because they are directly linked to our strategic goals.

As executives assume greater responsibilities, more of their pay is contingent on company performance. With respect to 2023, 82.6% of our CEO’s total target direct compensation was variable and tied to our annual and long-term performance, including stock price performance.

 

2023 Total Target Direct Compensation  
      Base Salary     Annual Cash Incentives    

PRSUs

(Grant Date Fair Value)

   

RSUs

(Grant Date Fair Value)

 

CEO

     17.4     17.4     32.6     32.6

Other NEOs (Average)

     30.6     18.0     25.7     25.7

 

2023 CEO Direct Compensation(1)   2023 Other NEOs Average Direct Compensation(1)
LOGO   LOGO

 

(1)

Percentages calculated based on 2023 total target direct compensation

 

BASE SALARY

In February 2023, the committee approved the 2023 annual base salaries for our NEOs. Consistent with management’s recommendation, the committee did not increase the 2023 annual base salaries for any of our NEOs except Ms. Kidwell. The committee increased Ms. Kidwell’s base salary by 19.3% in connection with her appointment as Chief Human Resources Officer (“CHRO”) in recognition of the additional duties and responsibilities she assumed by taking on the CHRO role in January 2023 in addition to her existing responsibilities as Senior Vice President, Chief Legal and Compliance Officer and Corporate Secretary.

 

2023 Base Salary Adjustments  
NEO    2022
(Post-Spinoff)
Base Salary
($)
    

2023

Base Salary
($)

     Increase
(%)
 

Vafa Jamali

     800,000        800,000        0.0  

Richard Heppenstall

     454,500        454,500        0.0  

Rebecca Whitney

     412,000        412,000        0.0  

Indraneel Kanaglekar

     360,500        360,500        0.0  

Heather Kidwell

     360,400        430,000        19.3  

 

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EXECUTIVE COMPENSATION

 

CASH INCENTIVES

 

Executive Annual Incentive Plan

In determining the target awards for our NEOs under our executive annual incentive plan (“EAIP”) for 2023, the committee reviewed the NEOs’ job responsibilities (including Ms. Kidwell’s increased responsibilities as CHRO), market data based on peer group benchmarking, internal equity, and certain other factors. After considering these factors, the committee approved the following EAIP target opportunities for 2023:

 

EAIP Target Opportunities
NEO    2023 EAIP Target
Opportunity (as a
percentage of
base salary)
(%)
  

Percentage
increase from
2022 EAIP Target
Opportunity

(%)

Vafa Jamali

   100    0.0

Richard Heppenstall

   80    0.0

Rebecca Whitney

   60    0.0

Indraneel Kanaglekar

   60    0.0

Heather Kidwell

   55    10.0

The committee established financial and cultural goals by which to assess our 2023 performance for purposes of awards under the EAIP. The financial goals accounted for 100% of the target award opportunity for each NEO. The payout determined based on achievement of the financial goals could then be adjusted downward (but not upward) based on achievement of cultural goals and assessments of individual performance tied to functional as well as company goals.

With respect to the financial goals, the committee selected three financial performance measures. The below table shows the selected financial performance measures, their respective weightings, and the rationale for their selection.

 

2023 EAIP Financial Performance Measures
Performance Measure    Weighting    Rationale
Constant currency third-party net sales    40%    The committee used constant currency third-party net sales because it measures our ability to innovate and compete in the global marketplace, it focuses NEOs on top-line sales growth, it is one of the primary bases on which we set performance expectations for the year, it is a widely used measure of overall company performance, and the committee believes it is highly correlated to shareholder return. It is also a measure with respect to which we generally provide financial guidance to the investment community. Constant currency third-party net sales is a non-GAAP financial measure.*
Adjusted constant currency earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”)    40%    The committee used adjusted EBITDA because it is one of the primary bases on which we set performance expectations for the year, it is consistent with how we provide earnings guidance and report our operating results to the investment community, it is a widely used measure of overall company performance, and the committee believes it is highly correlated to shareholder return. Adjusted EBITDA is a non-GAAP financial measure.*
Bonus constant currency cash flow metric (“cash flow metric”)    20%    The committee used our cash flow metric because it recognizes the importance of the efficient use of cash on our ability to pay down the debt we incurred in connection with the spinoff (to pay a dividend to Zimmer Biomet) and to fund investments in our business. Our cash flow metric is a non-GAAP financial measure.*

 

*

See footnotes (3), (4), and (5) to the “2023 EAIP Financial Performance Measures—Targets, Actual Achievement, and Weighted Payout” table below and Appendix A for a discussion of our non-GAAP financial measures and reconciliations of those measures to the most directly comparable financial measures determined in accordance with U.S. generally accepted accounting principles (“GAAP”).

 

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EXECUTIVE COMPENSATION

 

The committee believes that together, these measures provide a balanced set of performance targets that focus on growth, profitability, and operating efficiency.

The committee set corporate performance metrics based on total company results for Messrs. Jamali and Heppenstall and Ms. Kidwell. With respect to Ms. Whitney, the committee set performance metrics based on a blend of 75% on the results of the spine products segment and 25% on total company results. With respect to Mr. Kanaglekar, the committee set performance metrics based on a blend of 75% on the results of the dental products segment and 25% on total company results. The committee believes this approach more closely aligns those executives’ pay with the performance of the portfolios for which they are primarily responsible.

The payout curves applied to these performance measures are shown below:

 

2023 EAIP Financial Performance Measures – Payout Curves

Constant Currency

Third-Party Net Sales

 

 

Adjusted EBITDA

 

 

Cash Flow Metric

 

Achievement
Percentage
  Payout (% of Target)   Achievement
Percentage
  Payout (% of Target)    Achievement
Percentage
  Payout (% of Target)
110%+   150%   120%+   150%   120%+   150%
100%   100%   100%   100%   100%   100%
85%   25%   85%   25%   85%   25%
Less than 85%   0%   Less than 85%   0%   Less than 85%   0%

The annual performance measures, targets, our actual performance against the targets, and the resulting achievement and payout percentages for 2023 are shown in the below table.

 

2023 EAIP Financial Performance Measures – Targets, Actual Achievement, and Weighted Payout  
     ($ in millions)     

Achievement(1)(2)

(%)

    

Weight

(%)

    

Weighted
Payout(1)(2)

(%)

         
   Target      Actual  
Performance and Payout Percentages    ($)      ($)  

Total Company – Messrs. Jamali and Heppenstall and Ms. Kidwell (100%); Mr. Kanaglekar and Ms. Whitney (25%)

                 

Constant currency third-party net sales(3)

     896        858        95.74        40        31.5     

Adjusted EBITDA(4)

     137        122        89.41        40        18.8     

Cash flow metric(5)

     73        56        77.40        20        0.0           

Company total weighted payout

 

              50.3  

Spine Products Segment – Ms. Whitney (75%)

                 

Constant currency third-party net sales(3)

     348        332        95.38        40        30.8     

Adjusted EBITDA(4)

     61        50        82.44        40        0.0     

Cash flow metric(5)

     71        72        101.2        20        20.5     

Unit weighted payout

 

     51.3     

At overall 75% weight

 

        38.5  

Company total weighted payout

 

     50.3     

At overall 25% weight

 

        12.6  

Total weighted payout for Ms. Whitney

 

              51.1  

Dental Products Segment – Mr. Kanaglekar (75%)

                 

Constant currency third-party net sales(3)

     471        451        95.70        40        31.3     

Adjusted EBITDA(4)

     117        98        84.09        40        0.0     

Cash flow metric(5)

     103        87        84.50        20        0.0     

Unit weighted payout

 

     31.3     

At overall 75% weight

 

        23.5  

Company total weighted payout

 

     50.3     

At overall 25% weight

 

        12.6  

Total weighted payout for Mr. Kanaglekar

 

 

              36.1  

 

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EXECUTIVE COMPENSATION

 

(1)

Achievement percentages, weighted payout percentages, and total weighted payout percentages are computed from the underlying whole numbers rather than the rounded numbers presented in this table and, therefore, the percentages and totals may not correspond exactly to the rounded numbers.

 

(2)

The achievement percentage for each performance measure was applied to the relevant payout curve (set forth above) to determine the payout percentage for that measure. The resulting payout percentages were then weighted and summed.

 

(3)

When measuring actual performance against the target for third-party net sales, the committee made adjustments to eliminate the impact of fluctuations in foreign currency exchange rates during the year, whether positive or negative, compared to the rates that were budgeted when the targets were set. The committee eliminated the impact of foreign currency translation so that only our underlying performance is measured; the committee does not believe it is desirable to either reward or penalize executives based on the impact of foreign currency swings. These adjustments result in “constant currency” third-party net sales, which is a non-GAAP financial measure. See Appendix A for a reconciliation of reported third-party net sales to constant currency third-party net sales.

 

(4)

The performance measure adjusted EBITDA under the 2023 EAIP provided for certain non-GAAP adjustments so that the performance measure would more consistently reflect underlying business operations than the comparable GAAP measure and would be consistent with the measure management uses when evaluating the performance of the business internally, as well as with how management generally provides earnings guidance and reports the company’s operating results to the investment community. The committee believes adjusted metrics allow us to connect pay and operational performance more effectively and are more aligned with how shareholders expect the company and our peers to measure performance. The goal of adjusting metrics from GAAP requirements is to provide meaningful incremental information that allows investors to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported income but that do not impact the fundamentals of our operations. The committee believes that adjusted metrics are therefore often the most appropriate metrics to use when incentivizing executives to make decisions that are aligned with the long-term interests of shareholders. While GAAP provides accounting uniformity across companies, GAAP requires the inclusion of items that may not be reflective of our core operations. In the case of adjusted EBITDA for purposes of the 2023 EAIP, we adjust net income (loss) as detailed in the reconciliation provided in Appendix A.

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 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 cash flow metric.

 

Cultural Goals

Once the potential payout amounts under the EAIP were computed based on our financial performance as described above, the committee considered the achievement of the following cultural goals that had been established for the NEOs for 2023:

 

   

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

 

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EXECUTIVE COMPENSATION

 

   

Complete an equity review within the NEO’s business / function (program, policies, total rewards, promotions)

After reviewing the progress made in 2023 with respect to these cultural goals, the committee determined that the goals were fully achieved for 2023; as such, the committee did not adjust downward the payout associated with achievement of the financial goals set forth above.

 

Individual Performance

After considering achievement of the financial and cultural goals as described above, the committee considered each NEO’s individual performance during 2023 to determine the actual cash incentive payment amounts.

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 2023 included goals pertaining to, among other areas, corporate strategy; growth drivers; new product launches; and corporate compliance and regulatory compliance, including product quality and safety.

Based on its assessment of individual performance in relation to those goals, the committee did not adjust downward the payout associated with the achievement of the financial goals set forth above.

 

2023 EAIP Payouts

Set forth below are the payouts to our NEOs under the EAIP for 2023 based on achievement of financial, cultural, and individual goals as described above.

 

     2023 EAIP Payouts  
     Opportunity      Actual Payment  
NEO    (as a % of
Base Salary)
(%)
   (at Target
Performance)
($)
     (as a % of Target
Opportunity)
(%)
   ($)  

Vafa Jamali

   100      800,000      50.3      402,400  

Richard Heppenstall

    80      363,600      50.3      182,891  

Rebecca Whitney

    60      247,200      51.1      126,319  

Indraneel Kanaglekar

    60      216,300      36.1      78,084  

Heather Kidwell

    55      235,028      50.3      118,219  

 

EQUITY INCENTIVES

Equity incentives are the most significant component of each NEO’s compensation package. The committee believes the emphasis on equity awards is appropriate, as these officers have the greatest role in establishing the company’s direction and should have the greatest proportion of their compensation aligned with the long-term interests of shareholders.

 

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EXECUTIVE COMPENSATION

 

In 2023, our first full year as an independent public company, the committee awarded the following long-term equity incentives, as discussed more fully below:

 

   

50% of the award value was an annual grant of RSUs to each of our NEOs (and other eligible team members); and

   

50% of the award value was an annual grant of PRSUs to each of our NEOs (and other eligible team members).

 

Annual Equity Awards

Equity Grant Value Determination

In determining target grant values for the 2023 annual grant of long-term equity-based awards, the committee reviewed market data based on peer group benchmarking in order to determine grant levels that would be competitive with the market. The committee also took into consideration other factors, including the target annual grant value awarded to each NEO in 2022 (which had been determined by Zimmer Biomet, consistent with the offer letters each of our NEOs executed with Zimmer Biomet in 2021); each NEO’s 2022 performance, including the NEO’s contribution to our 2022 performance; the committee’s expectations of each NEO’s future contributions to the company; each NEO’s job responsibilities (including Ms. Kidwell’s increased responsibilities as CHRO); internal equity; external market conditions; shares available to be granted; potential shareholder dilution; and the expense associated with stock-based compensation. After considering these factors, the committee approved awards with the following target grant date fair values in May 2023:

 

2023 Annual Equity Awards  
NEO    Grant Date Fair Value of
Target 2023 Annual LTI Award
($)
     Percentage Increase from
Grant Date Fair Value of
Target 2022 Annual LTI Award
(%)
 

Vafa Jamali

     3,000,002        0.0  

Richard Heppenstall

     1,000,015        0.0  

Rebecca Whitney

     600,009        0.0  

Indraneel Kanaglekar

     680,002        13.3  

Heather Kidwell

     500,007        25.0  

The committee considered these target grant date fair values in connection with its determination of each NEO’s total compensation for 2023.

Equity Award Types

The 2023 annual equity awards granted to the NEOs included an equal mix (based on grant date fair value) of RSUs that vest ratably over three years and PRSUs with a three-year performance period.

PRSU Design

The PRSUs granted in 2023 measure performance based 60% on three-year cumulative constant currency third-party net sales and 40% on three-year cumulative adjusted EBITDA margin, metrics that the committee believes directly relate to shareholder value creation. The maximum payout is 150% of target and the threshold payout is 50% of target. Earned units vest on the third anniversary of the grant date. We generally do not disclose forward-looking goals for our multi-year incentive programs, because we do not provide forward-looking guidance to our investors with respect to multi-year periods and it is competitively sensitive

 

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EXECUTIVE COMPENSATION

 

information. We intend to disclose multi-year performance goals in full after the close of the applicable performance period.

 

   

Constant currency third-party net sales* was selected by the committee because it measures our ability to innovate and compete in the global marketplace, it focuses NEOs on top-line sales growth, it is one of the primary bases on which we set performance expectations for the year, it is a widely used measure of overall company performance, and the committee believes it is highly correlated to shareholder return. It is also a measure with respect to which we generally provide financial guidance to the investment community.

 

   

Adjusted EBITDA margin* was selected by the committee because it measures our ability to drive improved performance through both revenue growth and expense management, it focuses NEOs on business profitability as well as top-line growth, it is a widely used measure of overall company performance, it is one of the primary bases on which we set performance expectations for the year, and the committee believes it is highly correlated to shareholder return. It is also a measure with respect to which we generally provide financial guidance to the investment community.

 

  *

Constant currency third-party net sales and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA margin is adjusted EBITDA divided by third-party net sales. See footnotes 3 and 4 to the “2023 EAIP Financial Performance Measures—Targets, Actual Achievement, and Weighted Payout” table above for a discussion of constant currency third-party net sales and adjusted EBITDA and their associated adjustments.

 

2022 Founders’ Grants

As previously disclosed, to recognize the significant event that ZimVie’s spinoff into a new public company represented, in 2022, the committee awarded Founders’ grants in the form of RSUs to executives and other team members, which grants were scheduled to vest in 2025. Following our announcement in December 2023 of our entry into a definitive agreement to sell our spine business, the committee considered the impact of such announcement on our team members holding the Founders’ grants. The committee considered that team members who would convey to the buyer as part of the transaction in 2024 or whose employment would be terminated without cause in 2024 as part of the anticipated reorganization that ZimVie intends to undertake in connection with the transaction, would forfeit the grant (along with all other unvested equity awards). The committee further considered that, under the terms of the definitive agreement to sell our spine business, the committee could accelerate the vesting of the Founders’ grants for the team members who would convey in the transaction without the consent of the buyer only if it accelerated the vesting for all team members holding the grant. Based on these and certain other considerations, the committee determined it was appropriate to ensure that all team members holding the Founders’ grant, regardless of their future with ZimVie, were rewarded for their efforts beginning with the spinoff of ZimVie into a new public company through the announcement of the definitive agreement to sell the spine business. Accordingly, the committee accelerated the vesting of all of the Founders’ grants to December 28, 2023.

 

OTHER COMPENSATION

 

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.

 

38


EXECUTIVE COMPENSATION

 

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 Severance 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, 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.

 

Retirement Benefits

During 2023, NEOs were eligible to participate in the following plans:

 

   

our 401(k) plan; and

 

   

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.

 

39


EXECUTIVE COMPENSATION

 

We offer retirement benefit plans in an effort to remain competitive with market practices, retain talented team members, assist team members in preparing for retirement, provide income to team members following retirement and, in the case of the DCP, provide benefits to eligible team members that are comparable, as a percentage of compensation, to benefits provided to team members 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 team member 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 2023 table.

 

Disability Compensation

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 team members whose compensation is not limited for purposes of determining benefits payable under our base long-term disability insurance plan.

 

Perquisites

We provide executives with a limited range of perquisites or other benefits not generally available to all salaried team members. For 2023, these included the DCP and the Supplemental Individual Disability Insurance Plan discussed above.

 

THE COMMITTEE’S PROCESSES AND ANALYSES

Role of Committee and Input from Management. The committee is responsible 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 Aon, 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 Aon.

The committee also reviews and approves actions related to other aspects of compensation that affect team members 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.

 

40


EXECUTIVE COMPENSATION

 

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.

In determining potential peer companies, the committee, with assistance from its consultant, 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. At the time compensation recommendations were developed and decisions were made relating to 2023 compensation, the following 18 companies made up the peer group:

 

Accuray Incorporated

Avanos Medical, Inc.

Bioventus Inc.

CONMED Corporation

Envista Holdings Corporation

Globus Medical, Inc.

Haemonetics Corporation

ICU Medical, Inc.

Integer Holdings Corporation

Integra LifeSciences Holdings Corporation

LivaNova PLC

Merit Medical Systems, Inc.

Natus Medical Incorporated

Nevro Corp.

NuVasive, Inc.

Orthofix Medical Inc.

Penumbra, Inc.

Varex Imaging Corporation

The committee routinely reviews the continuing relevancy of the companies in the peer group and makes changes as circumstances warrant. In September 2023, the committee reviewed the existing peer group and potential changes to the peer group with the assistance of Aon. As part of its review, the committee considered business focus, market capitalization, revenues, the public availability of compensation and financial performance information, and competition for executive talent. After considering these factors, the committee made the following changes to the peer group:

 

   

added Alphatec Holdings, Inc., Embecta Corp., and Inogen, Inc.; and

 

   

removed Accuray Incorporated, Natus Medical Incorporated, and Penumbra, Inc.

Role of Compensation Consultant. In 2023, the committee engaged the services of Aon to provide advice and guidance to the committee, including with respect to review of the peer group, changes to compensation levels, the design of incentive plans, the setting of performance goals, and the design of other forms of compensation and benefits programs, as well as relevant information about market practices and trends. Typically, the consultant attends committee meetings, reviews existing compensation programs to ensure consistency with our compensation philosophy and current market practices, and produces the comparative information derived from peer group and published survey data that the committee reviews when setting compensation. The committee has reviewed applicable factors and determined that the work of Aon has not raised any conflicts of interest.

 

41


EXECUTIVE COMPENSATION

 

GOVERNANCE FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM

 

Equity Incentive Grant Practices

In general, the committee expects to approve annual equity-based awards to NEOs at approximately the same time each year, in March, following the filing of our Annual Report on Form 10-K for the prior year and once the operating plan for the current year has been approved. In 2023, the committee established a grant date in May for annual equity grants to all eligible team members, following the 2023 annual meeting at which shareholders approved amendments to the 2022 Stock Incentive Plan, including an increase in the number of shares available for issuance under the plan.

In general, the committee approves target grant values for equity awards to NEOs and other eligible team members 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/or

 

   

the same valuation methodology we use to determine the accounting expense of the grants under ASC 718.

In 2023, the committee delegated authority to our CEO to grant a limited number of off-cycle awards to non-executive level team members for purposes of attracting new team members, retaining key team members, providing special recognition, and otherwise as the CEO may determine in his discretion to reward team member performance. The CEO made no such awards in 2023.

 

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 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.

 

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EXECUTIVE COMPENSATION

 

Compensation Recovery (Clawback) Policy

In order to further align management’s interests with the interests of shareholders, to support good governance practices, and to comply with Nasdaq listing rules, the company maintains a robust compensation recovery policy (commonly known as a clawback policy) applicable to all incentive-based compensation received 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 (including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period), the committee will determine the excess of the amount of incentive-based compensation received by Section 16 officers during the three completed fiscal years immediately preceding the required restatement date 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. The company will provide each such officer with a written notice of such amount and a demand for repayment or return. If such repayment or return is not made within a reasonable time, the policy provides that the company will recover the erroneously awarded compensation in a reasonable and prompt manner using any lawful method, subject to limited exceptions as permitted by Nasdaq listing standards.

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.

 

Prohibition on Hedging and Pledging

Our Stock Trading Policy prohibits all members of our Board, all executive officers, all team members at or above a director level and certain other designated team members (as well as such individuals’ family members, others living in their home and any entities that such individuals influence or control) from the following:

 

   

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;

 

   

engaging in short sales of ZimVie securities; and

 

   

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.

 

43


EXECUTIVE COMPENSATION

 

Tax Deductibility of Executive Compensation

The committee views the tax deductibility of compensation as one of many factors to be considered in the design of our executive compensation program. Section 162(m) of the Internal Revenue Code (the “Code”) limits our ability to deduct for U.S. tax purposes compensation in excess of $1.0 million that is paid to certain executive officers. In determining the compensation paid or awarded to our NEOs, the committee seeks to achieve the objectives of our compensation program, including attracting, retaining, motivating and sustaining high performing executive talent and incentivizing the achievement of both short-and long-term results through the alignment of rigorous performance goals and pay. In structuring our compensation program in a manner consistent with these objectives, the committee may approve compensation that is not fully deductible for U.S. tax purposes if the committee believes it will contribute to the achievement of our business objectives and is in our best interests and the best interests of our shareholders.

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors consists of the five directors named below, each of whom meets the independence standards of the Board’s Corporate Governance Guidelines, Nasdaq listing standards, and applicable securities laws.

We reviewed and discussed with management the Compensation Discussion and Analysis that precedes this report. Based on our review and discussions with management, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in ZimVie’s Annual Report on Form 10-K for the year ended December 31, 2023 and this proxy statement.

Compensation Committee

Sally Crawford, Chair

Vinit Asar

David King

Richard Kuntz, M.D., M.Sc.

Karen Matusinec

 

44


EXECUTIVE COMPENSATION

 

 

2023 SUMMARY COMPENSATION TABLE

The following table sets forth the compensation awarded to or earned by our NEOs for the years ended December 31, 2023, 2022 and 2021. Amounts for 2021 and the first two months of 2022, prior to the spinoff, represent compensation paid to our NEOs by Zimmer Biomet.

 

Name and Principal

Position

  Year    

Salary

($)

   

Bonus(1)

($)

   

Stock

Awards(2)

($)

   

Option

Awards(3)

($)

   

Non-Equity

Incentive Plan

Compensation(4)

($)

   

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

   

All Other

Compensation(5)

($)

   

Total

($)

 
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  

Vafa Jamali

President and CEO

    2023       800,000             3,000,002             402,400             24,542       4,226,944  
    2022       773,462             6,000,035       3,000,019       556,892             80,805       10,411,213  
    2021       605,769       990,673       3,250,210       3,250,058                   17,287       8,113,997  

Richard Heppenstall

EVP, CFO and Treasurer

    2023       454,500             1,000,015             182,891             27,980       1,665,386  
    2022       453,462             1,500,021       500,012       261,194             35,169       2,749,858  
    2021       129,808       200,000       500,038       500,003       94,591             6,231       1,430,671  

Rebecca Whitney

SVP, President – Global Spine

    2023       412,000             600,009             126,319             37,776       1,176,104  
    2022       409,231             900,027       300,012       176,788             36,955       1,823,013  
    2021       383,836       163,104       170,137       170,020                   33,699       920,796  

Indraneel Kanaglekar

SVP, President – Global Dental

    2023       360,500             680,002             78,084             21,152       1,139,738  
    2022       358,077             900,027       300,012       154,689             21,734       1,734,539  
    2021       316,587             166,296       166,065       214,682             15,494       879,124  

Heather Kidwell

SVP, Chief Legal, Compliance,
and HR Officer and Corporate Secretary

    2023       427,323             500,007             118,219             22,994       1,068,543  
    2022       355,692             600,018       200,012       128,049             20,777       1,304,548  
    2021       317,250             182,623       82,533       116,774             26,155       725,335  

 

(1)

With respect to 2021, represents (a) for Mr. Jamali, (i) a cash sign-on bonus in the amount of $500,000, which was subject to repayment upon Mr. Jamali’s voluntary resignation or termination of employment for cause prior to February 15, 2023, and (ii) a cash bonus of $490,673 that was paid in recognition of the overall performance of Zimmer Biomet’s corporate and NewCo/ZimVie metric groups in 2021; (b) for Mr. Heppenstall, a cash payment intended to cover his estimated bonus loss from changing employment; and (c) for Ms. Whitney, a cash bonus that was paid in recognition of the overall performance of Zimmer Biomet’s Spine metric group in 2021.

 

(2)

The amounts in the “Stock Awards” column do not represent amounts the NEOs received or are entitled to receive; rather, the reported amounts represent the aggregate grant date fair value of stock awards granted in that year computed in accordance with ASC 718. For a discussion of the method of valuation and any assumptions made in the valuation of these awards, see Note 5 to the Consolidated Financial Statements included in our 2023 Form 10-K.

The 2023 stock awards reported in the table consist of annual awards of RSUs and PRSUs to all NEOs. These PRSU awards are subject to performance conditions and the amount reported in the “Stock Awards” column represents the grant date fair value based upon the probable outcome of the performance conditions. These PRSUs are subject to internal performance goals (cumulative constant currency third-party net sales and cumulative adjusted EBITDA margin) over a three-year performance period.

The 2022 stock awards reported in the table consist of: (a) annual awards of RSUs to all NEOs; (b) a special one-time award of RSUs to all NEOs in recognition of their efforts related to the spinoff; and (c) for Mr. Jamali, a make-whole RSU award 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. For a discussion of the method of valuation and any assumptions made in the valuation of these awards, see Note 5 to the Consolidated Financial Statements included in our 2022 Form 10-K.

The 2021 stock awards reported in the table consist of awards of PRSUs to each of the NEOs other than Mr. Heppenstall, and an award of RSUs to each of the NEOs other than Ms. Whitney. These awards were subsequently adjusted and converted in connection with the spinoff from Zimmer Biomet. These PRSU awards were subject to performance conditions and the amount reported in the “Stock Awards” column represents the grant date fair value based upon the probable outcome of the performance conditions. These PRSUs were subject to both internal (constant currency revenue growth) and market-related (relative TSR) performance goals over a three-year performance period. The grant date fair value of the relative TSR component was determined using a Monte Carlo simulation model.

 

45


EXECUTIVE COMPENSATION

 

The following table presents the grant date fair value of the PRSUs we granted in 2023 and the PRSUs Zimmer Biomet granted in 2021 included in the “Stock Awards” column and the grant date fair value of these awards assuming that the highest level of performance conditions would be achieved.

 

     2023 PRSU Awards      2021 PRSU Awards  
Name   

Grant Date Fair Value

(Based on Probable

Outcome) ($)

    

Grant Date Fair Value

(Based on Maximum

Performance) ($)

    

Grant Date Fair Value

(Based on Probable

Outcome) ($)

    

Grant Date Fair Value

(Based on Maximum

Performance) ($)

 

Vafa Jamali

     1,500,001        2,250,002        1,500,072        3,000,144  

Richard Heppenstall

     500,007        750,011                

Rebecca Whitney

     300,004        450,007        170,137        340,274  

Indraneel Kanaglekar

     340,001        510,001        91,139        182,278  

Heather Kidwell

     250,004        375,005        82,623        165,246  

 

(3)

The amounts in the “Option Awards” column do not represent amounts the NEOs received or are entitled to receive; rather, the reported amounts represent the aggregate grant date fair value of option awards granted in that year computed in accordance with ASC 718. For a discussion of the assumptions made in the valuation of our stock options, see Note 5 to the Consolidated Financial Statements included in our 2023 Form 10-K. The 2022 option awards reported in the table include: (a) annual awards of stock options to all NEOs; and (b) for Mr. Jamali, a make-whole stock option award 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.

 

(4)

For 2023 and 2022, amounts reported consist of the annual cash incentive award under the EAIP. For 2021, amounts reported consist of the annual cash incentive award under Zimmer Biomet’s Performance Incentive Plan.

 

(5)

Amounts reported for 2023 include the following:

 

           

Vafa
Jamali

($)

    

Richard
Heppenstall

($)

    

Rebecca
Whitney

($)

  

Indraneel
Kanaglekar

($)

    

Heather
Kidwell

($)

 

Company matching contributions to 401(k) plan

          21,177        24,168      15,102      18,759        20,145  

Company matching contributions to deferred compensation plan (credited to participants’ accounts in 2024)

                      20,226              

Supplemental Individual Disability Insurance Plan premiums

           3,365         3,812       2,449       2,393         2,848  
     Total      24,542        27,980      37,776      21,152        22,994  

 

46


EXECUTIVE COMPENSATION

 

 

GRANTS OF PLAN-BASED AWARDS IN 2023

The following table sets forth non-equity incentive plan arrangements and equity awards granted to our NEOs in 2023.

 

Name  

Grant

Date

   

Date of

Comp.

Committee
Action

   

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards(1)

 

   

Estimated Future Payouts

Under Equity Incentive

Plan Awards

 

   

All Other Stock
Awards:
Number of
Shares of
Stock or Units

(#)

    

Grant Date

Fair Value

of Stock

and Option

Awards(2)

($)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

    Threshold
(#)
    Target
(#)
    Maximum
(#)
 
                     
(a)   (b)            (c)     (d)     (e)     (f)     (g)     (h)     (i)      (l)  

Vafa Jamali

                200,000       800,000       1,200,000                                           

RSUs

    05/15/23       05/11/23                                                       145,138        1,500,001  

PRSUs

    05/15/23       05/11/23                               72,569       145,138       217,707                1,500,001  

Richard Heppenstall

                90,900       363,600       545,400                                           

RSUs

    05/15/23       05/11/23                                                       48,380        500,007  

PRSUs

    05/15/23       05/11/23                               24,190       48,380       72,570                500,007  

Rebecca Whitney

                61,800       247,200       370,800                                           

RSUs

    05/15/23       05/11/23                                                       29,028        300,004  

PRSUs

    05/15/23       05/11/23                               14,514       29,028       43,542                300,004  

Indraneel Kanaglekar

                54,075       216,300       324,450                                           

RSUs

    05/15/23       05/11/23                                                       32,898        340,001  

PRSUs

    05/15/23       05/11/23                               16,449       32,898       49,347                340,001  

Heather Kidwell

                58,757       235,028       352,542                                           

RSUs

    05/15/23       05/11/23                                                       24,190        250,004  

PRSUs

    05/15/23       05/11/23                               12,095       24,190       36,285                250,004  

 

(1)

Amounts in the first line associated with each executive’s name consist of the cash incentive opportunity amounts under the EAIP for 2023.

 

(2)

The values reported in this column represent the grant date fair value of stock awards computed in accordance with ASC 718 and may differ from the values represented in the Summary Compensation Table due to rounding. See footnote 2 to the Summary Compensation Table for additional information regarding the determination of grant date fair value of stock awards.

Non-Equity Incentive Plan Awards. The non-equity incentive plan awards reflected in the first row of the table for each NEO in columns (c) through (e) represent the annual cash incentive opportunity under the EAIP for 2023. Material terms of the awards, including a discussion of the applicable performance measures and target and actual performance for 2023, are described in the CD&A. Amounts actually earned for 2023 performance are shown in column (g) of the Summary Compensation Table.

PRSU Awards. The equity awards reflected in columns (f) through (h) were granted under the 2022 Stock Incentive Plan and represent PRSUs. For all NEOs, these PRSUs had a grant date fair value of $10.335 per unit. The PRSUs are subject to the performance-based goals of cumulative constant currency third-party net sales and cumulative adjusted EBITDA margin, each over a three-year performance period. The material terms of the PRSUs, including applicable performance measures and targets, are described in the CD&A.

RSU Awards. The equity awards reflected in column (i) were granted under the 2022 Stock Incentive Plan and represent RSUs. For all NEOs, these RSUs were annual RSUs that had a grant date fair value of $10.335 per unit and vest one-third per year on each of the first, second and third anniversaries of the grant date, subject to continued employment. Material terms of the RSUs are described in the CD&A.

 

47


EXECUTIVE COMPENSATION

 

 

OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END

The following table summarizes the outstanding equity awards held by the NEOs as of December 31, 2023.

 

    Option Awards(1)     Stock Awards  
Name   Grant Date    

Number of
Securities
Underlying
Unexercised
Options

(#)

Exercisable

   

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

Option
Exercise
Price(2)

($)

    Option
Expiration
Date
   

Number of
Shares or
Units of
Stock
That
Have Not
Vested

(#)

   

Market Value
of Shares or
Units of
Stock That
Have Not
Vested(3)

($)

    Equity
Incentive Plan
Awards:
Number
of Unearned
Shares, Units
or Other
RightsThat
Have
Not Vested
(#)
    Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have
Not Vested(3)
($)
 
(a)          (b)     (c)     (e)     (f)     (g)     (h)     (i)     (j)  

Vafa Jamali

    04/01/2022       41,221       82,440       23.44       04/01/2032