DEF 14A
Table of Contents

 

 

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

ENOVIS CORPORATION

(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 the appropriate box):

 

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.

 

 

 


Table of Contents

 

 

 

LOGO

Proxy Statement

and

Notice of Annual Meeting

June 7, 2022 at 3:00 pm Eastern Time


Table of Contents

LOGO

 

Notice of 2022 

Annual Meeting 

of Stockholders 

 

 

Tuesday, June 7, 2022

3:00 p.m. Eastern Time

Via live webcast at

www.virtualshareholdermeeting.com/ENOV2022

To Our Stockholders:

Notice is hereby given that the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Enovis Corporation (“Enovis”) will be held via live webcast at www.virtualshareholdermeeting.com/ENOV2022 on Tuesday, June 7, 2022 at 3:00 p.m. Eastern Time, for the following purposes:

 

1.

To elect the eleven members of the Board of Directors named in the attached proxy statement;

 

2.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022;

 

3.

To approve the compensation of our named executive officers on an advisory basis (“say-on-pay”);

 

4.

To approve an amendment to the Enovis Corporation 2020 Omnibus Incentive Plan; and

 

5.

To consider any other matters that properly come before the Annual Meeting or any adjournment or postponement thereof.

The accompanying proxy statement describes the matters to be considered at the Annual Meeting. Only stockholders of record at the close of business on April 18, 2022 are entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof.

We are pleased to take advantage of the Securities and Exchange Commission rules that allow us to furnish our proxy materials and our annual report to stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide our stockholders with the information that they need more quickly while lowering our costs of printing and delivery and reducing the environmental impact of our Annual Meeting.

We are holding the Annual Meeting in a virtual-only format this year. We believe that this is the right choice for Enovis and its stockholders, as it provides expanded stockholder access, improves communications, and, given the ongoing COVID-19 pandemic, promotes the health and safety of participants by allowing them to participate from any location. To attend, participate in, and vote during the Annual Meeting, stockholders of record must go to the meeting website at www.virtualshareholdermeeting.com/ENOV2022 and enter the control number found on their proxy card or Notice of Internet Availability of Proxy Materials (the “Notice”). If you are a beneficial stockholder who owns common stock in street name, meaning through a bank, broker or other nominee, and your voting instruction form or Notice indicates that you may vote those shares through the http://www.proxyvote.com website, then you may attend, participate in, and vote during the Annual Meeting using the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, stockholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least five days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting.

As a stockholder of Enovis, your vote is important. Whether or not you plan to attend the Annual Meeting virtually, we urge you to vote your shares at your earliest convenience and thank you for your continued support of Enovis Corporation.

Dated: April 28, 2022

By Order of the Board of Directors

Brian P. Hanigan

Secretary


Table of Contents

Table of Contents

 

PROXY SUMMARY

     1  

Corporate Social Responsibility and Sustainability

     5  

Proxy Statement for Annual Meeting of Stockholders

     8  

PROPOSAL 1 ELECTION OF DIRECTORS

     9  

Director Qualifications

     9  

Nominees for Director

     10  

Vote Required

     13  

Board Recommendation

     13  

CORPORATE GOVERNANCE

     14  

Director Independence

     14  

Board of Directors and its Committees

     14  

Compensation Committee Interlocks and Insider Participation

     16  

Identification of Director Candidates and Director Nomination Process

     16  

Board Leadership Structure

     17  

Board Evaluation Process

     17  

Board’s Role in Risk Oversight

     17  

Standards of Conduct

     18  

Certain Relationships and Related Person Transactions

     19  

Contacting the Board of Directors

     19  

DIRECTOR COMPENSATION

     20  

PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     23  

Independent Registered Public Accounting Firm Fees and Services

     23  

Audit Committee’s Pre-Approval Policies and Procedures

     24  

Vote Required

     24  

Board Recommendation

     24  

AUDIT COMMITTEE REPORT

     25  

COMPENSATION DISCUSSION AND ANALYSIS

     26  

Executive Summary

     26  

Determination of Executive Compensation and Performance Criteria

     30  

Elements of Our 2021 Executive Compensation Program

     31  

COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE REPORT

     41  

EXECUTIVE COMPENSATION

     42  

Summary Compensation Table

     42  

Grants of Plan-Based Awards for 2021

     43  

Outstanding Equity Awards at 2021 Fiscal Year-End

     45  

Option Exercises and Stock Vested During Fiscal 2021

     48  

Nonqualified Deferred Compensation

     49  

Potential Payments Upon Termination or Change of Control

     54  

CEO PAY RATIO DISCLOSURE

     55  

EQUITY COMPENSATION PLAN INFORMATION

     56  

DELINQUENT SECTION 16(A) REPORTS

     57  


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PROPOSAL 3 APPROVAL OF NAMED EXECUTIVE OFFICERS’ COMPENSATION, ON A NON-BINDING ADVISORY BASIS (“SAY-ON-PAY”)

     58  

Why You Should Approve Our Executive Compensation Program

     58  

Vote Required

     58  

Board Recommendation

     58  

PROPOSAL 4 APPROVAL OF AN AMENDMENT TO THE ENOVIS CORPORATION 2020 OMNIBUS INCENTIVE PLAN

     59  

Share Request Background

     59  

Highlights of the Amended 2020 Plan

     59  

Summary of Material Terms of the 2020 Plan

     60  

Share Usage

     63  

Federal Income Tax Consequences

     64  

Existing Plan Benefits to Named Executive Officers and Others

     66  

Registration with the SEC

     68  

Equity Compensation Plan Information

     68  

Why You Should Approve the Amendment to the Enovis Corporation 2020 Omnibus Incentive Plan

     68  

Vote Required

     68  

Board Recommendation

     68  

BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

     69  

GENERAL MATTERS

     71  

Outstanding Stock and Voting Rights

     71  

Stockholder Proposals and Nominations

     72  

Delivery of Documents to Stockholders Sharing an Address

     72  

Additional Information

     73  

Other Matters

     73  

Appendix A

     A-1  

Appendix B

     B-1  


Table of Contents

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.

Annual Meeting of Stockholders

 

   
Date and Time:   

Tuesday, June 7, 2022 at 3:00 p.m., Eastern Time

Location:   

Via live webcast at www.virtualshareholdermeeting.com/ENOV2022

Record Date:   

April 18, 2022

 

Availability of Proxy Materials – Use of Notice and Access

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on June 7, 2022: Our Annual Report to Stockholders and this Proxy Statement are available at www.proxyvote.com.

Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission, we have elected to provide stockholders access to our proxy materials primarily over the Internet. Accordingly, on or about April 28, 2022, we sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders entitled to vote at the Annual Meeting as of the close of business on April 18, 2022, the record date of the meeting. The Notice includes instructions on how to access our proxy materials over the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis.

Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

Who May Vote

You may vote if you were a stockholder of record at the close of business on April 18, 2022, the record date.

How to Cast Your Vote

You can vote by any of the following methods:

 

LOGO  

Via the internet (www.proxyvote.com) through June 6, 2022;

LOGO  

By telephone (1-800-690-6903) through June 6, 2022;

 

LOGO

 

 

By completing, signing and returning your proxy by mail in the envelope provided or to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NJ 11717 by June 6, 2022; or

 

 

Via virtual attendance and voting at the Annual Meeting. To attend the Annual Meeting, you must go to the meeting website at www.virtualshareholdermeeting.com/ENOV2022 and enter your control number. Once admitted, you may vote by following the instructions available on the meeting website. If you are a beneficial stockholder who owns shares in street name and have questions about your control number or how to obtain one, please contact the bank, broker or other nominee who holds your shares.

If you are a beneficial stockholder who owns your shares in street name, the availability of online or telephone voting may depend on the voting procedures of the organization that holds your shares.

 

    

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Voting Matters

We are asking you to vote on the following proposals at the Annual Meeting:

 

 Proposal    Board Vote Recommendation    Page Reference 
 Proposal 1 – Election of Directors    FOR each director nominee   
 Proposal 2 – Approval of Auditor    FOR    23 
 Proposal 3 – Say-on-Pay    FOR    58 
 Proposal 4 – Approval of amendment to Enovis Corporation  2020 Omnibus Incentive Plan    FOR    59 

Board and Governance Highlights

 

 

Balanced Board tenure with five new independent directors appointed since 2020

 

 

82% independent Board with four female and three racially or ethnically diverse directors

 

 

Amended Corporate Governance Guidelines in 2021 to further emphasize our commitment to seeking highly qualified female and minority director candidates, which had previously been codified in our Nominating and Corporate Governance Committee Charter

 

 

Amended the Compensation Committee charter to rename the Committee as the “Compensation and Human Capital Management Committee” (the “CHCM Committee”) and to reflect the Committee’s expanded oversight role of the Company’s strategies and policies related to the Company’s employees

 

 

Rigorous stock ownership requirements for officers and directors

 

 

Anti-hedging, anti-pledging, and clawback policies

 

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Board Nominees (page 10)

The following table provides summary information about each director nominee:

 

 Name   Age    Director
Since
   Occupation    Independent    Committee
Memberships
   Other Public Boards

 Mitchell P. Rales

  65    1995    Chairman of the Board, Enovis Corporation
Chairman of the Executive Committee, Danaher Corporation
   ü    N/A   

 Danaher Corporation

 ESAB Corporation

 Matthew L. Trerotola

  55    2015    President and Chief Executive Officer, Enovis Corporation       N/A    None

 Barbara W. Bodem(1)

  54    2022    Interim Chief Financial Officer, Dentsply Sirona Inc.    ü    Audit   

 Turning Point Therapeutics, Inc.

 Syneos Health, Inc.

 Liam J. Kelly

  56    2020    President and Chief Executive Officer, Teleflex Incorporated    ü    Nominating   

 Teleflex Incorporated

 Angela S. Lalor(1)

  56    2022    Senior Vice President – Human Resources, Danaher Corporation    ü    CHCM    None

 Philip A. Okala

  53    2021    Chief Operating Officer, University of Pennsylvania Health Systems    ü    Audit    None

 Christine Ortiz(1)

  51    2022    Morris Cohen Professor of Materials Science and Engineering at Massachusetts Institute of Technology    ü    Nominating   

 Mueller Water Products, Inc.

 A. Clayton Perfall

  63    2010    Operating Executive, Tailwind Capital    ü    Audit (Chair)    None

 Brady Shirley(1)

  56    2022    Chief Operating Officer, Enovis Corporation       N/A    None

 Rajiv Vinnakota

  51    2008    President, Institute for Citizens & Scholars (formerly the Woodrow Wilson National Fellowship Foundation)    ü   

CHCM

Nominating (Chair)

  

 ESAB Corporation

 Sharon Wienbar

  60    2016    Former Venture Partner, Scale Venture Partners    ü    CHCM (Chair)   

 Resideo Technologies, Inc.

 Covetrus, Inc.

 

(1)

In connection with the separation of Enovis Corporation and ESAB Corporation, which together previously formed Colfax Corporation, on April 4, 2022, Barbara Bodem, Angela Lalor, Christine Ortiz and Brady Shirley joined our Board, and Patrick W. Allender, Rhonda L. Jordan and Didier Teirlinck resigned from our Board and joined the Board of ESAB Corporation.

 

    

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Our eleven director nominees are comprised of current directors with diverse backgrounds, skills and experience, which the Board believes contributes to the effective oversight of the Company. The following charts summarize the diversity, skills and experience of our Board members:

 

 

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Skills and Attributes

 

LOGO

                          
  

Current or former CEO, CFO or COO

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    9/11  
                          
                               

LOGO

                          
  

Other public company board experience

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    7/11  
                          
                               

LOGO

                          
  

Related MedTech industry experience

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    9/11  
                          
                               
LOGO                           
  

Broad international experience

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    7/11  
                          
                               

LOGO

                          
  

Extensive M&A or capital markets experience

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    8/11  
                          
                               
                          

   LOGO   

  

Diverse (female or racially/ethnically diverse)

                       
 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    6/11  
                          
                               

LOGO

                          
  

Technology/IT/Innovation experience

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    7/11  
                          
                               

LOGO

                          
   Organizational management and leadership development  

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    11/11  
                          
                               

LOGO      LOGO

                          
   Finance, accounting or risk management experience  

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

 

    

    7/11  
                          

 

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Table of Contents

In accordance with the Company’s Amended and Restated Bylaws (the “Bylaws”), to be elected each director nominee must receive a majority of the votes cast with respect to that director’s election. Incumbent directors nominated for election by the Board are required, as a condition to such nomination, to submit a conditional letter of resignation to the Chairman of the Board. In the event that a nominee for director does not receive a majority of the votes cast at the Annual Meeting with respect to his or her election, the Board will promptly consider whether to accept or reject the conditional resignation of that nominee, or whether other action should be taken. The Board will then take action and will publicly disclose its decision and the rationale behind it no later than 90 days following the certification of election results.

Corporate Social Responsibility and Sustainability

Our corporate social responsibility (“CSR”) and sustainability program is organized around identifying, assessing and managing on an ongoing basis the environmental, social and governance (“ESG”) factors that are relevant to our long-term financial performance. Our sustainability program takes into account the interests of our key stakeholder constituencies, including our employees, customers, communities and stockholders. ESG issues that we focus on across the Company include workplace health and safety, energy efficiency, waste management, climate risk, human capital management, diversity and inclusion, supply chain management, business ethics and compliance, and data privacy and protection.

In March 2021, we published our inaugural CSR Report, which can be accessed on our website at www.enovis.com on the Investors page under the Corporate Governance Tab. Following our announcement in March 2021 of the planned separation of our medical technology and fabrication technology businesses into two independent public companies, each business began to plan for its own standalone CSR program tailored to its unique characteristics, priorities and stakeholders. At the same time, we continued to build on the progress we had made last year, as highlighted below.

The information on our website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings we make with the SEC.

 

 

 

LOGO

 

Governance; Community Involvement and Corporate Citizenship

 

We take ESG-related risks and opportunities into account in our strategic decision-making, both by the Board and management.

 

 

ESG matters are managed and monitored by senior management throughout the year. The Board exercises oversight over ESG matters at the full Board level and through our relevant committees.

 

 

Under its charter, our Nominating and Corporate Governance Committee is expressly tasked with reviewing the Company’s undertakings with respect to ESG matters, including our role as a corporate citizen and policies and programs relating to health, safety and sustainability matters. An ESG update is included as a standing agenda item at each Nominating and Corporate Governance Committee Meeting.

 

 

In 2020, we amended our Nominating and Corporate Governance Committee charter to further reflect our commitment to actively seeking out highly qualified women and minority director candidates, as well as candidates with diverse backgrounds, experiences and skills as part of each director search the Company undertakes. In 2021, we amended our Corporate Governance Guidelines to include the same commitment therein.

 

 

Our Audit Committee charter expressly tasks the Audit Committee with the review and oversight of the Company’s policies with respect to risk assessment and risk management related to information technology and cybersecurity.

 

 

At least once a quarter, management provides the Audit Committee with an update on cybersecurity. In 2021, at the direction of the Audit Committee, the Company engaged an external consulting firm to conduct a comprehensive information security assessment of the Company’s businesses. The results of the assessment were presented to the Audit Committee. The Company has developed action plans to implement recommended improvements and provides regular updates to the Audit Committee on its progress.

 

 

The Company maintains a robust information security training and compliance program, which includes, among other things, regular phishing awareness training.

 

    

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We recently amended the Compensation Committee charter to rename the Committee as the “Compensation and Human Capital Management Committee” and to reflect the Committee’s expanded oversight role of the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development and retention.

 

 

We believe in giving back to our communities and supporting other worthwhile initiatives that contribute to the betterment of society. We encourage all of our sites to participate in a “Creating Better in the Community Day.” The initiative is led by our local teams and employees are provided with an additional day of paid time off to participate.

 

 

After a one year hiatus due to the pandemic, we resumed our annual DJO Marine Open charitable golf outing in 2021, raising over $120,000 to benefit the Marine Corps Scholarship Foundation. Since its inception in 2003, this event has raised more than $1.5 million.

 

 

 

LOGO

 

Health, Safety and Environment

 

The protection of human health, personal safety and environmental quality rank at the highest level of importance to Enovis.

 

 

Our full Board reviews our safety initiatives at the start of each regularly scheduled board meeting.

 

 

In addition, our executive leadership team reviews safety matters with our site leaders on a regular and ongoing basis, and our safety initiatives and safety performance are discussed and highlighted with all Enovis associates at each quarterly town hall meeting.

 

 

From the outset of the COVID-19 global pandemic, maintaining the health and safety of our associates has been a top priority. We quickly implemented health and safety protocols based on CDC, WHO and other applicable guidelines at all of our sites. In addition, we established a robust communications and feedback plan, led by our executive COVID-19 crisis response team.

 

 

In 2021, we expanded our highly successful Summer of Safety program to a year-long campaign that focuses on a different safety topic each month of the year. This program is designed to increase awareness of safety risks at work and home, and to create an appropriate continuous reminder throughout the year. Key components of the program include:

 

 

CEO communications to announce the monthly focus area

 

 

Discussion topics and activities, which are incorporated into daily management meetings or other processes

 

 

Use of QR codes for feedback and safety improvement suggestions

 

 

We encourage our business units to set objectives for key environmental aspects, such as lowering energy and water use, and eliminating hazardous substances.

 

 

Our Enovis site in Austin, Texas was selected by the Austin Water Environmental Protection Division for the second year in a row to receive the Excellence in Pretreatment Award, which recognizes businesses who exhibit environmental stewardship by proactively preventing pollution and managing wastewater discharge.

 

 

 

LOGO

 

Human Capital; Diversity, Equity and Inclusion; Human Rights and Supply Chain

 

As an equal opportunity employer, we are committed to a diverse workforce.

 

 

We have strengthened our diversity, equity and inclusion (DE&I) programs to include a DEI Council, proactive training, affinity groups and an increased focus in recruiting and talent development.

 

 

We conduct an annual global associate engagement survey to gather associate feedback. We share the survey results with all associates, and managers conduct formal focus groups and discussions with their teams to implement action plans to address key areas for improvement.

 

 

We have publicly stated our commitment to respecting human rights across all of our business operations in accordance with the Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work.

 

LOGO

 

 

Without limiting the foregoing, we do not utilize or permit:

Child labor,

Forced labor, or

Other abusive or unsafe working conditions.

 

 

 

 

To further emphasize our commitment to human rights, we recently adopted a Global Human Rights Policy, which is available on our website at www.enovis.com on the Investors page under the Corporate Governance tab.

 

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Auditor Ratification (page 23)

We ask our stockholders to approve the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2022. Below is summary information about fees paid or due to be paid to Ernst & Young LLP for services provided in 2021 and 2020:

 

 Fee Category (fees in thousands)    2021        2020  

 Audit Fees

   $ 6,849        $ 5,575  

 Audit-Related Fees

     3,175           

 Tax Fees

     301          646  

 All Other Fees

              4  
     

 TOTAL

   $ 10,325        $ 6,225  

Executive Compensation (page 26)

We strive to create a compensation program for our associates, including our executives, that provides a compelling and engaging opportunity to attract, retain and motivate the best talent. We believe this results in performance-driven leadership that is aligned to achieve our financial and strategic objectives with the intention to deliver superior long-term returns to our stockholders. Our compensation program includes the following key features:

 

 

We link rewards to performance and foster a team-based approach by setting clear objectives that, if achieved, will contribute to our overall success;

 

 

We emphasize long-term stockholder value creation by using stock options and performance-based restricted stock units, in combination with a stock ownership policy, to deliver long-term compensation incentives while minimizing risk-taking behaviors that could negatively affect long-term results;

 

 

We set Annual Incentive Plan operational and financial performance targets based on the results of our Board’s strategic planning process and corporate budget, and provide payouts that vary significantly from year-to-year based on the achievement of those targets; and

 

 

We believe the design of our overall compensation program, as well as our internal controls and policies, serve to limit excessive risk-taking behavior, as described further on page 38.

Say-on-Pay: Advisory Vote to Approve the Compensation of our Named Executive Officers (page 58)

We are asking our stockholders to approve on an advisory basis the compensation of our named executive officers. We believe our compensation programs and practices are appropriate and effective in implementing our compensation philosophy, and our focus remains on linking compensation to performance while aligning the interests of management with those of our stockholders.

 

    

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Proxy Statement for Annual Meeting of Stockholders

 

 

 2022 Annual Meeting

 

 

We are furnishing this Proxy Statement (the “Proxy Statement”) in connection with the solicitation by the Board of Directors (the “Board”) of Enovis Corporation (hereinafter, “Enovis,” “we,” “us” and the “Company”) of proxies for use at the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, June 7, 2022, at 3:00 p.m. Eastern Time, and at any adjournments or postponements thereof. The Board has made this Proxy Statement and the accompanying Notice of Annual Meeting available on the Internet. We first made these materials available to the Company’s stockholders entitled to vote at the Annual Meeting on or about April 28, 2022.

 

 

 About Enovis Corporation

 

 

Enovis Corporation (formerly Colfax Corporation) is an innovation-driven medical technology growth company dedicated to developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows. Powered by a culture of continuous improvement, global talent and innovation, the Company’s extensive range of products, services and integrated technologies fuel active lifestyles in orthopedics and beyond.

On April 4, 2022, the Company completed its previously announced separation of its formerly owned fabrication technology business into an independent, publicly traded company, ESAB Corporation. Immediately following the separation, the Company effected its previously announced reverse stock split of all issued and outstanding shares of Enovis common stock at a one-for-three ratio. On April 5, 2022, Enovis common stock began trading on the New York Stock Exchange (NYSE) under the symbol ENOV.

Our principal executive office is located at 2711 Centerville Road, Suite 400, Wilmington, DE 19808. Our telephone number is (302) 252-9160 and our website is located at enovis.com.

Any references herein to “Colfax” refer to the Company as it existed prior to the separation.

 

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Proposal 1    Election of Directors

Eleven director nominees will be elected at the Annual Meeting, each to serve until the next annual meeting of the Company and until his or her successor is duly elected and qualified. At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the following persons to serve as directors for the term beginning at the Annual Meeting on June 7, 2022: Mitchell P. Rales, Matthew L. Trerotola, Barbara W. Bodem, Liam J. Kelly, Angela S. Lalor, Philip A. Okala, Christine Ortiz, A. Clayton Perfall, Brady Shirley, Rajiv Vinnakota, and Sharon Wienbar. All nominees are currently serving on the Board.

Director Qualifications

 

 

 Nominating Committee Criteria for Board Members

 

 

The Nominating and Corporate Governance Committee considers, among other things, the following criteria in selecting and reviewing director nominees:

 

 

personal and professional integrity;

 

 

skills, business experience and industry knowledge useful to the oversight of the Company based on the perceived needs of the Company and the Board at any given time;

 

 

the ability and willingness to devote the required amount of time to the Company’s affairs, including attendance at Board and committee meetings;

 

 

the interest, capacity and willingness to serve the long-term interests of the Company and its stockholders; and

 

 

the lack of any personal or professional relationships that would adversely affect a candidate’s ability to serve the best interests of the Company and its stockholders.

Pursuant to its charter, the Nominating and Corporate Governance Committee also reviews, among other qualifications, the perspective, broad business judgment and leadership, business creativity and vision, and diversity of potential directors, all in the context of the needs of the Board at that time. We believe that Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, and ethnicity, and we seek independent directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions.

The charter of the Nominating and Corporate Governance Committee affirmatively recognizes diversity as one of the criteria for consideration in the selection of director nominees, and in its deliberations and discussions concerning potential director appointments the Nominating and Corporate Governance Committee has paid particular attention to diversity together with all other qualifying attributes. The Nominating and Corporate Governance Committee is committed to actively seeking out highly qualified women and minority director candidates, as well as candidates with diverse backgrounds, experiences and skills, as part of each director search that our Company undertakes. In addition, the Nominating and Corporate Governance Committee annually considers its effectiveness in achieving these objectives as a part of its assessment of the overall composition of the Board and as part of the annual Board evaluation process described further below, which includes a director skills matrix to identify areas of director knowledge and experience that may benefit the Board in the future. That information is used as a part of the director search and nomination process. The Nominating and Corporate Governance Committee looks for candidates with the expertise, skills, knowledge and experience that, when taken together with that of other members of the Board, will lead to a Board that is effective, collegial and responsive to the needs of the Company.

 

 

 Board Member Service

 

 

The biographies of each of the nominees below contain information regarding the experiences, qualifications, attributes or skills that the Nominating and Corporate Governance Committee and the Board considered in determining that the person should serve as a director

 

    

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of the Company. The Board has been informed that all of the nominees listed below are willing to serve as directors, but if any of them should decline or be unable to act as a director, the individuals named in the proxies may vote for a substitute designated by the Board, or the Board may determine to reduce the size of the Board. The Company has no reason to believe that any nominee will be unable or unwilling to serve.

In determining to nominate Ms. Bodem for election, the Nominating and Corporate Governance Committee and the Board took into account that Ms. Bodem has recently agreed to serve as interim chief financial officer of Dentsply Sirona Inc. (“Dentsply”). The Nominating and Corporate Governance Committee and Board determined that, as a result of Ms. Bodem’s extensive experience in the medical technology industry, including her finance and audit committee experience, her service on the Board provides valuable knowledge and skills as the Company works to create a high-value, high-growth medtech business, and therefore that she should be nominated for re-election to the Board. In reaching this conclusion, the Nominating and Corporate Governance Committee noted particularly that Ms. Bodem’s role at Dentsply is temporary, that Dentsply has initiated a search to identify a permanent chief financial officer, and that Ms. Bodem has informed Dentsply that she does not wish to be considered as a candidate for the permanent chief financial officer position.

Nominees for Director

The names of the nominees for director, their ages as of April 27, 2022, principal occupations, employment and other public company board service during at least the last five years, periods of service as a director of the Company, and the experiences, qualifications, attributes and skills of each nominee are set forth below:

 

   MITCHELL P. RALES
   

Age 65

 

Director since: 1995

 

CHAIRMAN OF THE BOARD

 

INDEPENDENT

 

Committees:

 

  None

  

Mitchell P. Rales is a co-founder of the Company and has served as a director of the Company since its founding in 1995. He is the Chairman of our Board of Directors. Mr. Rales is a co-founder and has served as a member of the board of directors of Danaher Corporation, a global science and technology company, since 1983 and as Chairman of Danaher’s Executive Committee since 1984, and also served as a member of the board of directors of Fortive Corporation, a diversified industrial growth company that was spun-off from Danaher, from 2016 to June 2021. He has been a principal in a number of private business entities with interests in manufacturing companies and publicly traded securities for over 25 years. Mr. Rales was instrumental in the founding of our Company and has played a key leadership role on our Board since that time. He helped create the Danaher Business System, on which the Enovis Growth Excellence (EGX) Business System is modeled, and has provided critical strategic guidance to the Company during its development and growth. In addition, as a result of Mr. Rales’ substantial ownership stake in our Company, he is well-positioned to understand, articulate and advocate for the rights and interests of the Company’s stockholders.

 

 

   MATTHEW L. TREROTOLA
   

Age 55

 

Director since: 2015

 

Committees:

 

None

  

Matthew L. Trerotola has been our President and Chief Executive Officer and has served as a director of the Company since July 2015. Prior to joining the Company, Mr. Trerotola was an Executive Vice President and a member of DuPont’s Office of the Chief Executive, responsible for DuPont’s Electronics & Communications and Safety & Protection segments. Mr. Trerotola also had corporate responsibility for DuPont’s Asia-Pacific business. Many of Mr. Trerotola’s roles at DuPont involved applying innovation to improve margins and accelerate organic growth in global businesses. Prior to rejoining DuPont in 2013, Mr. Trerotola had served in leadership roles at Danaher since 2007, and was most recently Vice President and Group Executive for Life Sciences. Previously, Mr. Trerotola was Group Executive for Product Identification from 2009 to 2012, and President of the Videojet business from 2007 to 2009. While at McKinsey & Company from 1995 to 1999, Mr. Trerotola focused primarily on helping industrial companies accelerate growth. Mr. Trerotola’s day-to-day leadership of the Company, combined with his significant international business experience and familiarity with EGX, gives the Board an invaluable Company-focused perspective supplemented by his global operational expertise.

 

 

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   BARBARA W. BODEM
   

Age 54

 

Director since: 2022

 

INDEPENDENT

 

Committees:

 

Audit

  

Barbara W. Bodem has served as a director of the Company since April 4, 2022. Ms. Bodem currently serves as Interim Chief Financial Officer at Dentsply Sirona Inc., a role she accepted in April 2022 to support Dentsply on a short-term basis as it completes its search for a permanent chief financial officer. She previously served as Senior Vice President and Chief Financial Officer at Hillrom, a global medical technology company, from 2018 until its acquisition by Baxter International Inc. in 2021, and as the Senior Vice President of Finance at Mallinckrodt Pharmaceuticals, a pharmaceutical manufacturer, from 2015 to 2018. Ms. Bodem has also served in senior finance roles for Hospira, Inc. and Eli Lilly & Company. She currently serves as a director of Turning Point Therapeutics, Inc., a clinical-stage precision oncology company, where she is chair of the audit committee and a member of the compensation committee, and Syneos Health, Inc., an integrated biopharmaceutical solutions company, where she is a member of the audit committee. Ms. Bodem received both her Bachelor of Science in Finance and MBA from Indiana University. Ms. Bodem’s extensive experience in the medical technology industry, as well as her experience as a public company chief financial officer and as an audit committee member on other public company boards, is a significant asset to our Board and Audit Committee.

 

 

   LIAM J. KELLY
   

Age 56

 

Director since: 2020

 

INDEPENDENT

 

Committees:

 

 Nominating and Corporate Governance

  

Liam J. Kelly has served as a director of the Company since January 1, 2020. Mr. Kelly has served as the Chairman, President and Chief Executive Officer of Teleflex Incorporated, a global provider of medical technology products, since May 1, 2020. Prior to that Mr. Kelly held the office of President and Chief Executive Officer of Teleflex since January 1, 2018. Since joining Teleflex in 2009, Mr. Kelly has held a variety of senior leadership roles. From May 2016 to December 2017, Mr. Kelly served as Teleflex’s President and Chief Operating Officer and from April 2015 to April 2016, he served as Executive Vice President and Chief Operating Officer. Prior to joining Teleflex, Mr. Kelly held various senior level positions with Hill-Rom Holdings, Inc., a medical device company, from October 2002 to April 2009, serving as its Vice President of International Marketing and R&D from August 2006 to February 2009. As a result of his significant experience in the medical technology industry, Mr. Kelly brings a valuable perspective to our Board.

 

 

   ANGELA S. LALOR
   

Age 56

 

Director since: 2022

 

INDEPENDENT

 

Committees:

 

  CHCM

  

Angela S. Lalor has served as a director of the Company since April 4, 2022. Ms. Lalor served as Senior Vice President, Human Resources, of Danaher Corporation from 2012 until April 1, 2022, when she moved into an advisory role at Danaher until her planned retirement in the first quarter of 2023. Prior to Danaher, Ms. Lalor served at 3M for 22 years in a series of roles of progressive responsibility, including her final role as Senior Vice President of Human Resources for the company. Ms. Lalor holds a B.A. in Psychology from University of Northern Iowa and an M.A. in Industrial Relations and Human Resources from the University of Iowa. Ms. Lalor’s experience as a global human resources leader for two public companies that have significant international operations and portfolios of healthcare businesses brings a valuable perspective to our Board. In addition, Ms. Lalor’s experience in leading organizational and talent strategy and development programs at Danaher will be a significant asset to the Compensation and Human Capital Management Committee of the Board.

 

 

   PHILIP A. OKALA
   

Age 53

 

Director since: 2021

 

INDEPENDENT

 

Committees:

 

  Audit

  

Philip A. Okala has served as a director of the Company since February 22, 2021. Mr. Okala has served as the Chief Operating Officer of the University of Pennsylvania Health Systems, a network of leading hospitals and associated care facilities serving Philadelphia County and the surrounding area, since 2017. Prior to this role, Mr. Okala held various positions with Penn Medicine since 2007, including serving as Senior Vice President for Business Development from 2013 to 2017. Before joining Penn Medicine, Mr. Okala held various positions with other healthcare organizations including System Vice President of the Cancer Service Line at Geisinger Health System, Vice President for Clinical Strategic Planning at Roswell Park Cancer Institute and management positions at the University of Texas MD Anderson Cancer Center. He is a Fellow in the American College of Healthcare Executives and currently serves on the boards of the Hospital and Healthsystem Association of Pennsylvania, Holy Child School at Rosemont and Vizient Mid-Atlantic Region. Mr. Okala’s experience as a hospital executive who has led major health system initiatives for strategic marketing positioning, overseen the expansion of clinical service lines and facilitated the growth of the Penn Medicine health system, including through successful mergers and strategic alliances, brings an important perspective to our Board.

 

 

    

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   CHRISTINE ORTIZ
   

Age 51

 

Director since: 2022

 

INDEPENDENT

 

Committees:

 

 Nominating and Corporate Governance

  

Dr. Christine Ortiz has served as a director of the Company since April 4, 2022. Dr. Ortiz is the Morris Cohen Professor of Materials Science and Engineering at the Massachusetts Institute of Technology, where she has made pioneering advancements in the areas of biotechnology, biomaterials, and nanotechnology. The author of more than 200 scholarly publications, she has supervised research projects across multiple academic disciplines, received 30 national and international honors, including the Presidential Early Career Award in Science and Engineering awarded to her by President George W. Bush, and served as the Dean for Graduate Education at MIT from 2010 to 2016. She is the founder of an innovative, nonprofit, post-secondary educational institution, Station1. Dr. Ortiz earned a Bachelor of Science degree from Rensselaer Polytechnic Institute and a Master of Science degree and a Doctor of Philosophy degree from Cornell University, each in the field of materials science and engineering. She also serves as a director of Mueller Water Products, a publicly traded water infrastructure and technology company. Dr. Ortiz’s deep knowledge of cutting-edge developments in biotechnology and biomaterials brings a valuable perspective to the Board and the Company’s focus on innovative medical technologies.

 

 

   A. CLAYTON PERFALL
   

Age 63

 

Director since: 2010

 

INDEPENDENT

 

Committees:

 

 Audit (Chair)

  

A. Clayton Perfall has served as a director of the Company since September 21, 2010. He is currently an Operating Executive of Tailwind Capital, a private equity fund manager focused on growing middle market companies in the Healthcare, Technology, Business Services and Industrial services sectors. He previously served as the Chairman and Chief Executive Officer of Archway Marketing Services, Inc., a provider of marketing logistics and fulfillment services, from 2008 through 2013. From 2001 until 2008 Mr. Perfall served as the Chief Executive Officer and as a member of the board of directors of AHL Services, Inc. Mr. Perfall also served as the Chief Executive Officer of Union Street Acquisition Corp. from 2006 until 2008. He served as the Chief Financial Officer of Snyder Communications, Inc. from 1996 until 2000 and was previously a partner with a large international accounting firm. Mr. Perfall currently serves on the board of directors of the private company Distinct Holdings Group, LLC and previously served on the boards of directors of Comstock Holding Companies, Inc. from 2004 to 2018, Tailwind Premier Holdings, LLC from 2015 until 2019, Archway Marketing Services, Inc. from 2008 until 2013, RT Acquisition Corp. from 2012 until 2015 and inVentiv Health, Inc. from 1999 to 2010. He served as the audit committee chairman for Comstock Holding Companies, Inc. and InVentiv Health during his time on those boards. Mr. Perfall’s significant financial expertise and experience as an audit committee chairman and public company chief financial officer, combined with his substantial executive leadership background, are assets to both our Board and our Audit Committee.

 

 

   BRADY SHIRLEY
   

Age 56

 

Director since: 2022

 

Committees:

 

 None

  

Brady Shirley has served as a director of the Company since April 4, 2022. He has served as the Company’s Chief Operating Officer since 2019 and as Chief Executive Officer of DJO (the Company’s former medical technology segment) since November 2016. Prior to this, Mr. Shirley served as the President of the DJO Surgical business, a position he was appointed to in March of 2014. From 2009 to 2013, Mr. Shirley was the CEO and Director of Innovative Medical Device Solutions (“IMDS”), a company that provides comprehensive product development, manufacturing and supply chain management solutions for medical device companies within the orthopedic medical device industry. At IMDS, Mr. Shirley managed the integration of four companies, consolidated the capital structure and led a successful sale of the business in 2013. From December 1992 to August 2009, Mr. Shirley had several key leadership positions with Stryker Corporation, including President of Stryker Communications and Senior Vice President of Stryker Endoscopy. Mr. Shirley received a Bachelor of Business Administration in Finance from the University of Texas, Austin. Given his experience at DJO and knowledge of our Company, Mr. Shirley brings invaluable experience to the Board.

 

 

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   RAJIV VINNAKOTA
   

Age 51

 

Director since: 2008

 

INDEPENDENT

 

Committees:

 

 Nominating and Corporate Governance (Chair)

 

 CHCM

  

Rajiv Vinnakota has served as a director of the Company since May 13, 2008. Since July 2019, he has served as President of the Institute for Citizens & Scholars (formerly the Woodrow Wilson National Fellowship Foundation), a 75 year-old non-profit organization that has played a significant role in shaping higher education. With an expanded mission, Citizens & Scholars is now rebuilding how we develop citizens in our country. From 2015 to September 2018 he was an Executive Vice-President at the Aspen Institute, leading a division focused on youth and engagement. Prior to this role, Mr. Vinnakota was the Co-Founder and Chief Executive Officer of The SEED Foundation, a non-profit educational organization, at which he served from 1997 to 2015. Mr. Vinnakota was the chairman of The SEED Foundation board from 1997 until 2006. Prior to co-founding SEED, Mr. Vinnakota was an associate at Mercer Management Consulting. He was also a trustee of Princeton University from 2004 until 2007 and a member of the Executive Committee of the Princeton University board of directors from 2006 to 2007, and he served as the national chairman of Annual Giving at Princeton from 2007 until 2009. Mr. Vinnakota’s management experience, combined with his experience in the non-profit sector, brings a valuable perspective to our Board.

 

 

   SHARON WIENBAR
   

Age 60

 

Director since: 2016

 

INDEPENDENT

 

Committees:

 

 CHCM (Chair)

  

Sharon Wienbar has served as a director of the Company since June 15, 2016. She was previously with Scale Venture Partners, a venture capital firm, from 2001 to 2018, where she led investments in technology companies and served on the board of numerous portfolio businesses. She was also a strategy consultant to Capella Education Company after it acquired Hackbright Academy, a leading software engineering training company for women, where she was the CEO from 2015 to 2016. Ms. Wienbar currently serves on the boards of Resideo Technologies, Inc., a New York Stock Exchange-listed public company, Covetrus, Inc. a Nasdaq-listed public company, and True Anthem, a privately held software provider. She previously served on other public and private boards, including the board of Everyday Health, Inc., a New York Stock Exchange-listed public company, until its acquisition in December 2016. Prior to her venture capital career, Ms. Wienbar was an executive in several software companies and a consultant at Bain & Company. Ms. Wienbar’s leadership of technology investments, deep understanding of innovation drivers, and business acumen bring an important perspective to our Board.

 

Vote Required

The affirmative vote of the holders of a majority of the votes cast is required for election of each director.

Board Recommendation

 

 

The Board unanimously recommends that stockholders vote FOR the election of each of the nominees for director listed above.

 

 

    

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CORPORATE GOVERNANCE

Director Independence

Our Corporate Governance Guidelines require that a majority of our Board members be “independent” under the NYSE’s listing standards. In addition, the respective charters of the Audit Committee, Compensation and Human Capital Management Committee and Nominating and Corporate Governance Committee require that each member of these committees be “independent” under the NYSE’s listing standards and, with respect to the Audit Committee, under the applicable heighted independence standards under the SEC rules. In order for a director to qualify as “independent,” our Board must affirmatively determine that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) that would impair the director’s independence. Our Board undertook its annual review of director independence in February 2022. The Board has determined that Mr. Rales, Ms. Bodem, Mr. Kelly, Ms. Lalor, Mr. Okala, Dr. Ortiz, Mr. Perfall, Mr. Vinnakota, and Ms. Wienbar each qualify as “independent” under the NYSE’s listing standards. The Board has also determined that Mr. Allender, Mr. Gayner, Ms. Jordan, and Mr. Teirlinck were independent during the time each served as directors. In reaching a determination on these directors’ independence, the Board considered that during fiscal 2021 Mr. Kelly and Mr. Okala were employed by organizations that do business with the Company. The amount received by the Company or such other organization in each of the last three fiscal years did not exceed the greater of $1 million or 1% of either the Company’s or such organization’s consolidated gross revenues. Additionally, in assessing Mr. Rales’ independence in 2022, the Board took into account that, although Mr. Rales is a founder and significant stockholder of the Company, he has never served as an employee of the Company (including its predecessor) and is not otherwise involved in managing the daily business operations of the Company. Accordingly, the Board concluded that Mr. Rales is independent under NYSE’s listing standards. None of the other independent directors nor their immediate family members have within the past three years had any direct or indirect business or professional relationships with the Company other than in their capacity as directors.

The independent members of our Board must hold at least two “executive session” meetings each year without the presence of management. In general, the meetings of independent directors are intended to be used as a forum to discuss such topics as they deem necessary or appropriate. If the Chair of the Board is not an independent director, the independent directors select an independent director to serve as Chairperson for each executive session. During 2021, Mr. Allender served as the presiding director of the independent director executive sessions. Going forward, Mr. Rales, as independent Chair, will serve as the presiding director of the independent director executive sessions and as such will lead the independent directors during these sessions.

Board of Directors and its Committees

The Board and its committees meet regularly throughout the year, and may also hold special meetings and act by written consent from time to time. The Board held a total of nine meetings during the year ended December 31, 2021. During 2021, all of our directors attended at least seventy-five percent of the aggregate Board meetings and meetings of the committees of the Board on which such directors served (during the periods that he or she served). Our Corporate Governance Guidelines request Board members to make every effort to attend our annual meeting of stockholders. All of our directors then serving at the time attended our annual meeting of stockholders in 2021.

 

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The Board has a standing Audit Committee, Compensation and Human Capital Management Committee, and Nominating and Corporate Governance Committee. The charters for the Audit Committee, Compensation and Human Capital Management Committee, and Nominating and Corporate Governance Committee are available on the Company’s website at www.enovis.com on the Investors page under the Corporate Governance tab. These materials also are available in print to any stockholder upon request to: Corporate Secretary, Enovis Corporation, 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The Board committees review their respective charters on an annual basis. The Nominating and Corporate Governance Committee oversees an annual evaluation of the Board and each committee’s operations and performance, as described in greater detail below.

 

  Name    Audit
Committee
   Nominating and Corporate
Governance Committee
   Compensation and Human Capital
Management Committee

  Mitchell P. Rales

        

  Matthew L. Trerotola

        

  Barbara W. Bodem

   ü      

  Liam J. Kelly

      ü   

  Angela S. Lalor

         ü

  Philip A. Okala

   ü      

  Christine Ortiz

      ü   

  A. Clayton Perfall

   LOGO      

  Brady R. Shirley

        

  Rajiv Vinnakota

      LOGO    ü

  Sharon Wienbar

             LOGO

 

LOGO

Chair

ü

Member

 

 

Audit Committee

 

 

Our Audit Committee met seven times during the year ended December 31, 2021. The Audit Committee is responsible, among its other duties and responsibilities, for overseeing our accounting and financial reporting processes, the audits of our financial statements, the qualifications of our independent registered public accounting firm, the performance of our internal audit function and independent registered public accounting firm, and the Company’s policies with respect to risk assessment and risk management related to information technology and cybersecurity. The Audit Committee reviews and assesses the qualitative aspects of our financial reporting, our processes to manage business and financial risks, and our compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. The members of our Audit Committee are Mr. Perfall, Chair, Mr. Okala, and Ms. Bodem. Mr. Okala and Ms. Bodem were each appointed to the Audit Committee on April 4, 2022. The Board has determined that each of Mr. Perfall, Mr. Okala and Ms. Bodem qualifies as an “audit committee financial expert,” as that term is defined under the SEC rules. The Board has determined that each member of our Audit Committee is independent and financially literate under the NYSE’s listing standards and that each member of our Audit Committee is independent under the standards of Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”).

 

 

Nominating and Corporate Governance Committee

 

 

Our Nominating and Corporate Governance Committee met five times during the year ended December 31, 2021. The Nominating and Corporate Governance Committee is responsible for recommending candidates for election to the Board. In making its recommendations, the committee will review a candidate’s qualifications and any potential conflicts of interest and assess contributions of current directors in connection with his or her renomination. The committee is also responsible, among its other duties and responsibilities, for making recommendations to the Board or otherwise acting with respect to corporate governance policies and practices, including Board size and membership qualifications, new director orientation, committee structure and membership, related person transactions, and communications with stockholders and other interested parties. The Nominating and Corporate Governance Committee is also responsible for reviewing the Company’s undertakings with respect to environmental, social, and governance matters, including the Company’s role as a corporate citizen and the Company’s policies and programs relating to health, safety and

 

    

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sustainability matters. The members of our Nominating and Corporate Governance Committee are Mr. Vinnakota, Chair, Mr. Kelly and Dr. Ortiz, who was appointed to the Nominating and Corporate Governance Committee on April 4, 2022. The Board has determined that each member of our Nominating and Corporate Governance Committee is independent under the NYSE’s listing standards.

 

 

Compensation and Human Capital Management Committee

 

 

Our CHCM Committee met six times during the year ended December 31, 2021. The members of our CHCM Committee are Ms. Wienbar, Chair, Mr. Vinnakota, and Ms. Lalor, who was appointed to the CHCM Committee on April 4, 2022. The Board has determined that each member of our CHCM Committee is a “non-employee director” within the meaning of SEC Rule 16b-3, and is independent under the NYSE’s listing standards for directors and compensation committee members.

The CHCM Committee is responsible, among its other duties and responsibilities, for determining and approving the compensation and benefits of our Chief Executive Officer and other executive officers, monitoring compensation arrangements applicable to our Chief Executive Officer and other executive officers in light of their performance, effectiveness and other relevant considerations and adopting and administering our equity and incentive plans. Specifically, the CHCM Committee annually reviews and approves the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates his performance in light of those goals and objectives, and determines his compensation level based on that analysis. The CHCM Committee also annually reviews and approves all elements of the compensation of our other executive officers. Our Chief Executive Officer plays a significant role in developing and assessing achievement against the goals and objectives for other executive officers and makes compensation recommendations to the CHCM Committee based on these evaluations. The CHCM Committee also administers all of the Company’s management incentive compensation plans and equity-based compensation plans. The CHCM Committee makes recommendations to the Board regarding compensation of all executive officer hires, all elements of director compensation, and the adoption of certain amendments to incentive or equity-based compensation plans. The CHCM Committee also assists the Board in its oversight of risk related to the Company’s compensation policies and practices applicable to all Enovis associates. Additionally, the CHCM periodically reviews the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development and retention. For further information on our compensation practices, including a description of our processes and procedures for determining compensation, the scope of the CHCM Committee’s authority and management’s role in compensation determinations, please see the Compensation Discussion and Analysis section of this Proxy Statement, which begins on page 26.

Since April 2009, our CHCM Committee has engaged Frederic W. Cook & Co. as its independent compensation consultant to, among other things, formulate an appropriate peer group to be used by the CHCM Committee and to provide competitive comparison data and for other compensation consulting services as requested by the CHCM Committee. Additional information on the nature of the information and services provided by this independent compensation consultant can be found below in the Compensation Discussion and Analysis.

Compensation Committee Interlocks and Insider Participation

No member of the CHCM Committee is or has ever been an officer or an employee of the Company or any of its subsidiaries, and no CHCM Committee member has any interlocking or insider relationship with the Company which is required to be reported under the rules of the SEC.

Identification of Director Candidates and Director Nomination Process

The Nominating and Corporate Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as by management and stockholders. The Nominating and Corporate Governance Committee may also use outside consultants to assist in identifying candidates and during 2021 used third-party search firms to identify and provide background information on possible candidates. Dr. Ortiz and Ms. Bodem were first recommended to the Nominating and Corporate Governance Committee by third-party search firms, and Ms. Lalor was first identified to the Nominating and Corporate Governance Committee by non-management members of the Board and subsequently recommended following a review by a third-party search firm. The Nominating and Corporate Governance Committee is responsible for assessing whether a candidate may qualify as an independent director. Each possible candidate is discussed and evaluated in detail before being recommended to the Board. The Nominating and Corporate Governance Committee utilizes the same criteria for evaluating candidates regardless of the source of the referral.

The Nominating and Corporate Governance Committee recommends, and the Board nominates, candidates to stand for election as directors. Stockholders may nominate persons to be elected as directors and, as noted above, may suggest candidates for

 

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consideration by the Nominating and Corporate Governance Committee. If a stockholder wishes to suggest a person to the Nominating and Corporate Governance Committee for consideration as a director candidate, he or she must provide the same information as required of a stockholder who intends to nominate a director pursuant to the procedures contained in Section 3.3 of our Bylaws, in accordance with the same deadlines applicable to director nominations, as described below under “General Matters—Stockholder Proposals and Nominations.”

Board Leadership Structure

Our Corporate Governance Guidelines specify that the positions of Chairman of the Board and Chief Executive Officer shall be held by separate persons. We believe that this structure is appropriate given the differences between the two roles in our current management structure. Our Chief Executive Officer, among other duties, is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of our Board, among other responsibilities, provides guidance to the Chief Executive Officer, takes an active role in setting the agenda for Board meetings and presides over meetings of the full Board.

Board Evaluation Process

The Board and its committees conduct self-assessments annually at their February meetings. The Nominating and Corporate Governance Committee oversees the process. The annual evaluation procedure is summarized below.

 

Action and Timeframe

   Description

Preparation – November/December

  

Each director receives draft materials for the annual evaluation of (i) the Board’s performance and (ii) the performance of his or her committee(s). The materials include the Board and committee self-assessment questionnaires. In advance of the assessment, questions are revised and supplemented based on the input received from the Board members and, prior to distribution, the Chair of the Nominating and Corporate Governance Committee leads a final review in the December Board and committee meetings.

Assessment – December/January

  

Each director is asked to consider a list of questions to assist with the evaluation of the Board and its committees, covering topics such as Board composition, the conduct and effectiveness of meetings, quality of discussions, roles and responsibilities, quality and quantity of information provided, and other opportunities for improvement.

Review and Discussion – February

  

The Board and its committees receive a report summarizing the annual evaluations as well as a year-over-year comparison. The reports are distributed for consideration in advance of and discussed at the February Board meeting. The committee chairs report to the Board on their respective committee evaluations, noting any actionable items. Past evaluations have addressed a wide range of topics such as Board materials, Board composition, director education and on-boarding, and allocation of meeting times.

Actionable Items and Follow-Up – Ongoing

  

The Board and committees address any actionable items throughout the year, including a mid-year check-in and end of year assessment against the actionable items identified in February.

Board’s Role in Risk Oversight

The Board maintains responsibility for oversight of risks that may affect the Company. The Board discharges this duty primarily through its standing committees and also considers risk in its strategic planning for the Company and in its consideration of acquisitions. The Board engages in discussions about risk at each quarterly meeting, where it receives reports from its committees, as applicable, about the risk oversight activities within their respective areas of responsibility. Specifically, the Audit Committee (i) receives reports from and discusses with management, our internal audit team, and our independent registered public accounting firm all major risk exposures (whether financial, operating or otherwise), (ii) reviews the Company’s policies with respect to risk assessment and enterprise risk management, including with respect to cybersecurity risks, and (iii) oversees compliance with legal and regulatory requirements and our ethics program, including our Code of Business Conduct and Ethics. In addition, the Nominating and Corporate Governance Committee oversees the corporate governance principles and governance structures that contribute to successful risk oversight and management. The CHCM Committee oversees certain risks associated with compensation policies and practices, as discussed below.

 

    

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The Audit, Nominating and Corporate Governance and CHCM Committees each make full reports to the Board of Directors at each regularly scheduled meeting regarding each committee’s considerations and actions, and risk considerations are presented to and discussed with the Board by management as part of strategic planning sessions and when considering potential acquisitions.

Standards of Conduct

 

 

 Corporate Governance Guidelines and Pledging

 

 

The Board has adopted Corporate Governance Guidelines, which set forth a framework to assist the Board in the exercise of its responsibilities. The Corporate Governance Guidelines cover, among other things, the composition and certain functions of the Board and its committees, executive sessions, Board responsibilities, expectations for directors, director orientation and continuing education, and our policy prohibiting pledging.

In February 2014, the Board amended the Corporate Governance Guidelines to prohibit any future pledging of Company common stock as security under any obligation by our directors and executive officers. The Board excepted from the policy shares of Company common stock that were already pledged at the time the policy was adopted, but any additional share pledges are prohibited. Pledged shares of Company common stock do not count toward our stock ownership requirements.

Certain shares of common stock owned by Mitchell Rales, Chairman of our Board, that were pledged at the time that the policy was adopted were grandfathered from the policy. Notwithstanding that the existing pledge was grandfathered under our policy, as part of its risk oversight function the Audit Committee of the Board reviews Mr. Rales’ share pledges on a quarterly basis to assess whether such pledging poses an undue risk to the Company. In evaluating Mr. Rales’ pledge of Company shares, the Audit Committee considered that Mr. Rales acquired these shares with his own funds in connection with founding the Company and did not receive them as compensation from the Company; that, as a founder of the Company and dedicated long-term stockholder, he has (as with many institutional stockholders) pledged a portion of his shares instead of selling shares for liquidity; and that Mr. Rales, as a founder or significant investor in other public companies (including Danaher Corporation and Fortive Corporation), has significant personal assets. In addition to taking into account the number of shares and percentage of outstanding shares pledged, the Audit Committee has also considered the degree of overcollateralization (the amount by which the market value of the shares pledged as collateral exceeds the amount of secured indebtedness), as the Committee believes this is a key factor in assessing the degree of risk posed by the pledging arrangements. Based on its evaluation, the Committee has concluded that the existing pledge arrangements do not pose an undue risk to the Company. The Audit Committee will continue to periodically review the shares pledged as part of its risk oversight function.

 

 

Code of Business Conduct and Ethics

 

 

As part of our system of corporate governance, the Board has also adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), that is applicable to all directors, officers and employees of the Company. The Code of Ethics sets forth Company policies, expectations and procedures on a number of topics, including but not limited to conflicts of interest, compliance with laws, rules and regulations (including insider trading laws), honesty and ethical conduct, and quality. The Code of Ethics also sets forth procedures for reporting violations of the Code of Ethics and investigations thereof. If the Board grants any waivers from our Code of Ethics to any of our directors or executive officers, or if we amend our Code of Ethics, we will, if required, disclose these matters through our website within four business days following such waiver or amendment.

 

 

Policies on Insider Trading, Hedging and Stock Ownership

 

 

The Company has a Policy on Insider Trading and Compliance which, in addition to mandating compliance with insider trading laws, prohibits any director, officer or employee of the Company from engaging in short sales, transactions in derivative securities (including put and call options), or other forms of hedging and monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, that allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities. Further, we have stock ownership policies applicable to our directors and executives to promote alignment of interests between our stockholders, directors and management, as described in greater detail further in this proxy statement

 

 

Where to Find Our Key Governance Policies

 

 

The Corporate Governance Guidelines and Code of Ethics are available on the Company’s website at www.enovis.com on the Investors page under the Corporate Governance tab. These materials also are available in print to any stockholder upon request to: Corporate Secretary, Enovis Corporation, 2711 Centerville Road, Suite 400, Wilmington, DE 19808.

 

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Certain Relationships and Related Person Transactions

 

 

Policies and Procedures for Related Person Transactions

 

 

We have adopted a written Policy Regarding Related Person Transactions pursuant to which our Nominating and Corporate Governance Committee or a majority of the disinterested members of our Board generally must approve related person transactions in advance. The policy applies to any transaction or series of similar transactions involving more than $120,000 in which the Company is a participant and in which a “related person” has a direct or indirect material interest. “Related persons” include the Company’s directors, nominees for director, executive officers, and greater than 5% stockholders, as well as the immediate family members of the foregoing. In approving or rejecting the proposed transaction, our Nominating and Corporate Governance Committee takes into account, among other factors it deems appropriate, whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the person’s interest in the transaction and, if applicable, the impact on a director’s independence. Under the policy, if we discover related person transactions that have not been approved, the Nominating and Corporate Governance Committee is to be notified and will determine the appropriate action, including ratification, rescission or amendment of the transaction.

 

 

Relationships and Transactions

 

 

Transactions with Fortive Corporation

Certain of our subsidiaries purchase products from and sell products to Fortive Corporation (“Fortive”) from time to time in the ordinary course of business and on an arms’-length basis. Such transactions are pre-approved under our Policy Regarding Related Person Transactions. In 2021, our subsidiaries purchased approximately $120,000 of products from Fortive, which is less than 0.01% of our, and of Fortive’s, gross revenues for 2021. Our subsidiaries intend to purchase products from and sell products to Fortive in the future in the ordinary course of their businesses and on an arms’-length basis. Mitchell P. Rales and Steven M. Rales each formerly served as a director of Fortive until their retirement from the Fortive board of directors in June 2021, and each of them no longer beneficially owns more than 5% of Fortive’s outstanding common stock.

Contacting the Board of Directors

The Board of Directors has established a process for stockholders and interested parties to communicate with the Board and to report complaints or concerns relating to our accounting, internal accounting controls or auditing matters. Stockholders and interested parties wishing to communicate with our Board may do so by writing to any of the members of the Board, the Chairman of the Board, or the non-management members of the Board as a group, at:

Enovis Corporation

2711 Centerville Road, Suite 400

Wilmington, Delaware 19808

Attn: Corporate Secretary

Complaints or concerns relating to our accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee. Other correspondence will be referred to the relevant director or group of directors. Our Policy on Stockholder and Interested Party Communications with the Board of Directors (the “Board Communications Policy”) requires that any stockholder communication to members of the Board prominently display the legend “Board Communication” in order to indicate to the Corporate Secretary that it is communication subject to our policy and will be received and processed by the Corporate Secretary’s office. Each communication received by the Corporate Secretary is copied for our files and promptly forwarded to the addressee. In our Board Communications Policy, the Board has requested that certain items not related to the Board’s duties and responsibilities be excluded from forwarded communications, such as mass mailings and business advertisements. In addition, the Corporate Secretary is not required to forward any communication that the Corporate Secretary, in good faith, determines to be frivolous, unduly hostile, threatening, illegal or similarly unsuitable. However, the Corporate Secretary maintains a list of each communication subject to this policy that is not forwarded, and on a quarterly basis delivers the list to the Chairman of the Board. In addition, each communication subject to this policy that is not forwarded because it was determined by the Secretary to be frivolous, commercial advertising, irrelevant or similarly unsuitable is nevertheless retained in our files and made available at the request of any member of the Board to whom such communication was addressed.

 

    

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DIRECTOR COMPENSATION

Our Board, at the recommendation of our CHCM Committee, sets the compensation program for non-employee directors. The Compensation and Human Capital Management Committee reviews this program on an episodic basis and recommends director compensation levels based on its evaluation of competitive levels for director compensation, utilizing data drawn from our current list of peer companies and its reasoned business judgment. See “Role of Compensation Consultants and Peer Data Review” on page 38. The compensation program was revised in May of 2021, and was further revised in December 2021 (which became effective in April 2022 upon the completion of the spin-off of ESAB Corporation) to reflect the Company’s shift to a growth-driven innovative medical technology company and to align with the Company’s new medical technology peer group following the separation.

For 2021, our non-employee Board members received the following:

 

 

an annual cash retainer of $90,000;

 

 

an annual equity award valued at $145,000, calculated under the same valuation approach applied in determining our annual equity grants as described in “Compensation Discussion and Analysis—Additional Compensation Information—Equity Grant Practice,” and awarded in connection with our annual meeting of stockholders, which consisted of director restricted stock units that vest after one year of service on the Board;

 

 

a $20,000 annual retainer for service as the Chair of our Audit Committee and a $15,000 annual retainer for service as Chair of the CHCM Committee or of the Nominating and Corporate Governance Committee; and

 

 

in the case of any director who joins the Board following the date of the grant of the annual equity award, a pro-rated portion of the annual equity award.

As noted above, following the completion of the spin-off of ESAB Corporation in April 2022, Board members will receive the following:

 

 

an annual cash retainer of $70,000;

 

 

an annual equity award valued at $215,000, to consist of 50% director restricted stock units that vest after one year of service on the Board and 50% director stock options, which are fully vested upon grant and exercisable for a seven-year term;

 

 

a $25,000 annual retainer for service as the Chair of our Audit Committee, a $20,000 annual retainer for service as Chair of the CHCM Committee, and a $15,000 annual retainer for service as Chair of the Nominating and Corporate Governance Committee; and

 

 

in the case of any director who joins the Board following the date of the grant of the annual equity award, a pro-rated portion of the annual equity award.

Our non-executive Chairman of the Board is entitled to receive an annual cash retainer of $1 and does not receive any other cash fees or the annual equity award described above.

The Board has also approved a stock ownership policy for our non-employee directors. Each non-employee director is required to own shares of our common stock (including shares issuable upon exercise of stock options and shares underlying restricted stock units) with a value equal to five times the annual cash retainer within five years of joining the Board. All of our directors except for Mr. Okala, who was appointed in February 2021, and Ms. Bodem, Dr. Ortiz and Ms. Lalor, who were appointed in April 2022 and are in the five-year grace period, have achieved these ownership targets as of the date of this Proxy Statement.

Further, our Board has adopted a policy prohibiting any director (or executive officer) from pledging as security under any obligation any shares of Company common stock that he or she directly or indirectly owns and controls (other than shares already pledged as of February 17, 2014), and providing that pledged shares of Company common stock do not count toward our stock ownership requirements.

The Board has adopted a Director Deferred Compensation Plan which permits non-employee directors to receive, at their discretion, deferred stock units (“DSUs”) in lieu of their annual cash retainers and committee chairperson retainers. A director who elects to receive DSUs receives a number of units determined by dividing the cash fees earned during, and deferred for, the quarter by the closing price

 

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of our common stock on the date of the grant, which is the last trading day of the quarter. A non-employee director also may convert director restricted stock unit grants to DSUs under the plan. DSUs granted to our directors convert to shares of our common stock after separation from service, based upon a schedule elected by the director in advance. In the event that a director elects to receive DSUs, the director will receive dividend equivalent rights on such DSUs to the extent dividends are issued on our common stock. Dividend equivalents are deemed reinvested in additional DSUs (or fractions thereof) at the dividend payment date.

We also reimburse all directors for travel and other necessary business expenses incurred in the performance of their services on our Board and the committees thereof and extend coverage to them under our directors’ and officers’ indemnity insurance policies.

The following table sets forth information regarding compensation paid to our non-employee directors during 2021:

DIRECTOR COMPENSATION FOR 2021

 

Name(1)    Fees Earned or
Paid in Cash
($)
     Stock
Awards
($)(3)
     Option
Awards
($)(5)
       Total
($)
 

Mitchell P. Rales

     1        0        0          1  

Patrick W. Allender

     103,750 (2)       136,932 (4)       0          240,682  

Thomas S. Gayner

     88,750 (2)       136,932 (4)       0          225,682  

Rhonda L. Jordan

     103,750        136,932 (4)       0          240,682  

Liam J. Kelly

     88,750        136,932        0          225,682  

Philip Okala

     76,472        152,964        14,250          243,686  

A. Clayton Perfall

     108,750 (2)       136,932 (4)       0          245,682  

Didier Teirlinck

     88,750 (2)       136,932 (4)       0          225,682  

Rajiv Vinnakota

     88,750        136,932        0          225,682  

Sharon Wienbar

     88,750 (2)       136,932 (4)       0          225,682  

 

(1)

Ms. Bodem, Dr. Ortiz and Ms. Lalor were appointed to our Board on April 4, 2022. Accordingly, they did not receive any compensation for 2021. In addition, compensation for our employee directors is summarized below in the “Summary Compensation Table.” Mr. Gayner retired from the Board on March 31, 2022, and Mr. Allender, Ms. Jordan and Mr. Teirlinck resigned from the Board on April 4, 2022 following the Company’s completion of its spin-off of ESAB Corporation on such date. The number of DSUs, restricted stock units and options listed in the footnotes to this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

(2)

Messrs. Allender, Gayner, Perfall and Teirlinck and Ms. Wienbar elected to receive DSUs in lieu of their annual cash retainers and committee chairperson retainers. DSUs convert to shares of our common stock after separation from service, based upon a schedule elected by the director in advance. During 2021, the amount of DSUs received in lieu of annual cash retainers and committee chairperson retainers by these directors was as follows: Mr. Allender—2,289, Mr. Gayner—1,959, Mr. Perfall—2,400, Mr. Teirlinck—1,959, and Ms. Wienbar—1,959. DSUs received for these cash retainers are considered “vested” and thus are not reflected in the table below.

 

(3)

Amounts shown in the “Stock Awards” column represent the grant date fair value for stock awards granted to each director during 2021, as computed pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 (“FASB ASC Topic 718”). See Note 14 to our consolidated financial statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2022. The amounts reflect the grant date fair value of the 2021 annual grant of 3,294 restricted stock units made to each director in connection with the 2021 annual meeting of stockholders, which vest in full on May 12, 2022. For Mr. Okala, who was appointed to our Board on February 22, 2021, the amount also reflects the grant date fair value of a grant of 357 restricted stock units in connection with a pro-rated annual grant for the period beginning with his appointment to the Board through the date of the 2021 annual meeting of stockholders which vested in full on February 22, 2022.

 

(4)

3,294 restricted stock units granted to each of these directors, which were awarded in connection with the 2021 annual meeting of stockholders, were converted into DSUs at the election of each director. DSUs convert to shares of our common stock after termination of service on the Board, based upon a schedule selected by each director in advance. These DSUs will vest in full on May 12,2022 in accordance with the vesting schedule applicable to the underlying restricted stock units.

 

(5)

For Mr. Okala, who was appointed to our Board on February 22, 2021, the amount reflects the grant date fair value for options to purchase 878 shares of our common stock in connection with a pro-rated annual grant for the period beginning with his appointment to the Board through the date of the 2021 annual meeting of stockholders. The director stock options are fully vested upon grant and exercisable for a seven-year term.

 

    

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As of December 31, 2021, the aggregate number of unvested stock awards and unexercised options outstanding held by each of our non-employee directors then serving at the time was as follows:

 

Name    Restricted
Stock Units(1)
     Stock
Options(1)
 

Mitchell P. Rales

     -        -  

Patrick W. Allender

     3,294        30,015  

Thomas S. Gayner

     3,294        30,015  

Rhonda L. Jordan

     3,294        30,015  

Liam J. Kelly

     3,294        7,741  

Philip Okala

     3,651        878  

A. Clayton Perfall

     3,294        30,015  

Didier Teirlinck

     3,294        18,139  

Rajiv Vinnakota

     3,294        30,015  

Sharon Wienbar

     3,294        22,377  

 

(1)

The number of restricted stock units and options listed in this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

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Proposal 2    Ratification of Selection of Independent Registered Public Accounting Firm

We are asking our stockholders to ratify the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of our independent auditors. Ernst & Young LLP has served as our independent auditor since its appointment in 2002. Although stockholder ratification is not required, the appointment of Ernst & Young LLP is being submitted for ratification as a matter of good corporate practice with a view towards soliciting stockholders’ opinions which the Audit Committee will take into consideration in future deliberations. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders. The Board of Directors and the Audit Committee believe that the retention of Ernst & Young LLP as the Company’s independent auditor is in the best interests of the Company and its stockholders.

Representatives for Ernst & Young LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Independent Registered Public Accounting Firm Fees and Services

The following table sets forth the aggregate fees for services rendered by Ernst & Young LLP for the Company for the fiscal years ended December 31, 2021 and 2020:

 

 Fee Category (fees in thousands)    2021      2020  

Audit Fees

   $ 6,849      $ 5,575  

Audit-Related Fees

     3,175         

Tax Fees

     301        646  

All Other Fees

            4  

TOTAL

   $ 10,325      $ 6,225  

Audit Fees

This category of the table above includes fees for the fiscal years ended December 31, 2021 and 2020 that were for professional services rendered (including reimbursement for out-of-pocket expenses) for the integrated audits of our annual consolidated financial statements, for reviews of the financial statements included in our Quarterly Reports on Form 10-Q, and for statutory audits. For 2021, this category also included audit fees of approximately $789,000 for incremental audit procedures related to the Company’s spin-off of ESAB Corporation.

Audit-Related Fees

This category of the table above includes the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” For 2021, Audit-Related Fees included $3,175,000 related to carve-out audited financial statements for ESAB Corporation. There were no Audit-Related Fees incurred for 2020.

Tax Fees

This category of the table above includes fees billed for tax compliance, tax preparation, tax planning and other tax services. For 2021, Tax Fees included approximately $256,500 for tax compliance and tax preparation, approximately $26,900 for tax planning and other tax services and approximately $17,100 for associated expenses. For 2020, Tax Fees included approximately $518,459 for tax compliance and tax preparation, approximately $126,300 for tax planning and other tax services and approximately $982 for associated expenses.

 

    

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All Other Fees

This category of the table above includes fees billed for products and services other than those described above under Audit Fees, Audit-Related Fees and Tax Fees. For 2020, these included fees incurred for Ernst & Young LLP’s online accounting information tool.

The Audit Committee has considered whether the services rendered by the independent registered public accounting firm with respect to the fees described above are compatible with maintaining the independent registered public accounting firm’s independence and has concluded that such services do not impair its independence.

Audit Committee’s Pre-Approval Policies and Procedures

Pursuant to its charter, the Audit Committee must pre-approve all auditing services, review and attest services, internal control related services and non-audit services provided to the Company by the independent registered public accounting firm and all fees payable by the Company to the independent registered public accounting firm for such services. The Audit Committee also is responsible for overseeing the audit fee negotiations associated with the retention of Ernst & Young LLP for the audit of our financial statements. The Audit Committee has adopted a pre-approval policy to promote compliance with the NYSE’s listing standards and the applicable SEC rules and regulations relating to auditor independence. In accordance with the Audit Committee charter and the pre-approval policy, the Audit Committee reviews with Ernst & Young LLP and management the plan and scope of Ernst & Young LLP’s proposed annual financial audit and quarterly reviews, including the procedures to be utilized and Ernst & Young LLP’s compensation, and pre-approves all auditing services, review and attest services, internal control related services and permitted non-audit services (including the fees and terms thereof) to be performed for us by Ernst & Young LLP. The Audit Committee may delegate pre-approval authority to one or more members of the Audit Committee consistent with the pre-approval policy, provided that the decisions of such Audit Committee member or members must be presented to the full Audit Committee at its next scheduled meeting. Pre-approval of permitted non-audit services can only be approved by the full Audit Committee.

Vote Required

The affirmative vote of the holders of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote is required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2022.

Board Recommendation

 

 

The Board unanimously recommends that stockholders vote “FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2022.

 

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AUDIT COMMITTEE REPORT

The Audit Committee currently consists of A. Clayton Perfall, Philip A. Okala, and Barbara W. Bodem, all of whom are non-management directors. Messrs. Allender, Gayner, and Teirlinck served as members of the Audit Committee for 2021 and in 2022 during the time each served as directors. Mr. Gayner retired from the Board on March 31, 2022 and Messrs. Allender and Teirlinck stepped down from the Board on April 4, 2022 in connection with the spin-off of ESAB Corporation. Each of Messrs. Allender, Gayner, and Teirlinck, as well as Mr. Perfall, participated in the reviews and discussions referenced below prior to stepping down from the Board. However, because Messrs. Allender, Gayner, and Teirlinck are no longer members of the Board, they are not named below this report.

The members of the Audit Committee meet the independence and financial literacy requirements of the NYSE and the additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. In 2021, the Audit Committee held seven meetings. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors, which it annually reviews. The charter, which complies with all current regulatory requirements, is available on the Company’s website at www.enovis.com on the Investors page under the Corporate Governance tab. During 2021, at each of its regularly scheduled meetings, the Audit Committee met with senior members of the Company’s finance team. Additionally, the Audit Committee has separate private sessions, during its regularly scheduled meetings, with the Company’s independent registered public accounting firm and head of internal audit, respectively. The Audit Committee is updated periodically on management’s process to assess the adequacy of the Company’s system of internal control over financial reporting, the framework used to make the assessment, and management’s conclusions on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee has also discussed with the independent registered public accounting firm, their evaluation of the Company’s system of internal control over financial reporting.

The Audit Committee evaluates the performance of the Company’s independent registered public accounting firm each year and determines whether to reengage the current independent registered accounting firm or consider other independent registered accounting firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered accounting firm, the firm’s global capabilities, and the firm’s technical expertise, tenure as the Company’s independent registered accounting firm and knowledge of the Company’s global operations and businesses. In connection with the applicable audit partner rotation requirements, the Audit Committee also is involved in considering the selection of the auditors’ lead engagement partner when rotation is required. Based on this evaluation, the Audit Committee decided to engage Ernst & Young LLP as our independent registered accounting firm for the year ended December 31, 2022. The Audit Committee reviews with the independent registered accounting firm and management the overall audit scope and plans, as well as the results of internal and external audit examinations and evaluations by management and the independent registered accounting firm of the Company’s internal controls over financial reporting and the quality of the Company’s financial reporting. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee recommends that the Board ask stockholders, at the Company’s annual meeting, to ratify the appointment of the independent registered accounting firm (see Proposal 2 beginning on page 23).

The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2021 with management and with the Company’s independent registered public accounting firm, including a discussion of the quality and suitability of the accounting principles, the reasonableness of significant accounting judgments and estimates, and the clarity of disclosures in the financial statements. In addressing the quality of management’s accounting judgments, members of the Audit Committee are apprised of certifications prepared by the Chief Executive Officer and the Chief Financial Officer that the unaudited quarterly and audited annual consolidated financial statements of the Company fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company.

In performing all of these functions, the Audit Committee acts in an oversight capacity. The Audit Committee reviews the Company’s quarterly and annual reports on Form 10-Q and Form 10-K prior to filing with the SEC. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for establishing and maintaining adequate internal control over financial reporting and for preparing the financial statements, and other reports, and of the independent registered public accounting firm, which is engaged to review the quarterly consolidated financial statements of the Company, and audit and report on the annual consolidated financial statements of the Company and the effectiveness of the Company’s internal control over financial reporting as of the Company’s year-end.

The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC. The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence. On the basis of the reviews and discussions referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2021 be included in the Company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

Audit Committee of the Board of Directors

A. Clayton Perfall, Audit Committee Chair

 

    

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COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis of compensation arrangements of our named executive officers for 2021 should be read together with the compensation tables and related disclosures set forth under the section heading “Executive Compensation.”

Executive Summary

 

 

Named Executive Officers

 

 

The following discussion provides details regarding our executive compensation program and the compensation of our named executive officers in 2021. Our named executive officers (“NEOs”) for 2021 are:

 

 Name    Title

Matthew Trerotola

   President and Chief Executive Officer

Christopher Hix

   EVP, Chief Financial Officer

Daniel Pryor

   EVP, Strategy and Business Development

Shyam Kambeyanda1

   Chief Executive Officer of ESAB

Brady Shirley

   Chief Executive Officer of DJO

 

1 

Mr. Kambeyanda resigned from the Company as of April 4, 2022 to become President and Chief Executive Officer of ESAB Corporation following the consummation of the spin-off of ESAB Corporation.

 

 

Our Compensation Philosophy and Guiding Principles

 

 

Our executive compensation approach links compensation to Company and individual performance while aligning the long-term interests of management and stockholders. We strive to create a compensation program for our associates, including our executives, that provides a compelling and engaging opportunity to attract, retain and motivate the best talent. We believe that our compensation programs motivate performance-driven leadership that is aligned to achieve our financial and strategic objectives with the intention to deliver superior long-term returns to our stockholders. Utilizing this philosophy, our executive compensation program has been designed to:

 

Link rewards to performance and foster a team-based approach

   Each executive has clear performance expectations and must contribute to our overall success rather than solely to objectives within his or her primary area of responsibility.

Align the performance responsibilities of executives with the long-term interests of stockholders

   Our program emphasizes long-term stockholder value creation by using predominantly stock options and performance-based restricted stock units, in combination with a stock ownership policy, to deliver long-term compensation incentives while minimizing risk-taking behaviors that could negatively affect long-term results.

Provide transparency through simplicity of design and practices

   We provide three main elements in our compensation program–base salary, annual incentive cash bonuses, and long-term incentives–with an appropriate blend of purposes and incentives linked to easily understood objectives, as described further on page 29.

 

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Fiscal 2021 Pay for Performance Alignment and Compensation Overview

 

 

 

2021 was truly a transformational year for our Company. On March 4, 2021, we announced our plan to separate our fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly-traded companies (the “Separation”). On April 4, 2022, the Company successfully completed the Separation, in the form of a distribution of 90% of the common stock of ESAB Corporation to the Company’s stockholders. In addition to playing an integral role in completing the Separation on the Company’s previously announced timetable, our leadership teams executed a number of significant transactions that facilitated the Separation and prepared the Company and ESAB for future success, which are described in further detail below under “Key Executive Team Achievements.”

Our leadership teams also remained focused on the Company’s response to the challenges posed by the ongoing COVID-19 pandemic, with the health and safety of our associates continuing to be our top priority, while we navigated associated inflationary pressures and supply chain constraints across our businesses.

Despite these challenges, we were able to deliver on our commitments, finishing 2021 with adjusted earnings per share of $2.14, adjusted EBITDA of $614 million, and free cash flow of $277 million. Both of our business segments accelerated their pace of investment and innovation while continuing to outgrow their markets. ESAB and DJO also made progress on their margin improvement journeys in an inflationary environment, as ESAB improved its adjusted EBITDA margins by 150 basis points and DJO expanded its core (excluding acquisitions) adjusted EBITDA margins by 80 basis points. At the same time, our NEOs, as well as the rest of our executive management team and our associates worldwide, worked together to prepare Enovis and ESAB for a successful Separation, which was completed on April 4, 2022.

We achieved and exceeded many of our internal corporate financial and operational goals, leading to an overall corporate bonus achievement under our Annual Incentive Plan (“AIP”) of 122% of target for Messrs. Trerotola, Hix, and Pryor. Our ESAB business delivered even stronger results, which were reflected in a company-wide/business specific achievement under our AIP resulting in a blended company factor (weighted 30% Colfax corporate and 70% ESAB) of 138% of target for Mr. Kambeyanda. DJO also posted solid results, despite a return in COVID-19 slowdowns in the fourth quarter of 2021, resulting in a blended company factor (weighted 30% Colfax corporate and 70% DJO) of 96% of target for Mr. Shirley.

Further, the CHCM Committee took the following actions during 2021:

 

 

Limited base salary increases. Due to concerns about the ongoing potential effects of COVID-19 on the business, no base salary increases were provided to the CEO or other NEOs in 2021, with the exception of Mr. Pryor, who received a 2% increase, and Mr. Kambeyanda, who received a 12% increase in consideration of the significant additional duties and responsibilities he assumed in connection with preparing ESAB for the Separation.

 

 

Approved Retention Program. In March 2021, on the recommendation of the CHCM Committee, the Board approved a comprehensive retention program in order to retain key employees, including the NEOs, at a critical time to facilitate the successful completion of the Separation. As part of the retention program, each NEO entered into a retention agreement with the Company, which provides for a cash payment that is earned if the NEO remains employed through the twelve month anniversary of the Separation. Messr. Trerotola, Pryor, Kambeyanda and Shirley also received a retention grant of restricted stock units (“RSUs”) that vest ratably over a three-year period, subject to the NEO remaining in service through the relevant vesting dates, except in certain qualifying terminations. See “Executive Compensation – Employment Agreements, Change in Control Agreements, Retention Agreements and Executive Officer Severance Plan” for further details.

 

 

Continued focus on long-term performance. Each of our NEOs’ annual equity awards consisted of (i) 50% PRSUs that cliff vest in three years based on relative TSR performance over a three-year performance period and require above-average TSR performance in order to pay out at target, (ii) 25% RSUs that vest in equal installments over a three-year period following their grant date, and (iii) 25% stock options that vest in equal installments over a three-year period following their grant date.

 

 

2021 Say-On-Pay Vote

 

 

At our 2021 Annual Meeting, approximately 98.3% of the stockholder votes cast on our advisory proposal to approve the compensation of our NEOs were voted in favor of our executive compensation proposal. Our CHCM Committee considered the outcome of this vote in the context of our prior and on-going engagement with stockholders and accordingly did not make any additional changes to our executive compensation policies and program elements. The CHCM Committee will continue to carefully evaluate the feedback received from our stockholders in connection with the voting on that proposal.

 

    

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Our Executive Compensation Program

 

 

Our executive compensation program includes elements designed to align executive pay with Company objectives and long-term stockholder returns, including the PRSU grants based on relative Total Shareholder Return as discussed above.

For 2021, the CHCM Committee established the following target compensation program for our CEO:

 

2021 CEO Incentive Compensation Structure
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88% of CEO compensation “at risk” and aligned with company and shareholder success

With respect to our other NEOs, for 2021, the CHCM Committee established the following target compensation program:

 

2021 Incentive Compensation Structure for Other NEOs (Average)
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79% of compensation for other NEOs “at risk” and aligned with company and shareholder success

 

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Our 2021 executive compensation structure consists of three core compensation elements–base salary, an annual cash bonus, and long-term incentives. The CHCM Committee reviewed each element individually while also considering the total compensation package provided to create an appropriate mix designed to attract, incentivize, and retain our executives. The following table summarizes the core elements of our 2021 executive compensation program:

 

  Element of Compensation   Purpose/Description   Form/Timing of Payout

  Base Salary

  Fixed compensation set at a competitive level to attract and retain our executive talent. Provides a base level of compensation that is not at risk to avoid fluctuations in compensation that could distract executives from the performance of their responsibilities.   Paid in cash throughout the year.

  Annual Incentive Plan (“AIP”)

  Variable compensation that rewards our executive officers for achievement of critical annual operational and financial performance goals by the Company and, if applicable, respective business units, and recognizes the executive’s individual performance during the year.   Paid in cash after the year has ended and performance has been measured. See page 31 for further detail.

  Long-Term Incentive Plan

  Variable compensation that aligns the rewards of executives with the interests of stockholders to encourage actions and long-term prioritization that we believe will increase stockholder value by generating sustained and superior operational and financial performance over an extended period of time.   See page 34 for further detail.

Leading Compensation Practices

The framework of our executive compensation program includes the governance features and other specific elements discussed below:

 

What we do          What we don’t do
ü   Pay for performance focus – Our AIP compensation is linked to pre-established financial and operational goals that are intended to drive performance over the annual performance plan period. Options, RSUs and PRSUs are linked with longer-term performance, our stock price, and, for PRSUs, relative TSR performance, which we believe incentivizes long-term Company success and stockholder value creation.     ×   No gross-up payments to cover excise taxes or perquisites – We do not provide tax gross-ups to our executives in connection with severance benefits or executive perquisites other than relocation.
ü   Varying performance metrics under short-term and longer-term incentive plans – In balancing compensation objectives linked to short-term and long-term time horizons, the Company seeks to align compensation with several performance metrics that are critical to achievement of sustained growth and stockholder value creation.     ×   No pledging or hedging of Company stock – We prohibit our executives and directors from hedging Enovis stock and from entering into new pledge arrangements or derivative agreements using Enovis stock.
ü   Caps on Annual Incentive Plan payouts – Executive bonus payments are capped under our AIP, as approved by our stockholders, in part to discourage excessive risk taking. The CHCM Committee is prohibited from increasing the results with respect to each financial and operational performance metric once established, but retains the discretion to reduce or eliminate compensation under our AIP even if performance goals are attained.     ×   No repricing or buyout of underwater stock options – We do not permit the repricing of underwater stock options without the express approval of our stockholders.
ü   Double trigger provisions for change in control payments – Severance payable upon a change in control is only received upon executive’s employment termination without cause or resignation for good reason within two years following, or the three months preceding, the change in control. This approach is commonly referred to as “double trigger.”     ×   No excessive change in control severance – No severance upon a change in control in excess of two times salary and target bonus.

 

    

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What we do          What we don’t do
ü   Clawback Policy and Insider Trading Policy – We have a comprehensive compensation clawback policy that is triggered by a material restatement of the Company’s financial statements and applies to all of our executive officers, and enforce a strict insider trading policy and blackout periods for executives and directors.     ×   No short-term vesting – We do not award any long-term incentives with a standard vesting period shorter than one year.
ü   Stock Ownership Policy – We have a robust stock ownership policy to further align the long-term financial interests of Company executives with those of our stockholders.     ×   No compensation programs or policies that reward for material or excessive risk taking – We annually review the Company’s compensation policies and practices in relation to our risk management practices and any potential risk-taking incentives. Our most recent assessment concluded that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
ü   Independent CHCM Committee and Consultant – Our CHCM Committee is comprised solely of independent directors. The compensation consultant to the CHCM Committee during 2021, FW Cook (i) is, based on the CHCM Committee’s assessment, independent and without any conflicts of interest with the Company and (ii) has never provided any services to the Company other than the compensation-related services provided to the CHCM Committee. See page 38 for further details.     ×   No defined benefit pension plan – We do not maintain a defined benefit pension plan for any senior executives.

Determination of Executive Compensation and Performance Criteria

Our executive compensation program is based on the philosophy and design outlined above with a focus on exceptional performance and continuous improvement from our management team. Within this framework, the CHCM Committee exercises its reasoned business judgment in making executive compensation decisions and takes into account recommendations by our Chief Executive Officer with respect to the compensation of each executive officer, other than himself (see “CEO Recommendations” on page 37). Some of the factors that generally are referenced when making executive compensation decisions, none of which is assigned a particular weight, are as follows:

 

 

The nature of the executive’s position

 

 

The CHCM Committee’s assessment of pay levels and practices for executives with the skills and experience our executives possess (see “Role of Compensation Consultants and Peer Data Review” on page 38)

 

 

The experience and performance record of the executive

 

 

The Company’s operational and financial performance

 

 

The executive’s leadership potential

 

 

The retention value of our compensation program over time

Further, a substantial percentage of compensation under our Annual Incentive Plan is determined solely by the achievement of annual performance criteria based on Board-approved financial and operational goals for the fiscal year. These goals are then incorporated into the metrics set for our Annual Incentive Plan and approved by the CHCM Committee, as further discussed under “Bonus Calculation and Payment - Financial and Operational Metrics and 2021 Performance Results” on page 32. We believe that this link to our Board-established corporate and business goals reinforces alignment and incents breakthrough results both at the business-unit level and Company-wide.

 

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Elements of Our 2021 Executive Compensation Program

 

 

Base Salary

 

 

Base salaries are designed to provide compensation that is market competitive so that we can attract the best qualified individuals and retain our senior management. Base salaries are established at an executive’s hire and generally reviewed annually for potential increases. In February 2021, the CHCM Committee set the salary levels for each of our NEOs based on the CHCM Committee’s assessment of the relative roles and responsibilities of management and the results of their individual performance assessments, combined with perspective from competitive compensation data prepared by FW Cook and the CHCM Committee’s reasoned business judgment. A modest base salary increase was approved for Mr. Pryor in consideration of his efforts in furtherance of the Company’s acquisition strategy and leadership of its cybersecurity initiatives. A larger increase was approved for Mr. Kambeyanda in consideration of the significant additional duties and responsibilities he assumed in connection with preparing ESAB for the Separation. A comparison of base salary levels as of December 31, 2021 and 2020 is set forth below:

 

 Named Executive Officer    2020
Annual
Base Salary
     2021
Annual
Base Salary
     Percentage
Increase
 

Mr. Trerotola

   $ 1,077,000      $ 1,077,000         

Mr. Hix

   $ 650,000      $ 650,000         

Mr. Pryor

   $ 565,000      $ 579,000        2

Mr. Kambeyanda

   $ 625,000      $ 700,000        12

Mr. Shirley

   $ 850,000      $ 850,000         

 

 

Annual Incentive Plan

 

 

The goal of our AIP is to reward our executives for achievement in key areas of Company operational and financial performance as well as each executive’s individual contributions to Company success. Our NEOs are eligible to receive a cash incentive payment that is expressed as a percentage of the executive’s base salary (i.e., “target bonus”) under our Annual Incentive Plan. Performance measures include corporate and individual performance against pre-determined financial and operational metrics approved by the CHCM Committee at the beginning of the fiscal year.

These performance metrics established by the CHCM Committee for business leaders reflect both Company-wide and business-specific performance targets resulting in a company performance factor (“CPF”). The CPF for Messrs. Kambeyanda and Shirley is a weighted average consisting of 70% segment performance and 30% Colfax corporate performance. The amount payable under the AIP can be adjusted upward or downward based on the individual performance factor (“IPF”), which is linked to specific, individualized business goals. Actual bonus amounts are determined following completion of the performance year and are based on performance relative to these pre-established business and individual goals using the following formulas:

 

LOGO

Executives can achieve a payout percentage of their target bonus ranging from zero for below-threshold performance to a threshold of 50% to a maximum of 200%, with 100% target goal achievement resulting in 100% payout of the individual’s target bonus for that performance metric, based on the extent to which objective pre-established financial and operational performance goals are achieved.

The total amount earned is subject to adjustment based on individual achievement as measured by an IPF. The IPF is a multiplier that ranges from 0 to 1.5 (subject to an overall payout cap of 250% of the target bonus). The IPF rating is based on individual performance

 

    

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against pre-established objectives and the embodiment of our Company’s core values and behaviors. The IPF and key performance indicators include both financial and non-financial Company objectives over which the executive has primary control.

Detail regarding the individual components of these formulas for fiscal year 2021, including a calculation of the payout percentages and description of the IPF component, follows below.

Key Executive Team Achievements

 

 

Delivered strong financial results, finishing 2021 with net income from continuing operations of $94 million, or $0.60 per share, and adjusted earnings of $2.14 per share

 

 

Generated strong cash flow, successfully navigating COVID-19 pressures and supply chain constraints to produce full year operating cash flows of $356 million and free cash flow of $277 million

 

 

Both businesses made meaningful margin improvements, with ESAB adjusted EBITDA margins improving by 150 basis points and DJO core adjusted EBITDA margins improving by 80 basis points

 

 

Strengthened the Company’s balance sheet in advance of the Separation with a successful public offering of 16.1 million shares of common stock, raising $700 million and reducing existing indebtedness

 

 

Completed acquisition of Mathys AG Bettlach, an international orthopedics leader, which significantly expanded the Company’s fast-growing reconstructive platform outside of the United States

 

 

Completed a series of strategic acquisitions, including Trilliant and Medshape, to build out the Company’s foot and ankle portfolio

 

 

Successfully prepared both Enovis and ESAB for the Separation, which was completed on April 4, 2022, by building out management teams, systems, compensation plans, and other public company infrastructure

 

 

Continued focus on improvements in safety performance, in particular at ESAB, which achieved an industry-leading total recordable incident rate of 0.33, a 2.9% improvement from the prior year

 

 

Continued leadership focus in navigating the COVID-19 pandemic, prioritizing the health and safety of our associates while ensuring continuity of supply to our customers

 

 

Sustained focus on innovation and new product development at both ESAB and DJO, as well as continued growth in the digital space at both businesses

 

 

Both business segments continued to outperform peers, even in a market impacted by COVID-19 and global supply chain challenges

Bonus Calculation and Payment – Financial and Operational Metrics and 2021 Performance Results

For corporate executives, in 2021 we utilized financial targets based on net sales (as adjusted), adjusted EBITA, cash conversion, and adjusted EPS for the Company performance factors (“CPF”). Performance targets were based upon Board-approved operational and financial goals for 2021, and represented significant progress in each category toward the achievement of the Company’s long-term growth objectives and aligned with the Board-approved corporate budget.

For Messrs. Kambeyanda and Shirley, Colfax corporate measures constituted 30% of the potential CPF with their respective business unit goals making up the remaining 70%. These weightings are intended to drive accountability for business operational results while also encouraging thoughtful work and cooperation across the organization.

 

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The financial and operational performance measures and corresponding weightings of these metrics for 2021 were as follows:

 

Measure    Corporate     ESAB     DJO  

Net sales (as adjusted)(1)

     25     30     30

Adjusted EBITA(2)

     40     50     50

Cash Conversion(3)

     20     20     20

Adjusted EPS(4)

     15     N/A       N/A  

 

(1)

Net sales is measured by U.S. GAAP sales excluding any sales from unbudgeted 2021 acquisitions, compared to 2021 budgeted sales at actual foreign exchange rates, with budgeted results for any divested/discontinued entities added to actual results in determining 2021 performance.

(2)

Adjusted EBITA is measured by comparing Adjusted EBITA excluding any unbudgeted 2021 acquisition to the 2021 Adjusted EBITA targets at actual foreign exchange rates and is defined as U.S. GAAP net income from continuing operations plus net interest expense, income taxes and acquisition-related amortization and inventory step-up charges, restructuring costs per company policy, non-cash asset impairments including goodwill and intangibles, unbudgeted acquisition and divestiture costs, foreign currency exchange gains or losses arising from initial recognition of a highly inflationary currency, pension curtailment costs, effects from changes in U.S. GAAP or other unplanned or nonrecurring items that the CHCM Committee considers unusual and not representative of the underlying economic performance of the Company, with budgeted results for any divested/discontinued entities added to actual results in determining 2021 performance.

(3)

Cash conversion is cash from operating activities less capital expenditures plus proceeds from asset sales divided by Adjusted Net Income. ESAB and DJO use Modified Cash Conversion, which excludes income taxes, interest expenses and defined benefit plan costs and funding.

(4)

Adjusted EPS performance is measured by comparing Adjusted EPS excluding any unbudgeted 2021 acquisitions to the 2021 Adjusted EPS target and is defined as U.S. GAAP net income adjusted for business unit entities divested in 2021 including related gain/loss on disposition, restructuring costs per company policy, non-cash asset impairments including goodwill and intangibles, unbudgeted acquisition and divestiture costs, foreign currency exchange gains or losses arising from initial recognition of a highly inflationary currency, pension curtailment costs, effects from changes in U.S. GAAP or similar unplanned material tax or regulatory changes, the after-tax impact of discontinued operations, early extinguishment of debt costs, or other unplanned or nonrecurring items that the CHCM Committee considers unusual and not representative of the underlying economic performance of the Company, divided by the weighted average of diluted shares outstanding, with budgeted results for any divested/discontinued entities added to actual results in determining 2021 performance.

Bonus Calculation – Target Bonus

The CHCM Committee annually reviews and approves AIP target bonus percentages for each executive officer in alignment with our compensation philosophy and taking into consideration the CHCM Committee’s competitive marketplace review. Targets as a percentage of base salary, which are set forth below, did not change from prior-year targets.

The 2021 corporate performance goals and achievement for each are set forth below. In setting these performance goals, the CHCM Committee utilized the same performance criteria that it had initially utilized for 2020, but determined that it was appropriate to establish target levels of performance for 2021 that were lower than the targets it had initially set for 2020. As discussed in last year’s proxy statement, the 2020 goals were established prior to when the COVID-19 pandemic significantly affected the Company’s business, which required the CHCM Committee to set aside the original 2020 performance goals and adopt a modified 2020 annual incentive program. Thus, in establishing goals for 2021, the CHCM Committee set target goals that required significant and sustained improvements above 2020’s actual performance and were consistent with the 2021 fiscal year guidance that the Company publicly announced on February 18, 2021. As shown in the table, the weighted average performance result for the 2021 Colfax CPF was 122% of plan.

 

Measure    Weighting     Target     Threshold      Maximum      Achieved     CPF
Based on
Weighting
 
Net Sales (as adjusted)      25   $ 3.575 billion     $ 3.218 billion     $ 3.933 billion     $ 3.777 billion       42
Adjusted EBITA      40   $ 499 million     $ 399 million     $ 599 million     $ 503 million       45
Cash Conversion      20     85     68     103     84     19
Adjusted EPS      15   $ 2.15/share     $ 1.72/share     $ 2.58/share     $ 2.14/share       16
Weighted aggregate CPF for 2021                122 % 

 

    

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For Messrs. Kambeyanda and Shirley, Colfax corporate measures constituted 30% of the potential payout factor with their business unit goals consisting of 70% of the total target. Based on overall business performance for their business Mr. Kambeyanda achieved an overall CPF of 138% and Mr. Shirley achieved a CPF of 96%.

Bonuses for each of our NEOs, as calculated pursuant to the foregoing calculations, are set forth in the following table. These bonuses are also reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below on page 42.

 

 NEO

   Base Salary              Target Bonus
Percentage
             Target
Bonus
             CPF      Bonus
before IPF
application
     Individual
Performance
Factor (IPF)
             Executive
Bonus
Payment
 

 Mr. Trerotola

     1,077,000        X        125%        =        1,346,250        X        122%        1,642,425        105%        =        1,724,546  

 Mr. Hix

     650,000        X        80%        =        520,000        X        122%        634,400        105%        =        666,120  

 Mr. Pryor

     579,000        X        80%        =        463,200        X        122%        565,104        110%        =        621,614  

 Mr. Kambeyanda*

     700,000        X        80%        =        560,000        X        138%        772,800        105%        =        811,440  

 Mr. Shirley*

     850,000        X        100%        =        850,000        X        96%        816,000        100%        =        816,000  

 

*

The business payout percentage is a weighted average consisting of 70% business segment and 30% Colfax corporate.

Bonus Calculation—Individual Performance Factor

In addition to the target bonus percentages and financial and operational metrics discussed above, the third and final factor under our AIP is the IPF, as described above. The individual performance factors for each executive were determined after evaluating each NEO’s performance, including the collective achievements detailed on page 32 above.

 

 

Long-Term Incentives

 

 

The goal of our long-term incentive plan is to align the compensation of executives with the interests of stockholders by encouraging sustained long-term improvement in operational and financial performance and long-term increase in stockholder value. Long-term incentives also serve as retention instruments and provide equity-building opportunities for executives. Beginning in 2020, annual equity awards generally consisted of 50% PRSUs, 25% stock options, and 25% time-vesting RSUs. The CHCM Committee believes this further aligns the long-term interests of management and stockholders and promotes increased equity ownership among our executive officers.

 

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Annual Grants under Omnibus Incentive Plan

On February 22, 2021, the CHCM Committee granted annual awards under the 2020 Omnibus Incentive Plan with a target aggregate value as set forth in the table below. Each NEO received 50% of their annual grant in the form of PRSUs, 25% in the form of RSUs and 25% in the form of stock options. Mr. Trerotola’s target aggregate grant value for 2021 reflects an increase of 7.4% over the prior year. In determining such increase, the CHCM Committee reviewed market data based on peer group benchmarking, including industrial as well as medical technology peers, in order to determine a grant level that would be competitive with the market. The CHCM Committee also took into consideration other factors, including that Mr. Trerotola did not receive a base salary increase in 2020 or 2021, and had agreed to a voluntary salary reduction in 2020 to mitigate the impacts of the COVID-19 pandemic, as well Mr. Trerotola’s assumption of additional responsibilities in connection with the preparation for, and execution of, the Separation.

 

 Annual Grant Recipient    Total Aggregate
Value of Grant
($)(1)
    

 Mr. Trerotola

   6,200,000  

 Mr. Hix

   2,000,000  

 Mr. Pryor

   1,850,000  

 Mr. Kambeyanda

   1,500,000  

 Mr. Shirley

   2,400,000    

 

(1)

The target dollar values of the equity grants noted above do not reflect the valuations computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). Instead, based on the target dollar value of equity awards and the allocation of the form of equity awards noted above, the actual number of RSUs and the target number of PRSUs granted was determined by dividing the corresponding allocation of the dollar value by the 20-day average of the closing price of our common stock as of the grant date. Additional details on amounts of the 2021 annual equity grants to our NEOs are shown under Grants of Plan-Based Awards for 2021 on page 43.

Stock options and RSUs vest in three equal annual installments beginning on the first anniversary of the grant date and PRSUs cliff vest at the end of the three-year measurement period to the extent of achievement of the relative TSR performance metric based on the following payout scale:

 

      3-Year TSR
Percentile Rank*
   Resulting
Shares Earned
(% of target)
    

 Below Threshold

   <30th    0%  

 Threshold

   30th    50%  

 Target

   55th    100%  

 Maximum

   80th    200%    

 

*

Linear interpolation between threshold and target and target and maximum.

As shown in the table above, the target payout is subject to achieving the relative TSR performance metric at the 55th percentile, which underscores the Company’s commitment to delivering and incentivizing above-median performance and returns to stockholders.

RSU Grants Pursuant to Retention Agreements

On March 5, 2021, as part of the comprehensive retention program approved Board in order to retain key employees, including the NEOs, in order to facilitate the successful completion of the Separation, each NEO entered into a retention agreement with the Company, which provides for a cash payment that is earned if the NEO remains employed through the twelve-month anniversary of the Separation. Messrs. Trerotola, Pryor, Kambeyanda and Shirley also received a retention grant of RSUs as set forth in the table below. The RSUs vest ratably over a three-year period, subject to the NEO remaining in service through the relevant vesting dates, except in certain qualifying terminations. In lieu of a retention RSU award, Mr. Hix’s retention agreement provides for a larger cash payment opportunity. These arrangements were designed to facilitate the successful completion of the Separation, recognizing the importance of management continuity through the Separation, and that the Separation presents a period of significant uncertainty for senior talent at a time when the market for executive talent is extremely competitive, and that the Separation would result in the executives working for an organization that, immediately following the Separation, is smaller than the organization they had been running. See “Executive

 

    

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Compensation – Employment Agreements, Change in Control Agreements, Retention Agreements and Executive Officer Severance Plan” for further details.

 

 Name

   Number of RSUs(1)    

 

 

 Matthew Trerotola

     72,009    

 Daniel Pryor

     21,487    

 Shyam Kambeyanda

     17,422    

 Brady Shirley

     27,875          

 

(1)

The number of RSUs reported in this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

2019 PRSU Performance Payout

In February 2022, the CHCM Committee certified the performance results of certain PRSUs granted to Messrs. Trerotola, Hix, Kambeyanda and Pryor in 2019. The 2019 PRSUs were subject to the Company achieving investor return performance relative to the S&P MidCap 400 Industrials Index. At the end of the three-year performance period, the Company performance, which reflected a relative TSR ranking in the 74th percentile of the Index, resulted in a payout of 172.86% of target.

 

 

Additional Compensation Information

 

 

Other Elements of Compensation—Non-Qualified Deferred Compensation and Perquisites

The Company does not maintain an active pension plan and instead makes matching contributions to a tax-qualified 401(k) plan and Non-Qualified Deferred Compensation Plan. We established the Non-Qualified Deferred Compensation Plan, which provides participants the opportunity to defer a percentage of their compensation without regard to the compensation limits imposed by the Internal Revenue Code under our 401(k) plan, to allow our senior-level executives to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Enovis employees who are not limited by the Internal Revenue Code limits. For additional details concerning the Non-Qualified Deferred Compensation Plan, please see the Non-Qualified Deferred Compensation Table and the accompanying narrative disclosure. The Company also maintains the DJO Global Executive Deferred Compensation Plan (the “DJO Nonqualified Plan”), which was acquired in connection with the acquisition of DJO. The DJO Nonqualified Plan was frozen to new participants and future deferrals on December 31, 2019. Mr. Shirley holds an account balance in this legacy plan.

Aside from the benefits provided to Mr. Trerotola at the time of his hire, which include (i) an automobile allowance of $20,000 per year and (ii) personal use of a private aircraft chartered by the Company and/or personal financial planning services (or any combination thereof) in an aggregate amount not to exceed $100,000 in compensation income (i.e., imputed income under tax rules) for any calendar year, we provide minimal perquisites to our executives. Such perquisites include (i) up to $10,000 in financial and tax planning services for senior executives, (ii) business-related items such as relocation assistance, which may be grossed up consistent with competitive market recruitment practices, (iii) and benefits provided in non-U.S. locations in accordance with local practice.

Employment Agreements

Mr. Trerotola is party to an employment agreement with the Company. Mr. Trerotola’s employment agreement has an initial three-year term, subject to automatic one-year term extensions thereafter, unless we or Mr. Trerotola provides written notice in advance to terminate the automatic extension provision. Mr. Trerotola’s base salary may not be reduced below the amount previously in effect. In addition, Mr. Trerotola is entitled to participate in our Annual Incentive Plan with a target bonus amount no less than 120% of his base salary then in effect. Mr. Trerotola’s agreement also provides severance benefits as well as enhanced change in control severance benefits only if a termination for “good reason” or other than for “cause” occurs within two years following the change in control (i.e., “double trigger” provisions).

Mr. Pryor is party to an employment agreement with the Company. Mr. Pryor’s employment agreement has an initial two-year term, subject to automatic one-year term extensions thereafter, unless our Board or Mr. Pryor provides written notice in advance to terminate the automatic extension provision. Mr. Pryor’s base salary may not be reduced below the amount previously in effect without his written agreement. In addition, Mr. Pryor is entitled to participate in our Annual Incentive Plan with a target bonus amount no less than 50% of his base salary then in effect. Mr. Pryor’s agreement also provides severance benefits.

Mr. Hix’s letter agreement, entered into upon his hire, provides for severance benefits that are substantially comparable, in all material respects, to those provided for in our employment agreements.

 

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During 2021, Mr. Kambeyanda was party to a letter agreement with the Company that specified his starting annual salary and a target bonus of at least 70% under the AIP. This agreement also provided for a transition bonus made in connection with his hire that was paid in installments over his first five years of employment (with $330,000 payable in each of 2017 and 2018, and $130,000 payable in each of 2019, 2020 and 2021). This letter agreement also provided that Mr. Kambeyanda was eligible for our Executive Officer Severance Plan. In February of 2022, ESAB Corporation and Mr. Kambeyanda entered into an employment agreement that became effective upon the Separation. Under this employment agreement, Mr. Kambeyanda assumed the role of President and CEO of ESAB. This agreement has an initial three-year term, subject to automatic one-year term extensions thereafter, unless either party provides written notice in advance to terminate the automatic extension provision. Mr. Kambeyanda’s base salary was set at $1,000,000 and his target annual bonus was set at 115% of annual base salary. Pursuant to the agreement, he was also to be granted long-term incentive awards in 2022 with a value of $4,000,000 less the value of awards granted to Mr. Kambeyanda by Colfax in 2022, with the type of award and vesting to be determined by ESAB’s Compensation Committee. Mr. Kambeyanda’s employment agreement also provides severance benefits.

Mr. Shirley is party to a service agreement with DJO, which he entered into prior to our acquisition of the DJO business in 2019 and which was assumed as part of the acquisition. The agreement provides for a four-year initial term, with automatic one-year term extensions commencing November 14, 2020, unless we or Mr. Shirley provides written notice in advance to terminate the automatic extension provision. The agreement provides that Mr. Shirley’s base salary is a specified amount and that he is entitled to such increases as determined by the Board. In addition, Mr. Shirley is entitled to receive an annual bonus of 100% of his base salary. The employment agreement also provides severance benefits, but does not provide enhanced change in control benefits.

In addition, during 2021 each of our NEOs other than Mr. Trerotola was party to a change in control agreement with the Company. Under the change in control agreements, severance payable upon a change in control is only received upon the executive officer’s termination without cause or resignation for good reason within two years following, or the three months preceding, the change in control. The change in control agreements are designed to retain these executive officers and ensure their continued dedication to the Company notwithstanding a possible change in control.

Additional details regarding the material terms of these agreements are summarized under “Employment Agreements, Change in Control Agreements, Retention Agreements and Executive Officer Severance Plan” on page 46 and “Potential Payments Upon Termination or Change in Control” on page 50 and a summary of the material terms and eligibility requirements for the Executive Officer Severance Plan is provided under “Potential Payments Upon Termination or Change in Control.”

Stock Ownership Policy and Stock Holding Requirements

Our stock ownership policy further aligns the long-term financial interests of Company executives with those of our stockholders while also serving as a risk mitigation tool. Each executive at a vice president level or higher must retain at least one-half of vested equity awards, less shares withheld or sold for tax withholding obligations, until the executive has accumulated shares of our common stock or other qualifying forms of equity having the value described below. The ownership value thresholds are as follows:

 

 Leadership Position    Value of Shares 

 President and CEO

   6x base salary 

 EVP/SVP

   3x base salary 

 VP

   1x base salary 

All of the Company’s currently employed NEOs have achieved these ownership targets as of the date of this Proxy Statement.

CEO Recommendations

During 2021, Mr. Trerotola provided recommendations to the CHCM Committee with respect to the compensation levels for our executive officers, other than for himself. These recommendations were based on his assessment of the executive officer’s relative experience, overall performance, and impact on the achievement of our financial and operational goals and strategic objectives, combined with perspective from the competitive review data. While the Compensation and Human Capital Management Committee took these recommendations under advisement, it independently evaluated the pay recommendations for each executive officer and made all final compensation decisions in accordance with its responsibilities as set forth in the CHCM Committee Charter.

 

    

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Role of Compensation Consultants and Peer Data Review

Our CHCM Committee also obtains perspective from competitive data reviewed by FW Cook, the independent advisor to the CHCM Committee on matters of executive compensation. The CHCM Committee annually reviews the list of peer companies previously recommended by FW Cook to confirm that such peer group continues to reflect the peers used by financial analysts and governance advisors covering the Company and to represent our growth trajectory, revenue, market capitalization and overall scope and nature of operations. The peer group referenced in 2021 remained unchanged from he prior year and was as follows:

 

 2021 Peer Group          

 AMETEK, Inc.

   IDEX Corporation    STERIS plc

 The Cooper Companies, Inc.

   ITT Inc.    Teleflex Incorporated

 Crane Co.

   Kennametal Inc.    The Timken Company

 Dover Corporation

   Lincoln Electric Holdings, Inc.    Varian Medical Systems

 Flowserve Corporation

   Pentair plc    Xylem Inc.

 Haemonetics Corporation

   Regal Beloit Corporation    Zimmer Biomet Holdings, Inc.

 Hill-Rom Holdings, Inc.

   Rexnord Corporation   

 Hubbell Incorporated

   Snap-on Incorporated     

Competitive review data drawn from this group was utilized by the CHCM Committee as one of many reference points to assist in its compensation decisions, and for certain NEOs, competitive review data drawn from this group was used to “benchmark” the amount of compensation paid to such NEOs.

In the fall of 2021, the CHCM Committee, in consultation with FW Cook, reviewed the Company’s peer group in anticipation of the spin-off of ESAB Corporation, and selected a new go-forward peer group that the Company will utilize in 2022 following the completion of the spin-off. The new peer group reflects the Company’s transformation into a focused and growth-driven innovative medical technology company.

Independence of Compensation Consultant

In April 2022, the CHCM Committee considered the independence of FW Cook in light of the SEC rules regarding conflicts of interest involving compensation consultants and NYSE listing standards regarding compensation consultant independence. The CHCM Committee requested and received a letter from FW Cook addressing conflicts of interest and independence, including specific factors enumerated in both relevant SEC rules and NYSE listing standards. The CHCM Committee discussed and considered these factors, and other factors it deemed relevant, and concluded that FW Cook is independent and that its work during 2021 did not raise any conflict of interest.

Compensation Program and Risk

As part of our continued appraisal of our compensation program, management, with oversight from the CHCM Committee, annually reviews our compensation policies and practices and the design of our overall compensation program in relation to our risk management practices and any potential risk-taking incentives. This assessment includes a review of the primary elements of our compensation program in light of potential risks:

Compensation Program Risk Considerations

 

Pay Mix

  

  Compensation program includes an appropriate mix of short- and long-term incentives, which mitigate the risk of undue focus on short-term targets while rewarding performance in areas that are key to our long-term success.

  Base salaries are set at competitive levels to promote stability and provide a component of compensation that is not at risk.

   

Performance Metrics and Goals

  

  Distinct performance metrics are used in both our short-term (AIP) and long-term incentive plans.

  Our Annual Incentive Plan is designed with a payout scale (including a maximum cap) that supports our pay-for-performance philosophy, as set forth on page 31.

 

Long-Term Incentives

  

  The equity grant portion of our compensation program, combined with our stock ownership guidelines and stock holding requirements, is designed to align the long-term interests of our executives with those of our stockholders.

   

 

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We have controls and other policies in place that serve to limit excessive risk-taking behavior within our compensation program, including, but not limited to, the following:

Compensation Risk Mitigation Components

 

Compliance Risk Mitigation

  

  Oversight of our compensation process and procedures by the CHCM Committee, each member of which has been determined by the Board to be independent under applicable SEC rules and NYSE listing standards;

  Internal controls over our financial reporting, which are maintained by management and reviewed as a part of our internal audit process and further reviewed and tested by our external auditors, as overseen by the Audit Committee; and

  Audit Committee oversight and review of financial results and non-GAAP metrics used in certain components of our AIP and long-term incentives.

   

Personnel Risk Mitigation

  

  Implementation of and training on Company-wide standards of conduct, as described on page 18 under “Standards of Conduct.”

 

Risk Mitigation Policies

  

  Provisions in the Company’s insider trading policy prohibiting hedging transactions that would allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities;

  A policy prohibiting pledging of Company shares after February 17, 2014; and

  A clawback policy applicable to all executive officers.

   

The CHCM Committee reviews with management the results of its assessment annually. Based on its most recent review, the CHCM Committee concluded that the risks arising from Company compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company.

Additionally, the CHCM Committee also reviews the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development and retention.

Hedging Ban

Any director, officer or employee of the Company is prohibited from engaging in short sales, transactions in derivative securities (including put and call options), or other forms of hedging and monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, that allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities.

Pledging Policy

Our Board has adopted a policy that prohibits any director or executive officer from pledging as security under any obligation any shares of Company common stock that he or she directly or indirectly owns and controls (other than shares already pledged as of February 17, 2014). Any shares of Company common stock that were pledged prior to February 17, 2014 and remain pledged do not count toward meeting our stock ownership requirements.

Clawback Policy

The CHCM Committee has adopted a clawback policy applicable to our executive officers. Under the policy, in the event the Company is required to restate its financial results due to material non-compliance with any financial reporting requirement under the securities laws as generally applied, the Board will review all bonus payments made, including all bonus payments under our Annual Incentive Plan, and all performance-based equity compensation that was earned or vested on the basis of having met or exceeded financial results during the three years prior to the date that the Company determines such restatement is required.

If the Board determines that such payments or the amount of awards earned/vested would have been lower had they been determined or calculated based on such restated results, the Board will, to the extent permitted by governing law, seek to recoup for the benefit of the Company the value of such excess payments made to and/or equity awards earned by executive officers. The Board maintains discretion, to the extent permitted under applicable law, not to seek such recoupments if the Board determines, in the exercise of its fiduciary duties, that under the specific circumstances it would not be appropriate to seek to recover such amounts. The Company may effect such recoupment by requiring executive officers to pay such amount(s) to the Company, by set-off, by reducing future compensation, or by such other means or combination of means as the Board determines to be appropriate.

 

    

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Equity Grant Practice

The CHCM Committee has the authority to grant equity awards. The Company does not time the grant of equity awards around material, non-public information. Grant dates are determined either as of the date of CHCM Committee approval or on the date of a specific event, such as the date of hire or promotion, for certain executive officers. The target grant value is translated into a number of shares underlying each grant using a valuation formula that, for PRSUs and RSUs, incorporates a 20-day average closing price up to and including the grant date, to avoid the potential volatility impact of using a single-day closing price.

The CHCM Committee has delegated authority to our CEO and Chief Human Resources Officer for non-annual grants of equity awards to associates who are non-executive officers. The aggregate grant date value of such equity awards may not exceed $4,000,000 during the fiscal year period. Such awards are subject to further restrictions on individual size, and awards must be made pursuant to the terms of award agreement forms previously approved by the Board or the CHCM Committee. The effective grant date of these awards is on the first trading day on or after the date of hire or promotion for newly hired employees following review and approval by the CEO or Chief Human Resources Officer, as applicable. The CHCM Committee receives a report of any grants made pursuant to this delegated authority at each regularly scheduled meeting.

Rule 10b5-1 Trading Plans by Executive Officers

Certain of our executive officers have adopted written stock trading plans in accordance with Rule 10b5-1 under the Exchange Act and our insider trading policy. A Rule 10b5-1 Trading Plan is a written document that pre-establishes the amount (or ratio), prices, and dates (or range of possible dates) of future purchases or sales of our common stock. These plans are entered into during an open window period in accordance with the terms of our insider trading policy. From time to time, certain NEOs have entered into such plans (i) to sell the percentage of vested shares necessary to satisfy applicable tax withholding obligations upon the vesting and delivery of PRSUs and RSUs, or (ii) to exercise options that are approaching the end of their term.

 

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COMPENSATION AND HUMAN CAPITAL MANAGEMENT COMMITTEE REPORT

The Compensation and Human Capital Management (CHCM) Committee currently consists of Sharon Wienbar, Rajiv Vinnakota and Angela S. Lalor. Rhonda L. Jordan served as a member and Chair of the CHCM Committee during 2021 and in 2022 prior to her departure from the Board on April 4, 2022 in connection with the spin-off of ESAB Corporation. Philip Okala served as a member of the CHCM Committee during 2021 and through April 4, 2022 when he rotated off of the CHCM Committee to become a member of the Audit Committee. Ms. Jordan, Ms. Wienbar, Mr. Vinnakota and Mr. Okala each participated in the Company’s compensation decisions during 2021 and the preparation of the Compensation Discussion and Analysis, reviewing successive drafts and discussing the drafts with management. Based on its review and discussions with management, the CHCM Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s 2022 Proxy Statement and in the Company’s Annual Report on Form 10-K for 201 by reference to the Proxy Statement.

 

Compensation and Human Capital Management Committee of the Board of Directors1

Sharon Wienbar, Chair

Rajiv Vinnakota

Philip A. Okala

 

1 

Because (i) Ms. Jordan is no longer a member of the Board, and (ii) Ms. Lalor did not join the CHCM Committee until April 4, 2022 and did not participate in the activities described in this report, they are not named below this report. Mr. Okala, while no longer a member of the CHCM Committee, is named below because he participated in the activities described in this report and remains a member of the Board.

 

    

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EXECUTIVE COMPENSATION

Summary Compensation Table

 

 Name and Principal Position   Year     Salary
($)(1)
    Bonus
($)(2)
  Stock
Awards
($)(3)
    Option
Awards
($)(4)
    Non-Equity
Incentive Plan
Compensation
($)(5)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
  All Other
Compen-
sation
($)(6)
    Total
($)
 

 Matthew Trerotola

    2021       1,077,000         8,807,050       1,549,997       1,724,547         675,152       13,833,746  

 President and Chief

 Executive Officer

    2020       1,029,364         4,429,992       1,443,739       1,099,690         277,101       8,279,886  
    2019       1,071,346         2,724,996       2,724,996       1,480,600         428,088       8,430,026  

 Christopher Hix

    2021       650,000         1,685,832       499,998       666,120         77,833       3,579,783  

 Executive Vice President,

 Finance and Chief Financial Officer

    2020       626,250         1,534,148       499,994       390,000         70,255       3,120,897  
    2019       591,731         1,999,987       999,998       476,000         75,644       4,149,158  

 Daniel Pryor

    2021       575,608         2,627,914       462,506       621,615         71,739       4,359,382  

 Executive Vice President,

 Strategy and Business Development

    2020       544,356         1,419,104       462,491       339,000         75,644       2,840,595  
    2019       560,962         924,995       924,999       497,200         68,578       2,976,734  

 Shyam Kambeyanda

    2021       681,250     130,000     2,130,747       374,994       811,440         79,368       4,207,799  

 Former Executive Vice President,

 President and CEO of ESAB

    2020       575,521     130,000     1,150,592       374,996       375,000         24,737       2,630,846  
    2019       544,688     130,000     1,149,998       650,001       522,720         58,644       3,056,051  

 Brady Shirley

    2021       850,000         3,409,195       600,007       816,000         17,807       5,693,009  

 Chief Executive Officer of DJO

    2020       812,404         2,454,728           —       613,700         16,587       3,897,419  
    2019       719,231         2,499,995       500,003       702,100         22,027       4,443,356  

 

(1)

Amounts set forth in this column for 2020 reflect the impact of voluntary base salary reductions taken by our NEOs in 2020 in light of the impact of the COVID-19 pandemic on our business.

 

(2)

For Mr. Kambeyanda, the amounts represent for 2021, 2020, and 2019 the third, fourth and fifth of five installment payments of his cash signing bonus.

 

(3)

Amounts represent the aggregate grant date fair value of grants made to each NEO, as computed in accordance with FASB ASC Topic 718. See Note 14 to our consolidated financial statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the SEC on February 22, 2022. See “Long-Term Incentives” above on page 34. Assuming the maximum achievement of the performance goals applicable to the PRSUs, the grant date value of the PRSUs granted to the NEOs in 2021 would have been $6,968,056, $2,247,746, $2,079,153, $1,685,832 and $2,697,295 for Messrs. Trerotola, Hix, Pryor, Kambeyanda, and Shirley, respectively. For 2021, for each of Messrs. Trerotola, Pryor, Kambeyanda and Shirley, in addition to such NEO’s annual grant under the 2020 Omnibus Incentive Plan, amounts include the grant date fair value of the retention RSU grants made to such NEOs under their respective retention agreements. See “RSU Grants Pursuant to Retention Agreements” on page 35 and “Executive Compensation – Employment Agreements, Change in Control Agreements, Retention Agreements and Executive Officer Severance Plan” on page 46 for further details.

 

(4)

Amounts represent the aggregate grant date fair value of grants made to each NEO, as computed in accordance with FASB ASC Topic 718. See Note 14 to our consolidated financial statements for the year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2022. For 2021 grants, options were valued by the Black Scholes-based option value based on the closing price of our common stock on the date of grant. The exercise price for stock option awards equals the closing price of our common stock on the date of grant. See “Long-Term Incentives” above on page 34.

 

(5)

Amounts represent the payouts earned pursuant to our Annual Incentive Plan. For a discussion of the performance metrics on which the 2021 Annual Incentive Plan was based, including the weighting for each performance metric and the actual percentage achievement of the financial performance targets, see “Annual Incentive Plan” above on page 31.

 

(6)

Amounts set forth in this column for 2021 consist of the following:

 

 Name   Company
401(k)/Deferred
Compensation
Plan
Match and
Contribution
($)(a)
    Auto
Allowance
($)(b)
    Financial
Services
($)(c)
    Aircraft
Usage
($)(d)
    Supplemental
Long-Term
Disability
Premiums
($)(e)
    Group
Term Life
Insurance
($)(f)
    Executive
Physical($)(g)
    Total
($)
 

 Mr. Trerotola

    125,202       20,000       8,227       518,096       660       2,967             675,152  

 Mr. Hix

    62,400             10,000             660       4,773             77,833  

 Mr. Pryor

    54,877             10,000             660       2,202       4,000       71,739  

 Mr. Kambeyanda

    62,567             10,000             660       2,451       3,690       79,368  

 Mr. Shirley

    11,600                         660       5,547             17,807  

 

(a)

Amounts represent the aggregate Company match and Company contribution made by the Company during 2021 to such NEO’s 401(k) plan account and Non-Qualified Deferred Compensation Plan account. See the Nonqualified Deferred Compensation table and accompanying narrative for additional information on the Non-Qualified Deferred Compensation Plan.

 

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(b)

For Mr. Trerotola, amount represents an annual cash allowance for car-related expenses pursuant to his employment contract.

 

(c)

Amount represents amounts for financial planning services as reimbursed by the Company during 2021.

 

(d)

Amount represents Company expenses incurred for private plane usage in 2021. Heightened health and safety concerns relating to the COVID-19 pandemic, as well as concerns regarding potential travel disruptions or delays due to the pandemic, contributed to an increase in private plane usage from prior years. The Company is billed directly for the charter flight services used for Mr. Trerotola’s personal travel. The imputed income to Mr. Trerotola for these flights as calculated under the tax rules was $91,773, based on the SIFL rates promulgated by the Internal Revenue Service. The Company does not gross-up or make whole Mr. Trerotola for the income imputed to his personal use of chartered flights.

 

(e)

Amount represents premiums for supplemental long-term disability insurance.

 

(f)

Amount represents premiums for a life insurance benefit equal to 1.5 times salary, capped at $1,125,000.

 

(g)

Amount represents amounts for physical examinations as reimbursed by the Company during 2021.

Grants of Plan-Based Awards for 2021

The following table sets forth information with respect to grants of plan-based awards to our named executive officers during 2021. The number of securities and option exercise prices reported in this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

              Estimated
Possible Payouts Under
Non-Equity Incentive
Plan Awards(1)
    Estimated
Future Payouts
Under Equity Incentive
Plan Awards(2)
   

All Other
Stock
Awards:
Number of
shares of
stock

or units
(#)(3)

 

   

All Other
Option
Awards:
Number of
Securities
Underlying

Options
(#)(4)

 

   

Exercise
or Base
Price of
Option

Awards
($/Sh)

 

   

Grant
Date
Fair Value
of Stock
and

Option
Awards ($)(5)

 

 
 Name   Award Type   Grant Date     Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 
 Matthew L. Trerotola   Annual Incentive Plan           673,125       1,346,250       3,365,625                                            
  PRSUs     2/22/2021                         38,789       77,578       155,156                         3,484,028  
  RSUs     2/22/2021                                           38,789                   1,742,014  
  Stock Options     2/22/2021                                                 95,502       44.91       1,549,997  
  RSUs     3/5/2021                                                       72,009                       3,581,008  
 Christopher M. Hix   Annual Incentive Plan       260,000       520,000       1,300,000                                            
  PRSUs     2/22/2021                         12,513       25,025       50,050                         1,123,873  
  RSUs     2/22/2021                                           12,513                   561,959  
  Stock Options     2/22/2021                                                 30,807       44.91       499,998  
 Daniel A. Pryor   Annual Incentive Plan           231,600       463,200       1,158,000                                            
  PRSUs     2/22/2021                         11,574       23,148       46,296                         1,039,577  
  RSUs     2/22/2021                                           11,574                   519,788  
  Stock Options     2/22/2021                                                 28,497       44.91       462,506  
  RSUs     3/5/2021                                                       21,487                       1,068,549  
 Shyam Kambeyanda   Annual Incentive Plan           280,000       560,000       1,400,000                                            
  PRSUs     2/22/2021                         9,385       18,769       37,538                         842,916  
  RSUs     2/22/2021                                           9,384                   421,435  
  Stock Options     2/22/2021                                                 23,105       44.91       374,994  
  RSUs     3/5/2021                                                       17,422                       866,396  
 Brady Shirley   Annual Incentive Plan           425,000       850,000       2,125,000                                            
  PRSUs     2/22/2021                         15,015       30,030       60,060                         1,348,647  
  RSUs     2/22/2021                                           15,015                   674,324  
  Stock Options     2/22/2021                     36,969       44.91       600,007  
  RSUs     3/5/2021                                                       27,875                       1,386,224  

 

(1)

Amounts represent potential payouts under our Annual Incentive Plan. Threshold estimated possible payouts incorporate a 0.5 IPF, target estimated possible payouts incorporate a 1.0 IPF and maximum estimated possible payouts incorporate the 250% maximum payout cap under the Annual Incentive Plan. For a discussion of the performance metrics and actual results and payouts under the plan for fiscal 2021 see the Compensation Discussion and Analysis and the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above, respectively.

 

(2)

Amounts represent potential shares Issuable under performance-based restricted stock unit awards. The PRSUs may be earned at the end of the performance period upon certification by the CHCM Committee of the performance level that has been met. The PRSUs cliff vest at the end of the three-year performance period, if earned. Once vested, at least 50% of the shares delivered pursuant to the PRSUs (net of shares withheld or sold for taxes) must be held for an additional one-year period.

 

(3)

Amounts represent annual and retention awards of restricted stock units. The RSUs vest in three equal annual installments beginning on the first anniversary of the grant date.

 

(4)

Amounts represent stock option awards that vest ratably over three years, beginning on the first anniversary of the grant date, based on continued service.

 

(5)

The amounts shown in this column represent the full grant date fair value of grants made to each NEO, as computed in accordance with FASB ASC Topic 718. The stock prices used to calculate the grant date fair value of the grants reflect stock prices prior to the reverse stock split, specifically (i) $44.91 for the PRSUs and RSUs granted on 2/22/2021, (ii) $49.73 for the RSUs granted on 3/5/2021 and (iii) a Black-Scholes value of $16.23 for stock options granted on 2/22/2021. PRSUs are valued based upon the probable outcome of the performance conditions associated with these awards as of the grant date and such calculation is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures.

 

    

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Grants of Plan-Based Awards for 2021 – Supplementary Disclosure

As noted in the Grants of Plan-Based Awards for 2021 table above, the number of securities and option exercise prices reported in such table with respect to grants of plan-based awards to our named executive officers during 2021 have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

The following supplementary disclosure sets forth the number of securities and option exercise prices with respect to the PRSU, RSU and stock option grants of plan-based awards to Mr. Trerotola during 2021, on an as-adjusted basis to account for (i) the one-for-three reverse stock split effected on April 4, 2022 and (ii) the adjustments that occurred as of April 4, 2022 pursuant to the Employee Matters Agreement between the Company and ESAB Corporation in order to preserve the intrinsic value of outstanding Company equity awards following the spin-off of ESAB Corporation by the Company.

 

              Estimated
Future Payouts
Under Equity Incentive
Plan Awards
   

All Other
Stock
Awards:
Number of
shares of
stock

or units
(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying

Options
(#)

   

Exercise
or Base
Price of
Option

Awards
($/Sh)

 
 Name   Award Type   Grant Date     Threshold
(#)
    Target
(#)
    Maximum
(#)
 
 Matthew L. Trerotola   PRSUs     2/22/2021       22,818       45,635       91,270                    
  RSUs     2/22/2021                         22,817              
  Stock Options     2/22/2021                               56,179       76.34  
    RSUs     3/5/2021                               42,359                  

 

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Outstanding Equity Awards at 2021 Fiscal Year-End

The following table shows, as of December 31, 2021, the number of outstanding stock options, performance-based restricted stock unit awards and restricted stock unit awards held by the named executive officers. The number of securities and option exercise prices reported in this table and the related footnotes have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

    Option Awards     Stock Awards  
 Name   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
    Option
Exercise
Price
($)
    Option
Expiration
Date(1)
    Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)(2)
    Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(3)
    Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)(4)
    Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(5)
 

 Matthew L. Trerotola

    437,154             39.54       7/22/2022                          
    206,909       103,455       26.88       2/24/2026                          
    39,806       79,610       37.67       2/23/2027                          
      95,502       44.91       2/21/2028                          
                        136,931       6,294,718              
                                          341,045       15,677,839  

 Christopher M. Hix

    34,611             26,56       6/30/2023                          
    71,609             40.47       2/12/2024                          
    96,712             33.41       3/7/2025                          
    75,929       37,966       26.88       2/24/2026                          
    13,786       27,570       37.67       2/23/2027                          
          30,807       44.91       2/21/2028                          
            31,359       1,441,573      
                                                      120,091       5,520,583  

 Daniel A. Pryor

    87,209             52.02       2/15/2022                          
    114,613             26.51       11/15/2022                          
    73,715             40.47       2/12/2024                          
    181,335             33.41       3/7/2025                          
    70,235       35,118       26.88       2/4/2026                          
    12,752       25,502       37.67       2/23/2027                          
      28,497       44.91       2/21/2028                          
            41,432       1,904,629      
                                            111,084       5,106,531  

 Shyam Kambeyanda(6)

    42,123             40.47       2/12/2024                          
    58,027             33.41       3/7/2025                          
    49,354       24,678       26.88       2/24/2026                          
    10,340       20,677       37.67       2/23/2027                          
          23,105       44.91       2/21/2028                          
                            38,491       1,769,431              
                                          83,277       3,828,244  

 Brady Shirley

    37,965       18,983       26.88       2/24/2026                          
          36,969       44.91       2/21/2028                          
                            70,041       3,219,785              
                                                      62,612       2,878,274  

 

(1)

The vesting date of unvested stock option awards is set forth beside each option expiration date in the following chart. Note that the vesting date provided reflects when the options fully vest. Stock option awards vest ratably over three years beginning on the first anniversary of the grant date.

 

    

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Table of Contents
  Option Grant Date   Option Expiration Date     Option Full Vesting Date (options vest over
three year period except as noted above)

2/25/2019

    2/24/2026     2/25/2022

2/24/2020

    2/23/2027     2/24/2023

2/22/2021

    2/21/2028     2/22/2024

 

(2)

For Mr. Trerotola, the amounts represent (i) 26,133 RSUs, the remaining portion of an annual award that vests ratably over three years, beginning on February 24, 2021, (ii) 38,789 RSUs that vest ratably over three years, beginning on February 22, 2022, and (iii) 72,009 RSUs granted to Mr. Trerotola on March 5, 2021 as a retention award related to the completion of the separation of the Company’s ESAB and DJO businesses that vests ratably over three years, beginning on March 5, 2022. For Mr. Hix, the amounts represent (i) 9,797 RSUs that are the remaining portion of the promotional award granted to Mr. Hix on December 13, 2019 that vest ratably over three years, beginning on December 13, 2020, (ii) 9,049 RSUs, the remaining portion of an annual award that vests ratably over three years, beginning on February 24, 2021, and (iii) 12,513 RSUs that vest ratably over three years, beginning on February 22, 2022. For Mr. Pryor, the amounts represent (i) 8,371 RSUs, the remaining portion of an annual award that vests ratably over three years, beginning on February 24, 2021, (ii) 11,574 RSUs that vest ratably over three years, beginning on February 22, 2022, and (iii) 21,487 RSUs granted to Mr. Pryor on March 5, 2021 as a retention award related to the completion of the separation of the Company’s ESAB and DJO businesses that vests ratably over three years, beginning on March 5, 2022. For Mr. Kambeyanda, the amounts represent (i) 4,898 RSUs that are the remaining portion of the promotional award granted to Mr. Kambeyanda on December 13, 2019 that vest ratably over three years, beginning on December 13, 2020, (ii) 6,787 RSUs, the remaining portion of an annual award that vests ratably over three years, beginning on February 24, 2021, (iii) 9,384 RSUs that vest ratably over three years, beginning on February 22, 2022, and (iv) 17,422 RSUs granted to Mr. Kambeyanda on March 5, 2021 as a retention award related to the completion of the separation of the Company’s ESAB and DJO businesses that vests ratably over three years, beginning on March 5, 2022.. For Mr. Shirley, the amounts represent (i) 10,860 RSUs, the remaining portion of an annual award that vests ratably over three years, beginning on February 24, 2021, (ii) 16,291 RSUs that vest ratably over two years, beginning on February 24, 2022, (iii) 15,015 RSUs that vest ratably over three years, beginning on February 22, 2022, and (iv) 27,875 RSUs granted to Mr. Shirley on March 5, 2021 as a retention award related to the completion of the separation of the Company’s ESAB and DJO businesses that vests ratably over three years, beginning on March 5, 2022.

 

(3)

The amounts shown in this column represent the market value of the unvested PRSUs or restricted stock units, as applicable, based on the closing price of the Company’s common stock on December 31, 2021, which was $45.97 per share, multiplied by the number of units, respectively, for each unvested award.

 

(4)

The amounts shown in this column reflect unearned PRSUs as of December 31, 2021. If earned, these PRSUs are then subject to an additional service-based vesting period. The amounts shown in this column reflect awards made in 2019, 2020 and 2021 and show the target amount of PRSUs that may be earned at the end of the performance period upon certification by the CHCM Committee. The amounts would cliff vest at the end of the three-year performance period, if earned. For awards granted in 2019, once vested, at least 50% of the shares delivered pursuant to the PRSUs (net of shares withheld or sold for taxes) must be held for an additional one-year period. The PRSUs granted in 2019 vested on February 25, 2022 and the amounts represent (i) 185,067 shares earned for Mr. Trerotola, (ii) 67,915 shares earned for Mr. Hix, (iii) 62,821 shares earned for Mr. Pryor; and (iv) 44,145 shares earned for Mr. Kambeyanda. Mr. Shirley had no 2019 PRSU awards. The PRSUs granted to Messrs. Trerotola, Hix, Pryor and Kambeyanda in 2019 are reported at 172.86% of target. For 2021, these amounts are reflected in the “Grants of Plan-Based Awards for 2020” table above under the column “Estimated Future Payouts Under Equity Incentive Plan Awards” and for 2020 are reflected in the “Grants of Plan-Based Awards for 2020” table in the Proxy Statement for the 2021 Annual Meeting.

 

(5)

The amounts shown in this column represent the market value of the unearned PRSUs based on the closing price of the Company’s common stock on December 31, 2021, which was $45.97 per share, multiplied by the threshold number of units, respectively, for each unvested and unearned performance stock award.

 

(6)

Outstanding equity awards held by Mr. Kambeyanda at the time of the Separation were assumed by ESAB and adjusted to reflect the Separation.

 

 

Employment Agreements, Change in Control Agreements, Retention Agreements and Executive Officer Severance Plan

 

Messrs. Trerotola and Pryor are party to our current form of employment agreement for executive officers, which was adopted by the Company on September 15, 2010, and Mr. Hix is party to an employment letter agreement entered into upon his hire.

Mr. Shirley is party to an employment agreement with DJO, which he entered into prior to our acquisition of the DJO business in 2019. The agreement provides for a four-year initial term, with automatic one-year term extensions commencing November 14, 2020, unless we or Mr. Shirley provides written notice in advance to terminate the automatic extension provision. The agreement provides that Mr. Shirley’s base salary is a specified amount and that he is entitled to such increases as determined by the Board. In addition, Mr. Shirley is entitled to receive an annual bonus of 100% of his base salary. The employment agreement also provides severance benefits, but does not provide change in control benefits.

 

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Messrs. Hix, Pryor and Shirley are party to our current form of change in control agreement for executive officers, which was approved by the Board on October 27, 2020. Mr. Kambeyanda was also party to such agreement prior to the Separation.

We also maintain an Executive Officer Severance Plan, which provides for severance benefits upon a termination without cause or a resignation for good reason for executive officers who are not otherwise contractually entitled to severance compensation. The Executive Officer Severance Plan does not provide for change in control benefits. Mr. Kambeyanda was the only NEO subject to this plan. and participated in this plan prior to the Separation.

Employment Agreements, Change in Control Agreements and Retention Agreements

Messrs. Trerotola and Pryor are each parties an employment agreement based on the Company’s form of employment agreement for executive officers. Mr. Trerotola’s employment agreement has a three-year term and Mr. Pryor’s agreement has a two-year term and, in each case, is subject to automatic extension unless the Board or the executive provides written notice to terminate the automatic extension provision. In addition, in the case of Mr. Trerotola, in the event we undergo a “change in control” (as described below under “Potential Payments Upon Termination or Change in Control”) during the term of the employment agreement, the agreement will be automatically extended to the second anniversary of the change in control. Each officer’s base salary may not be reduced below the amount previously in effect without the written agreement of the executive.

With respect to the benefits payable to Mr. Trerotola under his agreement upon a change in control of Enovis, the benefits are only paid upon a “double trigger,” meaning a change in control event must occur and Mr. Trerotola must either be terminated without cause by Enovis (or its successor) or must resign for good reason.

On October 27, 2020, the Board approved a new form of change in control agreement for certain executive officers. Messrs. Hix, Pryor and Shirley are each parties to change in control agreements based on this form, and Mr. Kambeyanda was a party to this agreement prior to the Separation. The change in control agreements supersede and replace any prior agreement between the Company and such executive officers with respect to a “change in control” of the Company (as described below under “Potential Payments Upon Termination or Change in Control”).

Pursuant to the change in control agreements, upon a change in control of the Company, each executive officer will be entitled to an annual base salary, cash bonus opportunity and benefits package equal to or greater than the base salary, cash bonus opportunity or benefits package in effect for such executive officer immediately prior to the change in control. If during the two year period following, or the three month period preceding, a change in control of the Company, (a) the Company terminates the executive officer’s employment other than for cause or by reason of death or disability (as such terms are defined in the change in control agreements) or (b) the executive officer resigns for good reason (as such term is defined in the change in control agreements), the Company will pay the executive officer an amount equal to: (i) two times the annual base salary of such executive officer plus (ii) two times the target cash bonus opportunity of such executive officer. Any outstanding long-term equity incentive awards held by the executive officer will continue to be treated in accordance with the terms and conditions of the award agreements and plans pursuant to which such awards were granted.

Each change in control agreement has an initial two-year term, subject to automatic extension for successive one-year periods unless either the Company or the executive officer gives notice of non-renewal to the other or the agreement is otherwise terminated pursuant to its terms.

On March 5, 2021, the Company entered into retention agreements with Messrs. Hix, Pryor, Shirley and Trerotola. Under these agreements, a retention payment equal to either the executive officer’s 2021 annual base salary plus his 2021 annual cash bonus plan amount at target level (for each of Messrs. Trerotola, Pryor and Shirley) or the executive officer’s 2021 long term incentive compensation opportunity (for Mr. Hix) is earned if (a) the executive officer is still employed on the 12-month anniversary of consummation of the Separation or, (b) if the Separation does not occur by December 31, 2022, the 12-month anniversary of December 31, 2022. However, in the event the executive officer’s employment is terminated upon his death, upon mutual consent or by the Company without cause, or if the executive officer resigns his employment for Good Reason (as defined in the retention agreement) following the consummation of the Separation, the executive officer or his estate is entitled to receive the retention payment. For Messrs. Hix, Pryor, Shirley and Trerotola, the retention payment will be paid in the first regular payroll following the six month anniversary of the completion of the Separation and is subject to a 50% clawback if the executive officer is terminated for cause or separates without good reason or other than by mutual consent prior to the twelve month anniversary of the Separation. In addition, the retention agreements provide that, as of the date of the agreement, the terms of all outstanding and unvested options and RSUs will be modified so that if the executive officer separates by mutual consent, terminates for good reason after the Separation, dies or is terminated without cause, then his options and RSUs vest.

In March 2021, Mr. Trerotola was granted 72,009 RSUs, Mr. Pryor was granted 21,487 RSUs and Mr. Shirley was granted 9,292 RSUs under their retention agreements. These grants vest ratably over a three-year period subject to the NEO remaining in service on the relevant vesting dates, except in certain qualifying terminations. Due to the value of his potential cash retention payment as described in the preceding paragraph, Mr. Hix did not receive an additional grant of equity under his retention agreement.

Additionally, also on March 5, 2021, the Company entered into a retention agreement with Mr. Kambeyanda. Under his agreement, a retention payment equal to Mr. Kambeyanda’s 2021 annual base salary plus his 2021 annual cash bonus plan amount (at target

 

    

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level) is earned if (a) the Separation does not occur by December 31, 2022 and (b) Mr. Kambeyanda remains employed by the Company on December 31, 2022. However, if Mr. Kambeyanda’s employment is terminated upon his death, upon mutual consent or by the Company without cause, Mr. Kambeyanda or his estate is entitled to receive the retention payment. In addition, Mr. Kambeyanda’s retention agreement provides that, as of the date of the agreement, the terms of all outstanding and unvested options and RSUs will be modified so that if Mr. Kambeyanda separates by mutual consent, terminates for good reason after the Separation, dies or is terminated without cause, then his options and RSUs vest and his outstanding performance based awards shall be earned at pre-defined measurement dates and subject to payout at the end of the performance period.

Mr. Kambeyanda also received a grant of 17,422 RSUs under his retention agreement in March 2021. This grant vests ratably over a three-year period, subject to Mr. Kambeyanda remaining in service on the relevant vesting dates, except in certain qualifying terminations. These RSUs, as well as the other obligations under Mr. Kambeyanda’s retention agreement, were assumed by ESAB at the time of the Separation.

In entering into the retention agreements, the CHCM Committee took into account the considerations described on page 35. In addition, with these employment, retention and change in control agreements, the Company desired to ensure the continued dedication of these executive officers, notwithstanding the uncertainties regarding the Separation and possibility of a change in control, and to retain such officers in our employ after any such transaction. We believe that, should the possibility of a change in control arise, Enovis should be able to receive and rely upon our officers’ advice as to the best interests of the Company and without the concern that such officer might be distracted by the personal uncertainties and risks created by the potential change in control. In the event, however, that such officer is actually terminated during the period beginning three months prior to a change in control event or within a certain period of time following the change in control (or prior to the end of the term of the applicable employment agreement should the change of control not be consummated), which termination may be out of their control (i.e., by the successor company or management), we believe that the officers should be compensated for their efforts in positioning Enovis for the possibility of an acquisition event. Additional information on certain benefits provided under the forms of employment agreement and change in control agreement in certain terminations or in connection with a change of control is discussed below under “Potential Payments Upon Termination or Change in Control.”

 

 

Option Exercises and Stock Vested

 

The following table provides information regarding the vesting of earned PRSUs and RSUs and option exercises during 2021. The number of shares acquired upon exercise or vesting and the value realized before payment of any taxes and broker commissions is reflected below. Value realized represents the product of the number of shares received upon exercise or vesting and the closing market price of our common stock on the exercise or vesting date, less the exercise price for options. Mr. Shirley did not exercise any Company options in 2021.

Option Exercises and Stock Vested During Fiscal 20211

 

     Option Awards      Stock Awards  
  Name    Number of Shares
Acquired on Exercise
(#)
     Value Realized
on Exercise
($)
    

Number of Shares
Acquired on Vesting

(#)

     Value Realized
on Vesting
($)
 

  Matthew Trerotola

     661,009        13,251,644        55,986        2,194,143  

  Christopher M. Hix

     90,000        1,739,691        55,375        2,655,400  

  Daniel A. Pryor

     30,801        54,757        81,159        3,957,331  

  Shyam Kambeyanda

     24,644        634,125        32,924        1,580,700  

  Brady Shirley

                   25,075        1,134,052  

 

1 

The share numbers reported in this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

 

Nonqualified Deferred Compensation

 

We maintain the Enovis (formerly Colfax) Corporation Nonqualified Deferred Compensation Plan (the “Nonqualified Plan”) to provide certain select members of management and other highly compensated employees, including each of the NEOs, with an opportunity to defer a stated percentage of their base compensation or their bonus compensation without regard to the compensation limits imposed by the Internal Revenue Code for our 401(k) plan. We established the Nonqualified Plan to allow these individuals to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Enovis employees who are not limited by the Internal Revenue Code limits. The plan is “unfunded,” meaning there are no assets segregated for the exclusive benefit of plan participants.

 

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The Nonqualified Plan allows the NEOs to defer up to 50% of their base salaries and up to 75% of their bonus compensation. In addition, during 2021 we matched up to 4% of all excess deferrals by the NEOs and provided a 2% Company contribution. Our NEOs vest in these Company contributions to the Nonqualified Plan on the same terms as comparably contributions vest under the Company’s 401(k) plan.

Deferrals under the Nonqualified Plan are notionally invested among a number of different mutual funds, insurance company separate accounts, indexed rates or other measurement funds, which are selected periodically by the plan administrator to best match the funds offered in the qualified 401(k) plan. Each participating NEO can allocate his deferrals among these notional fund investment options and may change elections at any time by making a change of election with the plan administrator. Enovis notionally invests its match and contribution amounts in the same investment options in the same amounts and allocations as the reference funds selected by the officer.

Simultaneously with the executive’s election to defer amounts under the Nonqualified Plan, the executive must elect the time and form of payment for the deferred amounts, which may generally be either a lump sum distribution or in quarterly installments payable over a period of one to ten years following a specified date (that must be at least one year following the end of the year to which the officer’s deferral election relates) or at least six months following the officer’s separation from service. Limited changes to deferral elections are permitted in accordance with the terms of the Nonqualified Plan. If no election is made, the benefit will be paid in a lump sum on the last day of the month which occurs six months after the executive’s separation from service. Deferred amounts may alternatively be paid out in a lump sum in the event of an executive’s death or disability or in the event of an unforeseeable financial emergency, Furthermore, in the event the executive’s account balance at the time of his or her separation from service is less than $15,000, payment of the account balance will be made in a lump sum on or before the later of (i) December 31 of the calendar year of separation, or (ii) the date 2.5 months after the executive’s separation from service.

The Company also maintains the Enovis (formerly Colfax) Corporation Excess Benefit Plan (the “Excess Benefit Plan”) which was frozen to new participants and future new deferrals on December 31, 2015. Like the Nonqualified Plan, the Excess Benefit Plan is an unfunded non-qualified deferred compensation plan in which Mr. Pryor holds an account balance. Like the Nonqualified Plan, amounts deferred under the Excess Benefit Plan are notionally invested in offered measurement funds as selected by the plan participant and will be distributed in accordance with participant elections and the terms of the Excess Benefit Plan following a participant’s separation from service, death or disability.

The Company also maintains the DJO Global Executive Deferred Compensation Plan (the “DJO Nonqualified Plan”), which was acquired in connection with the acquisition of DJO. The DJO Nonqualified Plan was frozen to new participants and future deferrals on December 31, 2019. Like the Nonqualified Plan, the DJO Nonqualified Plan is an unfunded non-qualified deferred compensation plan. Mr. Shirley holds an account balance in this plan. Like the Nonqualified Plan, amounts deferred under the DJO Nonqualified Plan are notionally invested in offered measurement funds as selected by the plan participant and will be distributed in accordance with participant elections. Deferred amounts may generally be paid out in either a lump sum distribution or in annual installments payable over a period of two to ten years following a specified date or the officer’s separation from service (subject to any required 6-month delay). Deferred amounts will alternatively be paid out in a lump sum in the event of an executive’s death.

Nonqualified Deferred Compensation

 

  Name    Executive
Contributions
in Last FY
($)(1)
     Registrant
Contributions
in Last FY
($)(2)
     Aggregate
Earnings
in Last FY
($)(3)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last FYE
($)
 

  Matthew L. Trerotola

     144,463        107,802        260,969               1,900,723  

  Christopher M. Hix

     99,000        45,000        45,082               532,096  

  Daniel A. Pryor

     51,747        37,477        301,708               1,664,370  

  Shyam Kambeyanda

     27,007        45,167        72,111               574,671  

  Brady Shirley

                   8,166               79,636  

 

(1)

With respect to each applicable NEO, amounts represent deferred salary and deferred bonus amounts that are reported in the Summary Compensation Table above under the applicable column.

 

(2)

All amounts reported in this column for each applicable NEO are reported in the “All Other Compensation” column of the Summary Compensation Table above.

 

(3)

No amounts reported in this column for each applicable NEO are reported in the Summary Compensation Table above.

 

    

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Potential Payments Upon Termination or Change in Control

 

 

The information below describes relevant employment agreement, change in control agreement, severance plan and equity plan provisions for payments upon termination or a change in control and sets forth the amount of compensation that could have been received by each of the NEOs in the event such executive’s employment had terminated under the various applicable triggering events described below as of December 31, 2021. The benefits discussed below are in addition to those generally available to all salaried employees, such as distributions under the 401(k) plan, health care benefits and disability benefits or vested amounts payable under the Nonqualified Plan and Excess Benefit Plan described above. In addition, these benefits do not take into account any arrangements that we may provide in connection with an actual separation from service or a change in control. Due to the number of different factors that affect the nature and amount of any benefits provided in connection with these events, actual amounts payable to any of the NEOs should a separation from service or change-in-control occur during the year will likely differ, perhaps significantly, from the amounts reported below. Factors that could affect such amounts include the timing during the year of the event, the Company’s stock price, and the target amounts payable under annual and long-term incentive arrangements that are in place at the time of the event.

Employment Agreements

Pursuant to the terms of the employment agreements with each of Messrs. Trerotola, Pryor and Shirley, each executive is entitled to the following severance payments or benefits in the event his employment is terminated by us without “cause” or the executive resigns for “good reason,” in the case of Messrs. Trerotola and Pryor, or as a result of a “constructive termination,” in the case of Mr. Shirley (each as described below):

 

 

For Mr. Trerotola, (i) the payment of his base salary then in effect for 24 months following termination, (ii) an amount equal to 200% of his target annual incentive bonus for the year of termination paid in equal installments over the 24 months following termination, and (iii) COBRA coverage for 24 months or until he becomes eligible for coverage by another company or is no longer eligible for COBRA;

 

 

For Mr. Pryor, a lump sum payment equal to one times Mr. Pryor’s base salary in effect and his target annual incentive compensation for the year of termination (or, if greater, the average of the two highest actual annual incentive payments made to the executive during the last three years);

 

 

For each of Messrs. Trerotola and Pryor, a lump sum payment equal to the executive’s pro rata annual incentive compensation for the year of termination subject to the performance criteria having been met for that year under the Annual Incentive Plan; and

 

 

For Mr. Shirley, (i) a lump sum payment equal to one and a half times the sum of Mr. Shirley’s base salary in effect and his target annual incentive compensation for the year of termination and (ii) a pro rata portion of Mr. Shirley’s annual bonus that would have been earned for the year of termination.

In the event we terminate Mr. Trerotola’s employment without “cause,” or Mr. Trerotola terminates his employment for “good reason” within three months prior to a “change in control event” (as described below), or two years after a “change in control”, the terms of his employment agreement would entitle him to the following severance payments or benefits:

 

 

a lump sum payment equal to two times his base salary in effect and his target annual incentive compensation for the year of termination (or, if greater, the average of the two highest actual incentive payments made to him during the last three years);

 

 

a lump sum payment equal to his pro rata annual incentive compensation for the year of termination subject to the performance criteria having been met for that year under the Annual Incentive Plan; and

 

 

all equity awards will immediately vest, with any performance objectives applicable to performance-based equity awards deemed to have been met at the greater of (i) the target level at the date of termination, and (ii) actual performance at the date of termination.

Mr. Shirley’s agreement does not provide for any additional payments or benefits in the event of a change in control or a termination in connection with a change in control. However, he is party to a change in control agreement, as further described under “Change in Control Agreements” below.

In each case described above, the executive’s right to the severance payments and benefits is conditioned on the executive’s execution of a waiver and release agreement in favor of the Company. In addition, each employment agreement contains standard confidentiality covenants, non-disparagement covenants, non-competition covenants and non-solicitation covenants.

 

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Under Mr. Trerotola’s and Mr. Pryor’s agreements, in the event that any payment or benefit to the executives pursuant to the employment agreements or otherwise constitute excess parachute payments under Section 280G of the Internal Revenue Code such that they would trigger the excise tax provisions of the Internal Revenue Code, such payments are to be reduced so that the excise tax provisions are not triggered, but only upon determination that the after-tax value of the termination benefits calculated with the restriction described above exceed the value of those calculated without such restriction.

Mr. Trerotola’s and Mr. Pryor’s agreements further provide that, in the event it is determined that the willful actions of the executive have resulted in a material misstatement or omission in any report or statement filed by the Company with the SEC, or material fraud against Enovis, Enovis is entitled to recover all or any portion of any award or payment made to the executive.

For purposes of the employment agreements, the following terms generally have the following meanings:

 

 

“cause” means conviction of a felony or a crime involving moral turpitude, willful commission of any act of theft, fraud, embezzlement or misappropriation against the Company or its subsidiaries or willful and continued failure of the executive to substantially perform his or her duties;

 

 

“change in control” means:

 

 

a transaction or series of transactions pursuant to which any person acquires beneficial ownership of more than 50% of the voting power of the common stock of the Company then outstanding;

 

 

during any two-year consecutive period, individuals who at the beginning of the period constitute the Board (together with any new directors approved by at least two-thirds of the directors at the beginning of the period or subsequently approved) cease to constitute a majority of the Board;

 

 

a merger, sale of all or substantially all of the assets of the Company or certain acquisitions of the assets or stock by the Company of another entity in which there is a change in control of the Company; or

 

 

a liquidation or dissolution of the Company.

 

 

“change in control event” means the earlier to occur of a “change in control” or the execution of an agreement by the Company providing for a change in control.

 

 

“constructive termination” means:

 

 

the Company’s failure to pay or cause to be paid the executive’s base salary or annual bonus, if any, when due;

 

 

a reduction in the executive’s base salary or target annual bonus;

 

 

any diminution in the executive’s title or any substantial and sustained diminution in the executive’s duties;

 

 

a relocation of the executive’s primary work location more than 50 miles without the executive’s prior written consent; or

 

 

the Company provides notice to the executive that it is electing not to extend the executive’s employment term.

 

 

“good reason” means:

 

 

upon or following a change in control, the assignment to the executive of duties materially inconsistent with his position or any alteration of the executive’s duties, responsibilities and authorities, and then only if such adjustments or assignments are not the result of the conclusion by a significantly larger successor entity and its board of directors that such executive’s role needs to be altered;

 

 

the requirement for the executive to relocate his principal place of business at least 35 miles from his current place of business;

 

 

the Company’s failure to obtain agreement from any successor to fully assume its obligations to the executive under the terms of the agreement; or

 

 

any other failure by the Company to perform its material obligations under, or breach of the Company of any material provision of, the employment agreement.

 

    

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Trerotola Pro-Rata Vesting Provisions

In addition, Mr. Trerotola’s CEO Performance Stock Unit Agreements provide that if he is terminated by the Company without “cause” (and not on account of disability) or resigns for “good reason” his outstanding performance-based equity awards shall vest pro-ratably only if the performance objectives are achieved as of the end of the performance period.

Hix Letter Agreement

Mr. Hix is subject to a letter agreement entered into with the Company upon his hire. Pursuant to that letter agreement, severance in an amount equal to the sum of his base salary and target bonus is to be provided in the event of a termination without “cause” or for “good reason.” In the event of termination in connection with a “change in control,” Mr. Hix would be entitled to the benefits provided under his change in control agreement, as described below.

Change in Control Agreements

Pursuant to the terms of the change in control agreements with each of Messrs. Hix, Kambeyanda (prior to his departure), Pryor and Shirley, in the event of a change in control, the executive will continue to be paid an annual base salary at a rate not less than such executive’s current fixed or base compensation and will be given a bona fide opportunity to earn his annual cash bonus opportunity for the year. In the event the executive’s employment is terminated by us without “cause” or he resigns for “good reason” (each as described below) during the two year period following, or the three month period preceding, a change in control, such executive is entitled to a lump sum payment equal to (i) two times the executive’s base salary plus (ii) two times his target annual cash bonus opportunity for the year.

Each executive’s right to the severance payments is conditioned on the executive’s execution of a general release of claims in favor of Enovis. In addition, each change in control agreement contains standard confidentiality covenants, non-disparagement covenants, non-competition covenants and non-solicitation covenants.

In the event that any payment or benefit under the change in control agreements would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code and would have the effect of decreasing the after-tax amounts received by the executive, the executive has the right to reduce or eliminate any such payment or benefit to avoid having the payment or benefit being deemed a parachute payment.

For purposes of the change in control agreements, the following terms have the following meanings:

 

 

“cause” means that, prior to any termination, the executive committed:

 

 

an intentional act of fraud, embezzlement or theft in connection with his employment by the Company or any subsidiary;

 

 

intentional wrongful damage to property of the Company or its subsidiaries;

 

 

intentional wrongful disclosure of secret processes or confidential information of the Company or its subsidiaries;

 

 

conviction of a criminal offense; or

 

 

intentional wrongful engagement in any competitive activity which would constitute a material breach of the duty of loyalty. and any such act is materially harmful to the Company and its subsidiaries taken as a whole.

 

 

“change in control” means any of the following:

 

 

the acquisition by any person of beneficial ownership of more than 50% of the then-outstanding common stock of the Company or the combined voting power of the then-outstanding voting securities of the Company, subject to certain exceptions;

 

 

individuals who constitute the Board as of the date of the change in control agreement (together with any new directors approved by the vote of at least a majority of the directors comprising the Board as of the date of the change in control agreement or subsequently approved) cease for any reason (other than death or disability) to constitute at least a majority of the Board;

 

 

the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, subject to certain exceptions; or

 

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approval by the Company’s stockholders of a complete liquidation or dissolution of the Company.

 

 

“good reason” means:

 

 

failure to maintain the executive in the positions with the Company or its subsidiaries which the executive held immediately prior to the change in control or the removal of the executive as a director of the Company, if applicable;

 

 

a material reduction in the nature or scope of responsibilities or duties attached to the positions the executive held with Enovis and its subsidiaries immediately prior to the change in control, a material reduction in the executive’s base salary and annual cash bonus opportunity or the termination or material modification of the material employee benefits available to the executive immediately prior to the change in control;

 

 

the liquidation, dissolution, merger, consolidation or reorganization of the Company or a transfer or all or a significant portion of its business and/or assets, unless the successor has assumed all of the Company’s duties and obligations under the change in control agreement;

 

 

the Company relocates its principal executive offices, or the Company or any subsidiary requires the executive to have his principal location of work changed, to any location more than 50 miles from the location immediately prior to the change in control or the Company or its subsidiaries require the executive to travel significantly more than was required prior to the change in control; or

 

 

any material breach of the change in control agreement by the Company or any successor.

Executive Officer Severance Plan; Mr. Kambeyanda’s Employment Agreement

Prior to the separation and his termination of employment, Mr. Kambeyanda is a participant in our Executive Officer Severance Plan, which provides for severance benefits upon termination without cause or for good reason for executive officers who are not otherwise contractually entitled to severance compensation pursuant to a separate agreement with the Company. Severance provided in the event of termination without “cause” or for “good reason” (each defined as in the form of employment agreement) is a lump sum payment equal to one times the executive’s base salary in effect and a pro rata payment of his or her target annual incentive compensation for the year of termination. The Executive Officer Severance Plan does not provide for any additional change in control benefits.

In February of 2022, ESAB Corporation and Mr. Kambeyanda entered into an employment agreement that became effective upon the Separation. Under this employment agreement, Mr. Kambeyanda assumed the role of President and CEO of ESAB. This agreement has an initial three-year term, subject to automatic one-year term extensions thereafter, unless either party provides written notice in advance to terminate the automatic extension provision. Mr. Kambeyanda’s base salary was set at $1,000,000 and his target annual bonus was set at 115% of annual base salary. Pursuant to the agreement, he was also to be granted long-term incentive awards in 2022 with a value of $4,000,000 less the value of awards granted to Mr. Kambeyanda by Colfax in 2022, with the type of award and vesting to be determined by ESAB’s Compensation Committee. Mr. Kambeyanda’s employment agreement also provides severance benefits.

Equity Awards

The vesting of outstanding equity awards, other than performance-based awards, accelerates in full upon the death or total and permanent disability of the grantee or, unless assumed or substituted as discussed below, upon a “corporate transaction” (as defined below). The vesting of the outstanding PRSUs accelerates in full upon the death or total and permanent disability of the grantee only if and when the performance criteria for such award are achieved as of the end of the performance period upon certification of the same by the CHCM Committee, or immediately if the performance period has already ended and the CHCM Committee has certified that the performance criteria have been achieved. The outstanding PRSUs will terminate and cease to vest upon a “corporate transaction,” unless prior to the corporate transaction the achievement of the performance criteria is certified by the CHCM Committee, in which case the vesting for the award will accelerate in full unless assumed or substituted as discussed below. While these benefits are available to all of our equity plan participants equally, pursuant to SEC requirements, we have included these acceleration benefits in the table below. In addition, in the event of termination of service other than for death, disability or cause, any stock option awards will remain exercisable to the extent vested for 90 days after termination of service.

A “corporate transaction” under any outstanding equity awards is generally defined as:

 

 

the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more other entities in which we are not the surviving entity;

 

    

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a sale of substantially all of our assets to another person or entity; or

 

 

any transaction which results in any person or entity, other than persons who are stockholders or affiliates immediately prior to the transaction, owning 50% or more of the combined voting power of all classes of our stock.

Accelerated vesting upon a “corporate transaction” will not occur to the extent that provision is made in writing in connection with the corporate transaction for the assumption or continuation of the outstanding awards, or for the substitution of such outstanding awards for similar awards relating to the stock of the successor entity, or a parent or subsidiary of the successor entity, with appropriate adjustments to the number of shares of stock that would be delivered and the exercise price, grant price or purchase price relating to any such award. If an award is assumed or substituted in connection with a corporate transaction and the holder is terminated without cause within a year following a change in control, the award will fully vest and may be exercised in full, to the extent applicable, beginning on the date of such termination and for the one-year period immediately following such termination or for such longer period as the compensation committee shall determine.

Estimate of Payments

The following table provides information related to compensation payable to each NEO assuming termination of such executive’s employment on December 31, 2021, or assuming a change of control or corporate transaction with corresponding qualifying termination occurred on December 31, 2021. Amounts also assume the price of our common stock was $45.97, the closing price on December 31, 2021, the last trading day of the fiscal year.

Potential Payments Upon Termination or Change of Control

 

 Executive    Matthew L.
Trerotola
     Christopher
M. Hix
     Daniel A.
Pryor
     Shyam
Kambeyanda
     Brady Shirley  
 Employment Agreement/Severance Plan Benefits:               

 Termination without “cause” or “good reason”

 (for all NEOs other than Mr. Shirley)

 or “constructive termination” (for Mr. Shirley)

              
 Payment Over 24 Months/18 Months//Lump Sum Payment(1)      4,846,500        1,170,000        1,042,200        700,000        2,550,000  
 Pro Rata Incentive Compensation(2)      1,346,250               463,200        560,000        850,000  
 Termination in connection with a “change of control”               
 Lump Sum Payment      4,846,500        2,340,000        2,084,400        2,520,000        3,400,000  
 Pro Rata Incentive Compensation(2)      1,346,250                              
 Accelerated Stock Options(3)      9,828,134        4,830,518        7,272,273        2,655,699        1,126,324  
 Accelerated PRSUs(4)      7,170,309        2,398,531        2,218,650        1,798,898        2,878,274  
 Accelerated RSUs(4)      6,294,718        1,441,573        1,904,629        1,769,431        3,219,785  
 NQDC Plans/Pension(5)      1,900,723        532,096        1,664,370        574,671        79,636  

 

(1)

For Messrs. Trerotola and Shirley, the amount is paid over the 24 months and 18 months, respectively, following termination. For the other NEOs, the amount is paid as a lump sum.

 

(2)

Assumes achievement at target.

 

(3)

In addition to accelerated vesting pursuant to Messrs. Trerotola’s and Pryor’s employment agreements, stock options accelerate upon death, total and permanent disability, and, unless assumed or substituted as discussed above, upon a “corporate transaction” as defined above.

 

(4)

Under Messrs. Trerotola’s and Pryor’s employment agreements, in the event of a termination in connection with a change in control, the performance objectives applicable to unearned PRSUs will be deemed to have been met at the greater of (i) the target level at the date of termination, and (ii) actual performance at the date of termination. In addition to accelerated vesting pursuant to the employment agreements, RSUs and earned but unvested PRSUs for which the performance criteria have been certified as achieved, accelerate upon death, total and permanent disability and, unless assumed or substituted as discussed above, upon a “corporate transaction” as defined above.

 

(5)

Amounts represent the aggregate balance of the NEO’s Excess Benefit Plan or Non-Qualified Deferred Compensation account as of December 31, 2021. For more details on these plans, see “Nonqualified Deferred Compensation” above.

 

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CEO PAY RATIO DISCLOSURE

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median compensated associate and the annual total compensation of Mr. Trerotola, our President and Chief Executive Officer. The pay ratio included in this section is a reasonable estimate calculated in a matter consistent with Item 402(u) of Regulation S-K.

For 2021:

 

 

The annual total compensation of the median compensated of all of our employees (other than our CEO) was $30,024; and

 

 

The annual total compensation of Mr. Trerotola, as presented in the Summary Compensation Table, was $13,833,746.

 

 

Based on this information, for 2021 the ratio of the annual total compensation of Mr. Trerotola, our Chief Executive Officer, to the annual total compensation of our median compensated employee was 460.8 to one.

The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

To identify our median compensated employee, as well as to determine the annual total compensation of this “median employee”:

 

 

We determined that, as of December 31, 2021, our employee population consisted of approximately 14,838 persons, of whom approximately 3,090 were employed in the United States and approximately 11,748 were employed outside the United States, based on our payroll records;

 

 

We selected December 31, 2021 as the date upon which we would identify the “median employee”;

 

 

We annualized the compensation of associates employed by us for less than a full fiscal year;

 

 

Based on payroll data for all employees aside from those noted as excluded above, we used annualized base salary or base pay rate to identify our median employee, who was a full-time, hourly associate in the Czech Republic; and

 

 

Once the median employee was identified, we calculated the elements of this employee’s compensation for 2021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-X, resulting in annual total compensation of $30,024 based on the exchange rate in effect as of December 31, 2021.

 

    

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EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes the Company’s equity plan information as of December 31, 2021. The number of securities and the weighted average exercise prices reported in this table have not been adjusted to reflect the one-for-three reverse stock split effected on April 4, 2022.

 

 Plan Category    Number of securities
to be issued
upon exercise of
outstanding options,
warrants, and rights
(a)
    Weighted-average
exercise price
of outstanding
options, warrants,
and rights (b)(1)
     Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))(c)
 

 Equity compensation plans approved by

 Company stockholders

     6,294,021     $ 35.47        2,590,182  

 Stock options

     3,660,646     $ 35.47         

 Restricted stock units

     1,388,719               

 Performance-based restricted stock units

     1,244,656 (2)              

 Equity compensation plans not approved by

 Company stockholders

                   

 TOTAL

     6,294,021     $ 35.47        2,590,182  

 

(1)

The weighted average exercise price does not take into account the shares issuable upon outstanding restricted stock units and performance-based restricted stock units vesting, which have no exercise price.

 

(2)

This number assumes shares will be issued at the maximum vesting amount for outstanding performance-based restricted stock units.

 

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our officers (as defined under Section 16(a) of the Exchange Act), directors and persons who own greater than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Based on our records and other information, we believe that each of our officers, directors and certain beneficial owners of our common stock complied with all Section 16(a) filing requirements applicable to them during 2021 on a timely basis, except that the Form 4s related to first quarter 2021 equity grants to certain directors who elected to receive DSUs in lieu of their cash retainer fees were filed two days late due an administrative delay.

 

    

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Proposal 3

Approval of Named Executive Officers’ Compensation, on a Non-Binding Advisory Basis (“Say-on-Pay”)

We are asking our stockholders to cast an advisory vote at our Annual Meeting to approve the compensation of our named executive officers, as disclosed in this Proxy Statement. Pursuant to Section 14A of the Exchange Act, we are asking that you vote on the following advisory resolution:

RESOLVED, that the 2021 compensation paid to the Company’s named executive officers, as disclosed pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.

Though the vote is non-binding, the Compensation and Human Capital Management Committee and the Board of Directors value your opinion and will consider the outcome of the vote in establishing our compensation philosophy and making future compensation decisions. At this time, we intend to seek stockholder approval of our executive compensation program on an annual basis and thus expect the next such vote to occur at our 2023 Annual Meeting of Stockholders.

Why You Should Approve Our Executive Compensation Program

As discussed in our Compensation Discussion and Analysis, we believe our compensation programs and practices are appropriate and effective in implementing our compensation philosophy, and our focus remains on linking compensation to performance while aligning the interests of management with those of our stockholders.

Vote Required

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the advisory vote approving the compensation of our named executive officers.

Board Recommendation

 

 

The Board unanimously recommends that you vote FOR Proposal 3, which is advisory approval of Enovis’ named executive officer compensation as disclosed in this Proxy Statement. We strongly urge stockholders to review our entire Compensation Discussion and Analysis and the accompanying tables, which provides complete information on the compensation awarded to the named executive officers and the reasoning supporting those awards.

 

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Proposal 4

Approval of an Amendment to the Enovis Corporation 2020 Omnibus Incentive Plan

We are asking our stockholders to approve an amendment (the “Amendment”) to our 2020 Omnibus Incentive Plan (the “2020 Plan” and together with the Amendment, collectively the “Amended 2020 Plan”). On April 3, 2020, the Board of Directors, upon recommendation of the CHCM Committee, approved the adoption of the 2020 Plan subject to approval by the Company’s stockholders at the Annual Meeting. We are asking stockholders to consider and vote upon a proposal to approve the Amendment. If approved by our stockholders, the Amendment would authorize an additional 745,000 shares of common stock, $0.001 par value per share, of the Company (which we refer to in this Proposal 4 as shares of common stock) for issuance under the 2020 Plan effective June 7, 2022. The Amendment would not make any other changes to the 2020 Plan. If the Amendment is not approved by the Company’s stockholders, the 2020 Plan will continue to operate in accordance with its current terms.

The Board recommends that you vote for the approval of the Amendment in order to allow the Company to continue our equity-based, pay-for-performance compensation philosophy. The number of shares of common stock that remain available for issuance under the 2020 Plan may not be sufficient to satisfy our equity compensation needs for 2022 and beyond. Equity compensation aligns the compensation of our non-employee directors and employees with the investment interests of our stockholders and promotes a focus on long-term value creation. As of April 18, 2022, approximately 168 of our regular, full-time employees held outstanding equity awards.

The affirmative vote of a majority of our shares of common stock present, in person or represented by proxy, and entitled to vote at the Annual Meeting is required to approve the Amendment. Our executive officers and non-employee directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the 2020 Plan.

The material features and provisions of the 2020 Plan are summarized below. The full text of the 2020 Plan is attached as Appendix A and the proposed Amendment is attached as Appendix B to this Proxy Statement. The summary of the 2020 Plan set forth below also assumes the approval of the Amendment. Other than the changes proposed to be made by the Amendment described above, no other terms or conditions of the 2020 Plan will change pursuant to the Amendment. The following description is not complete and is qualified in its entirety by reference to those exhibits.

Share Request Background

Our stockholders originally approved the 2020 Plan at the 2020 annual meeting of stockholders; at that time, the 2020 Plan initially authorized the issuance of an aggregate of 4,430,000 shares of common stock under the 2020 Plan. We currently have approximately 1,080,024 shares of common stock available for issuance under the 2020 Plan, which number reflects the adjustments made in connection with the one-for-three reverse stock split of the Company’s common stock following the spin-off of ESAB Corporation from the Company on April 4, 2022. In addition, the outstanding awards granted under the 2020 Plan have been adjusted in a manner to preserve the aggregate intrinsic value of the awards following the completion of the spin-off of ESAB Corporation (see the Existing Plan Benefits table below for more information). As of April 18, 2022, 1,080,024 shares of common stock remain available for grants under the 2020 Plan. With the proposed 745,000 share increase under the Amendment, 1,825,024 shares will be available for issuance under the 2020 Plan, which represents approximately 3.38% of our 54,030,880 shares outstanding as of April 18, 2022. Absent an increase in the number of authorized shares under the 2020 Plan, we may not have sufficient shares to meet our anticipated equity compensation needs for the next year. Therefore, if this Proposal 4 is not approved by our stockholders, we believe our ability to attract, motivate and retain the talent we need to compete in our industry would be seriously and negatively impacted and this could affect our long-term success.

Highlights of the Amended 2020 Plan

The 2020 Plan authorizes the CHCM Committee to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based stock, performance-based stock units, dividend equivalents, and unrestricted stock awards for the purpose of providing our non-employee directors, officers and other employees (and those of our subsidiaries and affiliates) with incentives and rewards for performance.

 

    

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We believe our future success depends in part on our ability to attract, motivate and retain high quality employees and non-employee directors and that the ability to provide equity-based and incentive-based awards under the Amended 2020 Plan is critical to achieving this success. We would be at a competitive disadvantage if we could no longer use share-based awards to recruit and compensate our non-employee directors, officers and other employees.

Some of the key features of the 2020 Plan that reflect our commitment to effective management of equity and incentive compensation and our maintenance of sound governance practices in granting awards include:

Performance-Based Awards. The 2020 Plan provides that the payment of dividend equivalents with respect to performance-based awards will accumulate, be deferred and only paid contingent upon the level of achievement of the applicable management performance goals.

Clawback. All amounts paid to a grantee under the 2020 Plan are subject to recovery under any law, governmental regulation, stock exchange listing requirement or any policy adopted by the Company and may be deducted or clawed back in accordance with such law, regulation or policy.

Minimum Vesting Period. The 2020 Plan requires that nearly all awards granted under it be subject to a one-year minimum vesting period.

Limitation on Awards to Outside Directors. The aggregate equity-based and cash compensation granted under the 2020 Plan or otherwise to Outside Directors during any calendar year will not exceed $350,000, except in the instance of a newly-elected or appointed director or a newly-designated lead director or chair, which limit is then increased to $700,000.

No Discounted Options or Stock Appreciation Rights. The 2020 Plan prohibits the grant of options or stock appreciation rights with an exercise price less than the fair market value of our shares of common stock on the grant date.

No Repricing of Options or Stock Appreciation Rights. The 2020 Plan prohibits the repricing of options or stock appreciation rights (outside of certain corporate transactions or adjustment events described in the Amended 2020 Plan) without stockholder approval.

Independent Committee Administration. Awards to our named executive officers under the 2020 Plan will be granted by a committee composed entirely of independent directors.

Term of the 2020 Plan. No awards may be granted under the 2020 Plan more than ten years from the date of initial stockholder approval of the 2020 Plan.

Summary of Material Terms of the 2020 Plan

Shares of Common Stock Available. Subject to adjustment as provided in the Amendment and the approval of this Proposal 4 by stockholders at the Annual Meeting, the number of shares of common stock that may be issued or transferred:

 

 

upon the exercise of options or stock appreciation rights;

 

 

as restricted shares released from substantial risks of forfeiture;

 

 

in payment of performance shares or performance units that have been earned;