DEF 14A of Orthofix Medical Inc.
Filed Apr 29, 2024 · FY20230000950170-24-050013
Governance of Executive Compensation
Governance of Executive Compensation Consistent with shareholder interests and market best practices, our executive compensation program includes the following sound governance features: What we do: Align executive pay with the overall performance of our business and the Company’s common stock Set meaningful performance targets for annual and performance-based stock awards, approved by our Compensation and Talent Development Committee Include caps on annual cash incentive plan payments and shares earned under performance-based stock awards Discourage unnecessary and inappropriate risk taking, and we obtain an annual independent risk assessment analysis of our executive compensation program Maintain robust stock ownership guidelines for our executive officers and directors Maintain an incentive compensation clawback policy for executive officers Include “double-trigger” change in control vesting provisions in all equity grants to executive officers Our Compensation and Talent Development Committee directly retains an independent compensation consultant who conducts an annual benchmarking of our executive compensation program against an industry peer group What we don’t do: X Pay dividends or dividend equivalents on unvested stock options, unvested time-based vesting stock awards, or unearned performance-based vesting stock awards X Have employment agreements with our executive officers X Pay excise tax gross-ups for change in control payments X Reprice stock options without shareholder approval X Provide excessive perquisites X Permit hedging or pledging of our securities by employees, including our executive officers, or directors
Practices and Policies
Practices and Policies • Experienced, multi-dimensionally diverse Board with extensive business expertise in life sciences, finance, international business, and operational matters • Commitment to frequent Board refreshment, with two of the director nominees standing for election at the Annual Meeting having joined the Board in January 2023 in connection with the Company’s merger with SeaSpine, and three of the director nominees having joined the Board in December 2023 following constructive engagement and entry into a cooperation agreement with one of the Company’s significant institutional shareholders, Engine Capital Management , described in more detail on page 16 of this proxy statement • Independent directors met in executive session at every regularly scheduled quarterly Board meeting in 2023 • 99% average attendance by directors at Board and committee meetings in 2023 • Separation of the Chair of the Board and CEO positions for the majority of 2023, with the Chair stepping in as interim CEO on September 12, 2023 until January 7, 2024, at which time the Chair of the Board and CEO positions again became separated • Active Board and committee oversight in the area of enterprise risk management, cybersecurity, and environmental, social, and governance (“ESG”) matters, inclusive of climate-related matters, with direct oversight of enterprise risk management and cybersecurity matters provided by the Audit and Finance Committee and direct oversight of ESG-related matters provided by the Nominating, Governance, and Sustainability Committee Compliance and Ethics Committee oversees and monitors a comprehensive, company-wide compliance and ethics program Corporate codes of conduct enforced at all levels of the Company and its subsidiaries Commitment to attracting, retaining, and promoting a diverse workforce through programs such as the Moving 4Ward Diversity, Equity & Inclusion Program, the Orthofix Women’s Network (“OWN”), and the Orthofix Young Professionals Group • Commitment to healthy company culture that strives to directly impact communities around the world through meaningful partnerships, our employee volunteer program Orthofix Gives Back, and charitable contributions • Ongoing commitment of resources to keep pace with evolving data privacy and cybersecurity industry practices and regulatory standards • Commitment to sustainable practices in our operations, manufacturing, and supply chain through the use of sustainable energy, waste reduction, and waste and equipment recycling • Annual Board and Board committee self-assessments, including individual board member performance evaluations • Board regularly reviews director and executive succession planning • Robust stock ownership guidelines for our executive officers and directors • Majority voting in the election of directors in uncontested elections • Structured director education and onboarding program • Shareholders owning at least 25% of our outstanding common stock may call a special meeting of shareholders • No shareholder rights plan (commonly referred to as a “poison pill”) or blank check preferred stock • Single class of shares with equal voting rights (no super voting share class) • No supermajority voting requirements to approve mergers or other business combination transactions No political or PAC contributions by the Company
Shares of common stock owned by Orthofix’s directors and executive officers
Shares of common stock owned by Orthofix’s directors and executive officers The following table sets forth the beneficial ownership of shares of our common stock, including stock options currently exercisable and exercisable within 60 days of April 22, 2024 and stock units that are vested or potentially issuable within 60 days of April 22, 2024, by each current director, each director nominee, each named executive officer listed in the Summary Compensation Table, and the persons who were our directors and executive officers as of April 22, 2024 as a group. The Percent of Class figure is based on 37,528,562 shares of our common stock outstanding as of April 22, 2024. Unless otherwise indicated, the beneficial owners exercise sole voting and/or investment power over their shares.
Shares of common stock owned by Orthofix’s directors and executive officers
| Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership | Percent of Class | | Catherine M. Burzik | 128,823(2) | * | | Alan L. Bazaar | 8,936(3) | * | | Wayne Burris | 10,163(4) | * | | Stuart M. Essig, Ph.D. | 261,087(5) | * | | Michael M. Finegan | 8,350(6) | * | | Jason M. Hannon | 57,913(7) | * | | John B. Henneman, III | 80,540(8) | * | | James F. Hinrichs | 117,260(9) | * | | Charles R. Kummeth | 23,350(10) | * | | Shweta Singh Maniar | 20,080(11) | * | | Michael E. Paolucci | 80,614(12) | * | | Massimo Calafiore | 1,000(13) | * | | Geoffrey C. Gillespie | 6,580(14) | * | | Kimberley A. Elting | 199,144(15) | * | | Keith C. Valentine | 160,607(16) | * | | Jon C. Serbousek | 514,778(17) | 1.4% | | John Bostjancic | 47,286(18) | * | | Douglas C. Rice | 184,837(19) | * | | Patrick L. Keran | 33,122(20) | * | | Kevin J. Kenny | 292,122(21) | * | | All current directors and executive officers as a group (17 persons) | 1,003,840 | 2.6% |
Shares of common stock owned by Orthofix’s directors and executive officers
* Represents less than one percent. (1)The address for each person or entity listed in the table is c/o Orthofix Medical Inc., 3451 Plano Parkway, Lewisville, TX 75056. (2) Reflects 80,040 shares owned directly, 32,763 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 16,020 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (3)Reflects 8,936 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024. (4) Reflects 10,163 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024. (5) Reflects 192,534 shares owned directly, 14,354 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 54,199 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (6) Reflects 8,350 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024. (7) Reflects 3,574 shares owned directly, 29,638 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 24,701 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (8) Reflects 34,408 shares owned directly, 14,354 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 31,778 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (9) Reflects 47,712 shares owned directly, 39,548 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (10) Reflects 15,000 shares owned directly and 8,350 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024. (11) Reflects 5,726 shares owned directly and 14,354 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024. (12) Reflects 11,066 shares owned directly, 39,548 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (13) Reflects 1,000 shares owned directly. (14) Reflects 1,913 shares owned directly and 4,667 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (15) Reflects 61,816 shares owned directly, 23,763 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 113,565 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (16) Reflects 160,607 shares owned directly based solely on the most recent Form 4 filed with the SEC on March 2, 2023. (17) Reflects 188,610 shares owned directly, 86,636 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 239,532 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (18) Reflects 47,286 shares owned directly based solely on the most recent Form 4 filed with the SEC on March 2, 2023. (19) Reflects 45,028 shares owned directly, 25,452 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 114,357 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024. (21) Reflects 39,782 shares owned directly, 105,196 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2024, and 147,144 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2024.
Shares of common stock owned by Orthofix’s directors and executive officers
| DELINQUENT SECTION 16(a) REPORTS |
Shares of common stock owned by Orthofix’s directors and executive officers
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, requires our officers and directors, and holders of more than 10% of our common stock (collectively, the “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Such persons are required by regulations of the SEC to furnish us with copies of all such filings. Based on our review of these reports and related representations by the Reporting Persons, we believe that all Section 16(a) reports were filed timely in 2023, except that the Form 4 relating to the sale of common stock for Shweta Singh Maniar on March 10, 2023 was filed sixteen business days late.
Shares of common stock owned by Orthofix’s directors and executive officers
| INFORMATION ABOUT OUR executive officers |
Shares of common stock owned by Orthofix’s directors and executive officers
Information concerning our executive officers is set forth below.
Shares of common stock owned by Orthofix’s directors and executive officers
| Name | Age | Position | | Massimo Calafiore | 52 | President and Chief Executive Officer and Director | | Julie Andrews | 53 | Chief Financial Officer | | J. Andrés Cedrón | 43 | Chief Legal Officer | | Kimberley A. Elting | 59 | President, Global Orthopedics | | Lucas Vitale | 48 | Chief People and Business Operations Officer |
Shares of common stock owned by Orthofix’s directors and executive officers
Massimo Calafiore. Mr. Calafiore was appointed President and Chief Executive Officer and as a member of the Board of Directors on January 8, 2024, and effective January 10, 2024, he became the Interim President of Global Spine. Prior to joining the Company, Mr. Calafiore served since September 2022 as Chief Executive Officer of LimaCorporate S.p.A., a global orthopedics company focused on restoring motion through digital innovation and customized hardware, until its acquisition by Enovis Corporation in January 2024. Previously, he served from September 2021 through August 2022 as Executive Vice President and Chief Commercial Officer of NuVasive, Inc., where he oversaw product marketing, commercial and commercial enablement functions, as well as NuVasive’s specialized orthopedics and clinical services. From October 2020 through August 2021, he served as NuVasive’s Executive Vice President, Global Business Units, where he was responsible for NuVasive’s product and services organization, including Spine, NuVasive Specialized Orthopedics (NSO) and NuVasive Clinical Services, and commercial enablement such as clinical professional development and global marketing. From 2017 until October 2020 he held various other leadership roles at NuVasive with increasing levels of responsibility, serving as Senior Vice President, Spine Business Unit, from January 2020 to October 2020, Senior Vice President, Global Implant Systems and General Manager of NSO, from February 2019 to December 2019, and Senior Vice President, General Manager of NSO from August 2017 to February 2019.Before his executive service at NuVasive, he spent more than 15 years supporting and leading the U.S. business for Waldemar Link, a leader in the orthopedics and medical device industry. Mr. Calafiore holds an M.Sc. in Mechanical Engineering from the University of Catania and an MBA from New York University. Julie Andrews. Ms. Andrews joined Orthofix in January 2024 and serves as Chief Financial Officer (CFO). She previously served from August 2021 to April 2023 as Chief Financial Officer of Smart Wires Technology, a global transmission grid technology company focused on enabling the transition to renewable energy. Between September 2019 and December 2020, she served as the Senior Vice President, Global Finance for Wright Medical Group, a global medical device company focused on extremities and biologics that was acquired by Stryker in 2020. She served from May 2012 to August 2019 as Wright Medical’s Vice President of Finance and Chief Accounting Officer, where she held responsibility for corporate FP&A, business-unit FP&A, operations finance and accounting functions of the business on a global basis. Ms. Andrews also spent many years in roles of increasing responsibility at Medtronic Inc., including as Vice President of Finance for the Spine and Biologics division, where she provided oversight of all FP&A and accounting functions. Early in her career, Ms. Andrews served as Senior Financial Analyst for Thomas & Betts and as an auditor for Thomas Harvey, LLC. Currently she serves on the board and as chair of the audit committee of RxSight, Inc. an ophthalmic medical device company. Ms. Andrews received a Bachelor of Science in Accounting from Indiana University. She also participated in advanced leader and director development programs at both Medtronic and Wharton School of Business. J. Andrés Cedrón. Mr. Cedrón joined Orthofix in April 2024 and serves as Chief Legal Officer and Corporate Secretary. Most recently, he served as Vice President and Corporate Secretary at Stryker from July 2022 to April 2024. In this corporate officer position, Mr. Cedrón oversaw corporate governance, SEC compliance, merger and acquisition legal activities, and ESG matters. Prior to that, Mr. Cedrón held legal leadership roles as Chief Legal Counsel for Stryker's $10 billion MSNT Group of divisions from September 2018 to July 2022, as well as the company's EMEA and Latin America regions. He has extensive expertise in regulatory and compliance frameworks, anti-corruption programs, litigation management, and commercial legal strategy. Mr. Cedrón started his career as a corporate attorney at the Sullivan & Cromwell and Hunton & Williams law firms. He holds a J.D. from Columbia Law School and a B.A. from Colorado College. He has also participated in executive leadership programs from various institutions, including Harvard Business School. Kimberley A. Elting. Ms. Elting has served as our President, Global Orthopedics since April 2022 and, served as our Interim Chief Legal Officer from November 2023 until April 2024. She originally joined the Company as Chief Legal Officer in September 2016 and was named Chief Legal and Administrative Officer in 2017, and served as Chief Legal and Development Officer from 2020 until January 2023. Before joining Orthofix, she had served since 2013 as General Counsel and Vice President Corporate Affairs at TriVascular Technologies, Inc.. In this role, she led the legal, compliance, human resources (HR) and government affairs functions for the company. Between 2007 and 2012, she served in various roles of increasing responsibility with St. Jude Medical, including General Counsel and Vice President of HR and Health Policy for the Neuromodulation Division. She was previously a partner at the Jones Day law firm where she counseled clients in the health care sector on mergers and acquisitions and regulatory matters. A graduate of Ithaca College, Ms. Elting earned her Law Degree from the University of Denver and an LL.M. in Health Law from Loyola University Chicago. Lucas Vitale. Mr. Vitale joined Orthofix in March 2024 and serves as Chief People and Business Operations Officer. From October 2023 to March 2024 he served as the Chief Human Resources Officer (CHRO) at ReNAgade Therapeutics, a venture backed pharmaceutical company, and from April 2022 to October 2023 he served as the CHRO at Berkeley Lights/PhenomeX, a life sciences tools and services company acquired by Bruker. He also served as Senior Vice President of Human Resources at Arena Pharmaceuticals from April 2022 to October 2023. Mr. Vitale brings extensive spine and orthopedics experience having served as the CHRO at NuVasive from January 2019 to September 2021, where he led the global HR strategy for the company’s approximately 2,700 employees. During the seven years he was at NuVasive, he played an integral role in mergers and integrations, oversaw key commercial talent development efforts, and formalized the company’s Diversity, Equity and Inclusion program. Mr. Vitale earned a Bachelor of Science in Business Administration from Hawaii Pacific University and a Master of Arts in Industrial/Organizational Psychology from Alliant International University.
Shares of common stock owned by Orthofix’s directors and executive officers
| INFORMATION ABOUT OUR DIRECTORS |
Executive leadership transition
Executive leadership transition During 2023 and early 2024, the Company experienced a number of changes in its senior leadership. Following the merger with SeaSpine that was consummated on January 5, 2023, to assist with transition matters, our former President and Chief Executive Officer, Mr. Serbousek served as Executive Chairman until the date of our 2023 Annual Meeting and our former Chief Financial Officer, Mr. Rice, served as a consultant to the Company through the end of June 2023. Please see “Transition Agreements with Jon C. Serbousek and Douglas C. Rice” and “2023 Potential Payments Upon Termination or Change in Control” below for additional information regarding separation benefits for Mr. Serbousek and Mr. Rice. Following an investigation conducted by independent outside legal counsel and directed and overseen by the Company's independent directors, the Board terminated the employment of Messrs. Valentine, Bostjancic, and Keran, the Company’s former President and Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer, respectively, each effective September 11, 2023. As a result of the investigation, the Board determined that each of these executives engaged in repeated inappropriate and offensive conduct that violated multiple code of conduct requirements and was inconsistent with the Company’s values and culture. The Company notified each of Messrs. Valentine, Bostjancic and Keran that their respective terminations were being made for “Cause,” as defined in applicable employment-related agreements (including each executive’s respective Change in Control and Severance Agreement, dated June 19, 2023). The Company also notified each of Messrs. Valentine, Bostjancic and Keran that it did not believe it was required to make any further payments to them, other than payment of salary through September 12, 2023. The Board also requested that Mr. Valentine resign as a director, which he did in October 2023. Each of the former executives has made pending arbitration claims asserting that the respective former executive was wrongfully terminated for “Cause” because the former executive’s conduct did not meet the contractually applicable definition of “Cause,” and seeking severance payments, as well as the value of forfeited equity grants, under applicable change in control and severance agreements and further damages as a result of purported defamatory statements. The Company disagrees with many of the assertions made in the arbitration claims and intends to vigorously defend the asserted claims. In connection with these transitions, the Board appointed interim officers from its existing executive and Board leadership in September 2023 to serve as Interim Chief Executive Officer, Interim Chief Financial Officer, and Interim Chief Legal Officer while the Company engaged in a thorough process to select the successors for such positions. The Board appointed our non-executive Chair of the Board, Ms. Burzik, to serve as Interim Chief Executive Officer, our Controller, Mr. Gillespie, to serve as Interim Chief Financial Officer, and our Senior Vice President, Chief Ethics and Compliance Officer, Ms. Leekha, as Interim Chief Legal Officer. The Board immediately began a search for permanent appointments to these three executive roles. In November 2023, Ms. Leekha ceased serving as an employee, and Ms. Elting, who had previously served as Chief Legal Officer prior to the merger with SeaSpine, was appointed as Interim Chief Legal Officer, while continuing her permanent role as President, Global Orthopedics. Mr. Calafiore was appointed as the Company’s President and Chief Executive Officer effective January 8, 2024. Mr. Calafiore will receive an annual base salary of $825,000, a target bonus of 110% of salary, and target long-term incentives of $4,000,000 (delivered via a mix of 50% performance-based restricted stock units, 25% time-based restricted stock units, and 25% performance-based stock options). Mr. Calafiore also received sign-on equity incentive awards of $3,500,000 (delivered via a mix of 50% performance-based restricted stock units, 25% time-based restricted stock units, and 25% performance-based stock options). Consistent with Orthofix’s long-standing, pay-for-performance philosophy, a significant portion of Mr. Calafiore’s compensation is at risk. Ms. Andrews was appointed as the Company's Chief Financial Officer effective January 15, 2024. Ms. Andrews will receive an annual base salary of $475,000, a target bonus of 70% of salary, and target long-term incentives of $1,800,000 (delivered via a mix of 50% performance-based restricted stock units, 25% time-based restricted stock units, and 25% performance-based stock options). Mr. Cedrón was appointed as the Company's Chief Legal Officer effective April 15, 2024. Mr. Cedrón will receive an annual base salary of $470,000, a target bonus of 70% of salary, and target long-term incentives of $1,500,000 (delivered via a mix of 50% performance-based restricted stock units, 25% time-based restricted stock units, and 25% performance-based stock options).
Compensation Guiding Principles and Philosophy
Compensation Guiding Principles and Philosophy The Committee is comprised solely of independent directors. The Committee recommends to the Board for determination by the Board, the President and Chief Executive Officer’s compensation, and discharges the responsibilities of the Board relating to all compensation of the Company’s other Section 16 officers and Executive Leadership Team (“ELT”) (including equity-based compensation for both executive officers and other key employees). The Committee guides itself in large part by our Executive Compensation Guiding Principles. These guiding principles include an executive compensation philosophy for executives that reflects a meaningful “pay-for-performance” philosophy and seeks to align compensation payouts with the goals of growing our business and increasing sustainable shareholder value. Our Executive Compensation Guiding Principles, which were reviewed and affirmed by the Committee in March 2023, are as follows: Each compensation element should be competitive within the medical device industry (anchored to a target market position) but also tailored to Orthofix’s individual circumstances and business needs. • The Committee will annually approve a group of peer companies to assess market levels of compensation. • Variable compensation should provide appropriate leverage (upside and downside) so that payouts are commensurate with performance and aligned with shareholders' interests. • Each compensation element should support Orthofix’s business strategy and objectives of attracting, retaining and motivating top talent. • The Committee recommends to the Board, for determination by the Board, the President and Chief Executive Officer's compensation, and discharges the responsibilities of the Board relating to all compensation of the Company's other Section 16 officers and members of the ELT. • Management has responsibility for compensation decisions related to all employees of the Company who are not Section 16 officers or members of the ELT, subject to limits established by the Committee (e.g., long-term incentive awards and change in control agreement participation). • The Company’s executive compensation program should be easily understood by executives. Management is responsible for effectively communicating the design and administration of the compensation program to employees. Consistent with these principles, the Committee’s compensation philosophy is to fairly compensate executive officers with an emphasis on providing incentives that balance our short-term and long-term objectives. In implementing the “pay-for-performance” compensation philosophy for the Company’s executive officers, the Committee places considerable emphasis on variable elements of pay within the executive compensation program. For 2023, the variable elements of our executive compensation program consisted of the Company’s annual cash incentive plan, which is intended to reward executive officers for achieving specific financial and operational performance goals during the fiscal year, as well as a long-term incentive plan that consisted of stock options which only have value if the value of our stock price appreciates over the life of the option and time-based vesting RSU awards. Due to the timing of our merger with SeaSpine in January 2023, we did not include performance-based awards in our annual equity grants to executives in 2023 in order to allow the management team the opportunity to thoroughly review and refine the Company’s long-term strategy and long-term operating plan following the merger before setting performance goals tied to such plan; however, we have returned to our normal practice of including performance-based equity awards in our 2024 executive compensation program. Details regarding our 2024 LTI program are provided below under “2024 Compensation Program Changes”. The Committee seeks to provide payouts through the annual cash incentive plan based on actual performance relative to pre-established financial and operational performance goals reflecting strong financial performance by the Company and its business units. These pre-established performance goals also incorporated an enterprise objective relating to ESG metrics, based on company-wide goals associated with community service. The Committee also seeks to align executives’ interests with shareholders via grants of equity compensation, which encourage executive officers to focus on achieving longer-term goals and sustained increases in shareholder value, as the value of these awards is directly commensurate with the fluctuations in the value of the Company’s common stock. In addition to variable compensation programs, executives also receive health and welfare benefits (including our 401(k) plan) that are generally consistent with the level of health and welfare benefits provided to all U.S. based Company employees and those provided by companies in our industry peer group.
Compensation Consultant
Compensation Consultant The Committee has the authority under its charter to retain, at the Company’s expense, independent compensation consultants to assist in evaluating compensation decisions. The Committee also has the authority to terminate those engagements. In accordance with this authority and to aid the Committee in fulfilling its duties, the Committee has engaged Mercer US LLC (“Mercer”) as its independent compensation consultant since September 2017. In its role as compensation consultant, Mercer, at the Committee’s request, periodically conducts reviews and recommends updates to our executive officer and director compensation programs and long-term incentive practices. In connection with their engagement, Mercer reported to the Committee regarding its independence based on the six factors outlined in SEC regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Committee considered these factors and concluded that Mercer is independent and that its engagement by the Committee raised no conflicts of interest.
Peer Group Benchmarking
Peer Group Benchmarking Decisions related to executive compensation program design and pay levels are informed, in part, by the practices and pay levels of comparable peer organizations. The Committee engages Mercer to conduct an annual executive compensation analysis that provides market competitive levels of total compensation. The assessment used in connection with setting 2023 compensation compared the compensation levels of our Section 16 officers with market data to determine whether their compensation levels remained consistent with market practice and our compensation philosophy. In conducting the assessment, Mercer made comparisons to our industry peer group and survey data including companies in the life sciences/medical devices industries. In conducting the benchmarking for 2023 pay decisions, Mercer utilized a selection of 18 peer companies. The members of the peer group were selected for inclusion principally because of their overall similarity to Orthofix in terms of annual revenue, industry sector/sub-sector, medical technology product lines and international penetration. The peer group for 2023 pay decisions consisted of the following companies in the life sciences/medical devices industries, with whom we compete against for executive talent:
Peer Group Benchmarking
| Accuray Inc. | Globus Medical Inc.(2) | | Alphatec Holdings Inc. | Haemonetics Corporation | | AngioDynamics, Inc. | Integer Holdings Corporation | | Artivion Inc. (1) | Integra LifeSciences Holdings Corporation | | AtriCure, Inc. | LivaNova PLC | | Avanos Medical, Inc. | Merit Medical Systems, Inc. | | Bioventus Inc. | Nevro Corp. | | CONMED Corporation | NuVasive, Inc.(2) | | Cardiovascular Systems Inc.(3) | ZimVie Inc. |
Peer Group Benchmarking
1 Formerly known as CryoLife, Inc. 2 NuVasive, Inc. merged with Globus Medical in September 2023 3 Cardiovascular Systems Inc. was acquired by Abbott Laboratories in April 2023
The Role of Shareholder Say-on-Pay Votes
The Role of Shareholder Say-on-Pay Votes The Company provides its shareholders with the opportunity to cast an annual advisory, non-binding vote on executive compensation (a “say-on-pay proposal”), and subsequently evaluates these results and any feedback received by shareholders. At the 2023 annual meeting of shareholders, the Company’s say-on-pay proposal was supported by approximately 95% of the votes cast at the meeting, which we believe supports the Company’s “pay-for-performance” approach to executive compensation. The Committee evaluated the results of the vote and believes that the voting results over the course of the last several years (which has included 90% or greater approval votes at each of the Company’s last eight annual meetings of shareholders) affirm shareholders’ overall support of the Company’s approach to executive compensation. The Committee believes that its continued efforts to evolve the Company’s compensation programs towards policies viewed by institutional and other shareholders as aligning executive compensation with the interests of shareholders and good corporate governance are reflected in these recent vote results. In addition to responding to the input of shareholders, the Committee also has considered many other factors in designing and evaluating the Company’s executive compensation programs, including the alignment of our compensation programs with our corporate business objectives, periodic analysis of our programs by our compensation consultant, and an annual review of data versus a comparator group of peer companies. Each of these factors is evaluated in the context of the Committee members’ fiduciary duty to act as the directors determine to be in shareholders’ best interests. Each of these factors informed the Committee’s decisions regarding named executive officers’ compensation for 2023. The Committee will continue to consider feedback from shareholders, including the outcome of the Company’s say-on-pay votes, when making future compensation decisions for its named executive officers.
Overview
Overview Our compensation program for executive officers and other key employees consists of three primary elements: • annual salary; • performance-based cash incentives in the form of annual bonuses; and • long-term equity-based incentives under our long-term incentive plan. The Committee reviews annually what portion of the Section 16 officers’ total compensation should be in the form of salary, target annual cash bonus opportunity and long-term equity-based incentive compensation. The Committee believes an appropriate mix of these elements, commensurate with our Executive Compensation Guiding Principles, will assist the Committee in meeting its compensation objectives. In addition, as further described below, we sometimes grant one-time bonuses and stock awards in connection with new hires and promotions, or for retention or special recognition purposes. As part of its decision-making process, the Committee reviews information setting forth all components of the compensation and benefits received by our named executive officers. This information includes a specific review of dollar amounts for salary, target bonus opportunity, and long-term equity-based incentive compensation. The charts below show the annual total target direct compensation (full-year base salary, target annual cash incentive compensation, and long-term equity incentive compensation awards) for Mr. Valentine, our former President and Chief Executive Officer (who served in this role through September 2023) and our other named executive officers for 2023. These charts illustrate that 89% of our former Chief Executive Officer's annual total target direct compensation and 74% of our other named executive officers' annual total target direct compensation was performance-based or variable. In addition, 86% of Mr. Calafiore's (our new President and Chief Executive Officer) 2024 compensation package is performance-based or variable.
Cash Performance-Based Incentives – Annual Incentive Program
Cash Performance-Based Incentives – Annual Incentive Program The Committee believes that a significant portion of the compensation for each executive officer should be in the form of an annual performance-based cash bonus. These bonuses are provided through our annual cash incentive program, which seeks to align any payout to an executive officer with actual financial performance of the Company relative to certain pre-established financial and operational performance targets. The Committee is responsible for approving the annual bonus plan design every year. At the outset of each year, the Committee establishes target financial and operational performance goals and a range of performance around the target performance goals for which a bonus would be paid as described below. The plan design, metrics, and threshold, target, and maximum goals support the annual corporate operating plan for the year. The Committee established and approved performance goals at the outset of 2023, which goals were based on (i) net sales, (ii) adjusted EBITDA, (iii) adjusted free cash flow, (iv) attainment of operating expense synergies related to the SeaSpine merger, (v) new product introduction targets derived from the Company’s internal budget and financial forecast and (vi) certain enterprise objectives, which included ESG goals associated with community service hours. The performance goals for individuals serving in the offices of Chief Executive Officer and Chief Financial Officer at any point during the year (whether on a full-time or interim basis), and for Ms. Leekha were based on Company-wide net sales weighted at 40%, Company-wide adjusted EBITDA weighted at 15%, Company-wide adjusted free cash flow weighted at 20%, operating expense synergies weighted at 15%, new product introductions weighted at 5% and the Company enterprise objectives weighted at 5%. For Mr. Kenny and Ms. Elting, the Company-wide net sales, adjusted EBITDA, adjusted free cash flow, operating expense synergies, new product introductions, and Company enterprise objective metrics were weighted at 20%, 15%, 20%, 15%, 5% and 5%, respectively, while net sales for each of Mr. Kenny and Ms. Elting's business segments was also weighted at 20%. Adjusted EBITDA consists of EBITDA (defined as GAAP-derived net income from operations plus net interest expense, income tax expense, depreciation and amortization) net of credits or charges that were considered by the Committee at the time bonus targets were set to be outside of the normal ongoing operations of the Company. Adjusted free cash flow is a non-GAAP financial measure, consisting of net cash flows from operating activities, less capital expenditures, and excluding certain activities considered by the Committee at the time bonus targets were set to be outside of the normal ongoing operations of the Company. Operating expense synergies were determined based on net estimated costs savings resulting from either the reduction of headcount or from the elimination of duplicative expenses as a result of the recent merger with SeaSpine. An executive officer could earn from 0% to 150% of his or her targeted bonus based upon actual performance measured against the range of established performance goals. The Committee determined that no payouts would be made for performance below the 50% achievement threshold on any specific goal. The Company enterprise objectives for 2023 included employee engagement in community service across at least 30% of the global organization with a minimum of 1,750 hours contributed across the Company. Performance against the goals was measured and assessed by the Committee in March 2024. Each of the Committee members participated in and approved the assessment of performance against the goals. The table below outlines the threshold, target, and maximum performance goals relative to actual achievement for the financial performance metrics described above in 2023.
Cash Performance-Based Incentives – Annual Incentive Program
| | Weighting | | | Performance Goals/Actual Results (in millions) | | | | | | Other | Mr. | Ms. | Threshold | Target | Maximum | | | 2023 Financial and Operational Metrics(1) | NEOs | Kenny | Elting | 50% | 100% | 150% | Actual(2) | | Company-wide Net Sales | 40.0% | 20.0% | 20.0% | $750.0 | $762.0 | $776.0 | $743.8 | | Company-wide Adjusted EBITDA(2) | 15.0% | 15.0% | 15.0% | $61.3 | $66.1 | $71.7 | $61.0 | | Company-wide Adjusted Free Cash Flow | 20.0% | 20.0% | 20.0% | $(61.6) | $(56.4) | $(51.0) | $(49.3) | | OPEX Synergy Achievement | 15.0% | 15.0% | 15.0% | $17.5 | $20.0 | $20.5 | $22.9 | | Global Spine Net Sales | N/A | 20.0% | N/A | $628.6 | $638.8 | $649.1 | $618.1 | | Global Orthopedics Net Sales | N/A | N/A | 20.0% | $110.7 | $111.7 | $116.0 | $112.6 | | New Product Introductions | 5.0% | 5.0% | 5.0% | 24 | 30 | 36 | 30 | | Enterprise Objectives | 5.0% | 5.0% | 5.0% | | Minimum of 1,750 community service hours | | Met | | Total | 100.0% | 100.0% | 100.0% | | | | |
Cash Performance-Based Incentives – Annual Incentive Program
(1) Committee approval of financial performance targets provided that actual results would be adjusted to eliminate the effect of subsequent currency fluctuations. The amounts shown in the table represent actual reported amounts as adjusted to reflect such pre-approved constant currency adjustments. (2) Adjusted EBITDA amounts shown above are prior to the inclusion of expense associated with the annual incentive plan. Actual performance in 2023 fell short of the target performance goals, which resulted in lower than target payouts for all NEOs and other executives, as illustrated in the table below, demonstrating the Committee’s commitment to its pay-for-performance philosophy.
Cash Performance-Based Incentives – Annual Incentive Program
| Name | Company-wide Net Sales Percent Achievement | Company-wide Adjusted EBITDA Percent Achievement | Company-wide Adjusted Free Cash Flow Percent Achievement | OPEX Synergy | Business Segment Net Sales Percent Achievement | New Product Introductions | Enterprise Objectives | Weighted Percent Achievement | | Catherine Burzik | 0.0% | 0.0% | 150.0% | 150.0% | N/A | 100.0% | 100.0% | 62.5% | | Geoffrey C. Gillespie | 0.0% | 0.0% | 150.0% | 150.0% | N/A | 100.0% | 100.0% | 62.5% | | Kimberley A. Elting | 0.0% | 0.0% | 150.0% | 150.0% | 110.4% | 100.0% | 100.0% | 84.6% | | Kevin J. Kenny | 0.0% | 0.0% | 150.0% | 150.0% | 0.0% | 100.0% | 100.0% | 62.5% |
Cash Performance-Based Incentives – Annual Incentive Program
In conjunction with his Transition Agreement, Mr. Serbousek received a pro-rated cash bonus for the 2023 calendar year equal to his target bonus amount for the portion of the 2023 calendar year he was employed by Orthofix (see section titled “Transition Agreements with Jon C. Serbousek and Douglas C. Rice”). None of our other former NEOs were eligible for a payout under the annual incentive program and thus are excluded from the tables above and below.
Aggregate Payouts
Aggregate Payouts In light of disruption related to the departure of the Company’s former Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer in September 2023, and to recognize the management transition and retention concerns, the Committee used its discretion to approve an adjustment for each of the NEOs eligible for the annual performance-based cash bonus when determining the final approved percentage achievement under the annual incentive program. This adjustment provided for achievement at the “threshold” level for Company-wide and segment-specific net sales, for segments not already exceeding the threshold. These resulting payouts under the annual incentive program are described in the table below:
Aggregate Payouts
| Name | 2023 Base Salary Amount(1) | Target Bonus Percentage of Salary | Weighted Percent Achievement | Revenue Adjustment | Final Achievement Percentage | Total Annual Incentive Plan Bonus | | Catherine Burzik | $234,807 | 110% | 62.5% | 20.0% | 82.5% | $227,683 | | Geoffrey C. Gillespie | $263,608 | 70% | 62.5% | 20.0% | 82.5% | $94,570 | | Kimberley A. Elting | $494,626 | 80% | 84.6% | 10.0% | 94.6% | $374,616 | | Kevin J. Kenny | $494,401 | 70% | 62.5% | 20.0% | 82.5% | $285,739 |
Aggregate Payouts
(1) Amounts shown in this column are pro-rated for the portion of the year each individual was employed by the Company. Payouts to the named executive officers under the annual incentive program are reflected in column (g) of the “Summary Compensation Table.”
Long-Term Equity-Based Incentives
Long-Term Equity-Based Incentives
Long-Term Incentive Plan – 2012 LTIP and SeaSpine 2015 Plan
Long-Term Incentive Plan – 2012 LTIP and SeaSpine 2015 Plan In accordance with our Executive Compensation Guiding Principles, the creation of sustainable shareholder value by means of equity incentive awards is a very important element of the total compensation provided to executive officers at Orthofix. Our primary equity compensation plan is the 2012 LTIP, which was originally approved by our shareholders at the Company's 2012 annual meeting, with amendments further increasing the number of shares authorized under the plan being approved by our shareholders, most recently at the Company's 2023 annual meeting. As of the Record Date, 1,612,589 shares remained available for grant pursuant to this plan. In connection with the merger, the Company assumed awards outstanding under the SeaSpine Holdings Corporation Amended and Restated 2015 Incentive Award Plan Award Plan (the “SeaSpine 2015 Plan”). The SeaSpine 2015 Plan provides for the grant of options to purchase shares of the Company’s common stock, stock awards (including restricted stock, unrestricted stock, and stock units), stock appreciation rights, performance-based awards and other equity-based awards. All former SeaSpine employees and all new employees of the Company and its subsidiaries and affiliates hired after January 5, 2023 are eligible and may receive awards under the SeaSpine 2015 Plan. As of the Record Date, 1,013,909 shares remained available for grant pursuant to this plan. As further described under “Proposal 4: Approval of Amendment No. 5 to the Amended and Restated 2012 LTIP,” at the Annual Meeting, the shareholders will be asked to consider, and, if thought fit, approve an amendment to the 2012 LTIP to increase the shares available for awards under the plan by 5,000,000. We request that shareholders support this proposal given that equity is a key component of our pay-for-performance philosophy and equity grants best align and engage our leadership team with shareholder value creation. The additional shares are critical to our ability to continue to grant equity awards to eligible participants, to attract, retain and motivate our most important asset, our valuable employees, and to remain competitive. The Committee recommends to the Board the long-term incentive plan grants for our Chief Executive Officer, and the Board determines such grants after taking into account such recommendation. The Committee determines the long-term incentive plan grants for our other Section 16 officers and members of the ELT. In addition, the Committee occasionally makes inducement grants (in accordance with applicable Nasdaq rules) to newly hired employees outside of shareholder approved plans, as done in connection with the merger with SeaSpine. These inducement grants have been made on terms that are substantially similar to grants under the 2012 LTIP. For the 2023 annual equity-based grant (awarded on the SeaSpine merger close date), fifty percent of the award value was delivered via stock options while the other fifty percent of the award value was delivered via restricted stock units, each with time-based vesting. Due to the timing of our merger with SeaSpine in January 2023, we did not include performance-based awards in our annual equity grants to executives in order to allow the management team the opportunity to thoroughly review and refine the Company’s long-term business strategy and operating plan following the merger before setting long-term performance goals that supported a successful merger. However, we have returned to our normal practice of including performance-based equity awards in our 2024 executive compensation program. Details regarding our 2024 LTI program are provided below under “2024 Compensation Program Changes”.
Long-Term Incentive Plan – 2012 LTIP and SeaSpine 2015 Plan
| | RSUs | Options | | Value Weighting | 50% | 50% | | Performance Conditions | Service through vesting | Stock price appreciation Service through vesting | | Term/Length | N/A | Ten years | | Vesting | Vest in three equal installments on the first, second, and third anniversaries of the grant date | Vests one-third on the anniversary of the grant date and the remainder in eight substantially equal quarterly installments thereafter | | Payout | Participant acquires unrestricted shares of common stock upon vesting | Upon exercise, participant acquires shares of common stock at the previously defined exercise price |
Long-Term Incentive Plan – 2012 LTIP and SeaSpine 2015 Plan
In accordance with our Executive Compensation Guiding Principles, equity incentive awards currently follow the following principles: • Annual long-term incentive awards are typically delivered in a mix of options, RSUs, and PSUs. In 2023, only options and RSUs were awarded as described in the preceding table. For a detailed explanation of the 2024 equity award mix see “2024 Compensation Program Changes” below. • Annual long-term incentive awards are made to all Section 16 executive officers. • Annual long-term incentive award values are targeted at the median of the market based on market data for comparable positions and individual performance.
Equity Award Approval Process
Equity Award Approval Process In January 2023, the Committee met and recommended to the Board, and the Board approved, the value-based equity award for the Chief Executive Officer, and the Committee also approved the value-based equity awards for all other Section 16 officers and members of the ELT. These equity incentive awards were granted effective January 5, 2023. The number of shares/units underlying each award (and the exercise price for stock options) were based on the closing price of the Company’s common stock on such effective date. Generally, the Committee’s approval of annual equity incentive grants occurs at a time when the Company’s insider trading window for executives is open. However, in the event that grants are approved when such window is closed, the Committee does not seek to affect the value of grants by timing them in relation to the release or non-release of material public information. In addition to the annual equity incentive grants made in January 2023, the Committee also made a one-time grant to Ms. Elting in conjunction with her contributions to the closing of the Merger, to Ms. Burzik and Mr. Gillespie, in conjunction with assuming their interim roles as CEO and CFO, respectively, and Ms. Elting and Ms. Leekha in conjunction with assuming their interim roles as CLO during 2023. Each of these awards was granted in the form of RSUs which vest in full on the second anniversary of the grant date in the case of Mr. Gillespie and Ms. Elting and on April 7, 2024 with respect to Ms. Burzik. Ms. Leekha's awards were forfeited in connection with her resignation in November 2023. Additionally, a one-time grant of RSUs, performance stock units, and stock options was made to Mr. Kenny.
2024 Compensation Program Changes
2024 Compensation Program Changes The Committee believes the Company’s annual and long-term incentive compensation programs should be tied to key metrics and outcomes that are consistent with, and aligned to, the Company’s strategic priorities and increasing shareholder value over the long term. In consultation with its independent compensation consultant and following discussions with Company management, the Committee approved a change to the design of the annual and long-term incentive compensation offered to Company executives in 2024, as described below.
Annual Incentive Plan Changes
Annual Incentive Plan Changes Changes were made to the annual incentive plan in 2024, removing the operating expense synergies metric related to the SeaSpine merger, reducing the weighting on net sales, and re-weighting the remaining metrics to emphasize profitability and cash flow, while still encouraging both innovation (through new product introductions) and community involvement (through enterprise objectives).
Annual Incentive Plan Changes
| Financial and Operational Metrics | 2023 AIP Plan | | 2024 AIP Plan | | | | Corporate NEOs | Ms. Elting | Corporate NEOs | Ms. Elting | | Company-wide Net Sales | 40.0% | 20.0% | 30.0% | 15.0% | | Company-wide Adjusted EBITDA | 15.0% | 15.0% | 30.0% | 30.0% | | Company-wide Adjusted Free Cash Flow | 20.0% | 20.0% | 25.0% | 25.0% | | OPEX Synergy Achievement | 15.0% | 15.0% | -----Eliminated----- | | | Global Orthopedics Net Sales | N/A | 20.0% | N/A | 15.0% | | New Product Introductions | 5.0% | 5.0% | 10.0% | 10.0% | | Enterprise Objectives | 5.0% | 5.0% | 5.0% | 5.0% | | Total | 100.0% | 100.0% | 100.0% | 100.0% |
Long-term Incentive Plan Changes
Long-term Incentive Plan Changes As mentioned previously, because of the timing of our merger with SeaSpine in January 2023, we did not include performance-based awards in our annual equity grants to executives to allow the management team the opportunity to thoroughly review and refine the Company’s long-term business strategy and operating plan following the merger before setting long-term performance goals that supported a successful merger. However, in 2024 we have returned to our normal practice of including performance-based equity awards (75% of the total target long-term incentive grant) by implementing the following changes: • Reintroduced performance-based restricted stock units (PRSUs), which comprised 50% of 2024 target long-term incentive award value. PRSUs will be earned based on our three-year Relative Total Shareholder Return vs. the S&P Healthcare Equipment Select Industry Index and will vest at the end of the three-year performance period to the extent earned. • Introduced performance-based stock options for the grants to Mr. Calafiore, Ms. Andrews and Mr. Cedrón, which comprised 25% of their 2024 target long-term incentive award value, and to Mr. Vitale, which comprised 15% of his 2024 target long-term incentive award value. These options can only be exercised following the occurrence of both (a) the date certain service-based conditions over three years have been met and (b) the date that the average closing price of the Company’s common stock over a one-month calendar period has been equal to or greater than 150% of the closing price of the Company’s common stock on the grant date. • Reduced the weight of time-based restricted stock from 50% (in 2023) to 25% of the 2024 target long-term incentive award value.
Governance of Executive Compensation
| | Chief Executive Officer | Other Executive Officers | Non-Employee Directors | | Ownership requirement compared to base salary / annual cash retainer | 3x | 1x | 3x | | Equity that Qualifies as Ownership: | | | | | Common stock held | Yes | Yes | Yes | | Unvested time-based vesting restricted stock units | Yes | Yes | Yes | | Vested but unsettled time-based vesting restricted stock units(1) | Yes | Yes | Yes | | Unvested performance stock units | No | No | No | | Unvested stock options | No | No | No | | Vested and/or exercisable stock options, including in-the-money options | No | No | No | | Outstanding contributions to the stock purchase plan | Yes | Yes | Yes |
Accounting and Tax Effects
| SUMMARY COMPENSATION TABLE |
Accounting and Tax Effects
| Name and Principal Position(1) | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($) | Total ($) | | Active Officers as of December 31, 2023: | | | | | | | | | | Catherine Burzik - Former Interim | 2023 | 234,807 | 137,601(4) | 1,870,633(7) | - | 227,683 | 145,166(10) | 2,615,890 | | Chief Executive Officer | | | | | | | | | | Geoffrey C. Gillespie - Corporate Controller | 2023 | 263,608 | - | 387,294 | 97,273 | 94,570 | 44,301(11) | 887,046 | | and Former Interim Chief Financial Officer | | | | | | | | | | Kimberley A. Elting - President, Global | 2023 | 494,626 | 250,000(5) | 1,666,812 | 734,128 | 374,616 | 32,480(12) | 3,552,657 | | Orthopedics and Interim Chief | 2022 | 475,549 | - | 2,200,005 | - | 270,738 | 20,380 | 2,966,672 | | Legal Officer | 2021 | 461,250 | - | 1,118,464 | - | 300,274 | 19,625 | 1,899,613 | | Kevin J. Kenny - Former President, | 2023 | 494,401 | 100,000 | 1,020,664 | 790,527 | 285,739 | 15,316(11) | 2,706,647 | | Global Spine | 2022 | 475,551 | - | 1,725,009 | - | 118,507 | 13,581 | 2,332,648 | | | 2021 | 461,250 | - | 1,118,464 | - | 298,338 | 19,368 | 1,897,420 | | Former Officers: | | | | | | | | | | Keith C. Valentine - Former President | 2023 | 598,731 | - | 2,936,764 | 2,936,510 | - | 12,263(14) | 6,484,267 | | and Chief Executive Officer | | | | | | | | | | Jon C. Serbousek - President | 2023 | 424,616 | 428,055(6) | 10,605,610(8) | 836,940(8) | - | 3,332,902(15) | 15,628,123 | | and Chief Executive Officer | 2022 | 800,000 | - | 4,999,987 | - | 446,040 | 70,024 | 6,316,051 | | | 2021 | 775,000 | - | 3,728,276 | - | 720,750 | 116,839 | 5,340,865 | | John Bostjancic - Former | 2023 | 367,231 | - | 734,175 | 734,128 | - | 12,355(16) | 1,847,889 | | Chief Financial Officer | | | | | | | | | | Douglas C. Rice - Former | 2023 | 9,145 | - | 3,311,885(9) | 236,670(9) | - | 408,245(17) | 3,965,945 | | Chief Financial Officer | 2022 | 475,549 | - | 1,824,988 | - | 176,762 | 14,086 | 2,491,385 | | | 2021 | 461,250 | - | 1,225,015 | - | 300,274 | 20,961 | 2,007,500 | | Puja Leekha - Former Interim | 2023 | 121,539 | - | 699,993 | 300,000 | - | 14,858(18) | 1,136,390 | | Chief Legal Officer | | | | | | | | | | Patrick L. Keran - Former | 2023 | 352,462 | - | 734,175 | 734,128 | - | 12,193(19) | 1,832,958 | | Chief Legal Officer | | | | | | | | |
Accounting and Tax Effects
| GRANTS OF PLAN-BASED AWARDS |
Accounting and Tax Effects
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
Accounting and Tax Effects
| OPTION EXERCISES AND STOCK VESTED |
Accounting and Tax Effects
| POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
Potential Payments to Named Executive Officers
Potential Payments to Named Executive Officers
2023 Potential Payments Upon Termination or Change in Control
2023 Potential Payments Upon Termination or Change in Control The following table reflects the estimated payments and benefits that would be provided to each of Ms. Burzik, Mr. Gillespie, Ms. Elting, Messrs. Kenny, Valentine, Serbousek, Bostjancic, and Rice, Ms. Leekha, and Mr. Keran upon his or her termination or upon a change in control pursuant to the terms of his or her respective change in control and severance agreement and related equity award agreements. For purposes of this table, we assume that the triggering event took place on December 31, 2023, and the price per share of our common stock was $13.48, the closing market price as of that date. For any triggering event that presupposes a change in control, we assume a change in control has so occurred.
2023 Potential Payments Upon Termination or Change in Control
| Name | Triggering Event | Lump Sum Severance Payment ($) | Value of Stock- Based Rights ($) | Value of Welfare Benefits ($) | Fees and Expenses of Out-placement Firm ($) | Total ($) | | Active Officers as of December 31, 2023: | | | | | | | | Catherine Burzik (1) | Termination for death or disability | — | — | — | — | — | | | Termination for cause or voluntary termination | — | — | — | — | — | | | Termination for good reason or without cause | — | — | — | — | — | | | Termination for death, disability, good reason or without cause during a change in control period | — | — | — | — | — | | Geoffrey C. Gillespie | Termination for death or disability | 448,134 | 444,490(5) | 19,357 | 12,500 | 924,481 | | | Termination for cause or voluntary termination | — | — | — | — | — | | | Termination for good reason or without cause | 448,134 | — | 19,357 | 12,500 | 479,991 | | | Termination for death, disability, good reason or without cause during a change in control period | 672,201 | 444,490(6) | 19,357 | 18,750 | 1,154,798 | | Kimberley A. Elting | Termination for death or disability | 890,326 | 2,335,033(5) | — | 12,500 | 3,237,859 | | | Termination for cause or voluntary termination | — | — | — | — | — | | | Termination for good reason or without cause | 890,326 | — | — | 12,500 | 902,826 | | | Termination for death, disability, good reason or without cause during a change in control period | 1,335,490 | 2,335,033(6) | — | 18,750 | 3,689,273 | | Kevin J. Kenny | Termination for death or disability | 840,482 | 1,491,400(5) | 29,057 | 12,500 | 2,373,439 | | | Termination for cause or voluntary termination | — | — | — | — | — | | | Termination for good reason or without cause | 840,482 | — | 29,057 | 12,500 | 882,039 | | | Termination for death, disability, good reason or without cause during a change in control period | 1,260,723 | 1,491,400(6) | 29,057 | 18,750 | 2,799,930 | | Former Officers: | | | | | | | | Keith C. Valentine (2) | Termination for cause or voluntary termination | — | — | — | — | — | | Jon C. Serbousek (3) | Termination for death, disability, good reason or without cause during a change in control period | 3,305,000 | 4,146,731 | 12,107 | — | 7,463,838 | | John Bostjancic (2) | Termination for cause or voluntary termination | — | — | — | — | — |
2023 Potential Payments Upon Termination or Change in Control
| | Termination for good reason or without cause | — | — | — | — | — | | Douglas C. Rice (4) | Termination for death, disability, good reason or without cause during a change in control period | 1,234,100 | 1,349,132 | 2,370 | — | 2,585,602 | | Puja Leekha | Termination for cause or voluntary termination | — | — | — | — | — | | Patrick L. Keran (2) | Termination for cause or voluntary termination | — | — | — | — | — |
2023 Potential Payments Upon Termination or Change in Control
(1) Ms. Burzik does not have a Change in Control and Severance Agreement in place therefore was not considered eligible for potential payments upon termination or a change in control as of December 31, 2023. (2) In September 2023, the Board terminated for cause Messrs. Valentine, Bostjancic and Keran from their respective roles. For additional information, see “—Executive leadership transition”. Messrs. Valentine, Bostjancic and Keran have asserted arbitration claims seeking, among other things, severance payments, as well as the value of forfeited equity grants, under applicable change in control and severance agreements. (3) Amounts shown represent amounts paid to Mr. Serbousek in December 2023 upon his separation from the Company in July 2023 and, in accordance with his Transition Agreement (See section titled “Transition Agreements with Jon C. Serbousek and Douglas C. Rice”) and his Change in Control and Severance Agreement, was paid his severance amount and COBRA premiums in November 2023 (See “Summary Compensation Table”). (4) Mr. Rice separated from the Company in June 2023 and, in accordance with his Transition Agreement (See section titled “Transition Agreements with Jon C. Serbousek and Douglas C. Rice”) and his Change in Control and Severance Agreement, was paid his severance amount and COBRA premiums in January 2024. (5) In the event of a termination for death or disability, the executive would receive acceleration of all time-based restricted stock/restricted stock units and stock options, and outstanding performance stock units would be deemed vested and achieved at target levels. Amount in table reflects the value of all such accelerated shares (which in the case of stock options, is based on spread value) as of December 31, 2023. (6) Under the Company’s performance stock unit agreements, in the event of a change in control, (i) performance goals will be deemed achieved at the greater of target or the percentage achievement that the awards were on pace to achieve as of the consummation of the change in control, and (ii) if such awards are assumed or continued in connection with the change in control, the awards become time-based awards that vest upon the (x) executive’s continued service through the end of the original performance period or (y) the executive’s earlier death, disability, termination by the Company without cause or termination by the executive for good reason. The amounts shown in the table therefore show the value of these awards if performance goals were achieved at target, which would occur under the terms of the awards in the event of a change in control assuming that a change in control occurred at a time when awards were tracking below target levels. Further, as a result of the merger with SeaSpine on January 5, 2023, all outstanding PSUs were converted to time-based RSUs at target, which vest over the previously defined performance period.
2023 Potential Payments Upon Termination or Change in Control
| PAY RATIO DISCLOSURE |
2023 Potential Payments Upon Termination or Change in Control
The Company is required to disclose in its proxy statement the annual total compensation of the median-compensated employee of, generally, all Company employees (excluding its Chief Executive Officer), the annual total compensation of its Chief Executive Officer, and the ratio of the Chief Executive Officer's compensation to the median employee's compensation. The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Exchange Act. We selected the median employee in 2023 based on an analysis of full-time, part-time, temporary and seasonal workers employed by the Company or any of its consolidated subsidiaries as of December 31, 2023. The 2023 annual total compensation as determined under Item 402 of Regulation S-K for our Chief Executive Officer was $6,943,183. We calculated this amount by annualizing Ms. Burzik’s total compensation for the period from September 11, 2023 through December 31, 2023 when she served as Interim Chief Executive Officer. The 2023 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $78,604. The ratio of our Chief Executive Officer’s annual total compensation to our median employee’s total compensation for fiscal year 2023 was 88 to 1.
2023 Potential Payments Upon Termination or Change in Control
| PAY VERSUS PERFORMANCE |
2023 Potential Payments Upon Termination or Change in Control
In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company is required to disclose in its proxy statement information that shows the relationship between “Compensation Actually Paid” as defined in Item 402(v) of Regulation S-K and the financial performance of the Company. The following table provides compensation, both as reported in the Summary Compensation Table and with certain adjustments to reflect the “Compensation Actually Paid”, as computed in accordance with SEC rules, for our principal executive officer (“PEO”), who we have identified as Jon C. Serbousek, who served in the role of President and Chief Executive Officer for each of the years presented below through January 5, 2023 (PEO 1), Keith C. Valentine (PEO 2), our CEO from January 5, 2023 through September 11, 2023, Catherine Burzik (PEO 3), our Interim CEO beginning on September 11, 2023, and our other named executive officers for each of the years presented below other than the PEO (such other named executive officers, the “Non-PEO NEOs”). In accordance with SEC rules, the table also provides information on our cumulative TSR, the cumulative TSR of a peer group, Net Income, and a Company-Selected Measure, Company-wide net sales. “Compensation Actually Paid” does not necessarily reflect the target value of compensation as approved by our Compensation and Talent Development Committee or the value of compensation actually earned, realized, or received by the Company’s NEOs. The Compensation and Talent Development Committee did not consider the “Compensation Actually Paid” in making its pay decisions for any of the years shown.
2023 Potential Payments Upon Termination or Change in Control
| Year | Summary Compensation Table Total for PEO 1¹ ($) | Summary Compensation Table Total for PEO 2¹ ($) | Summary Compensation Table Total for PEO 3¹ ($) | Compensation Actually Paid to PEO 1¹˒²˒³ ($) | Compensation Actually Paid to PEO 2¹˒²˒³ ($) | Compensation Actually Paid to PEO 3¹˒²˒³ ($) | Average Summary Compensation Table Total for Non-PEO NEOs1 ($) | Average Compensation Actually Paid to Non-PEO NEOs1,2,3 ($) | Value of Initial Fixed $100 Investment based on: 4 | | Net Income ($ Millions) | Company-Wide Net Sales⁵ ($ Millions) | | | | | | | | | | | TSR ($) | Peer Group TSR ($) | | | | (a) | (b) | (b) | (b) | (c) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 15,628,123 | 6,484,267 | 2,615,890 | 2,339,023 | -1,199,925 | 2,578,673 | 2,275,647 | 521,034 | 29.19 | 130.16 | -151.4 | 746.64 | | 2022 | 6,316,051 | — | — | 5,003,168 | — | — | 2,133,026 | 1,363,185 | 44.46 | 120.91 | -19.75 | 460.71 | | 2021 | 5,340,865 | — | — | 723,446 | — | — | 1,791,220 | 673,740 | 67.32 | 169.55 | -38.38 | 464.48 | | 2020 | 5,337,861 | — | — | 6,764,143 | — | — | 1,502,685 | 1,451,284 | 93.07 | 145.89 | 2.52 | 406.56 |
2023 Potential Payments Upon Termination or Change in Control
(1) Jon C. Serbousek (PEO 1) was our CEO for each year presented until January 5, 2023. Keith C. Valentine (PEO 2) was our CEO from January 5, 2023 through September 11, 2023. Catherine Burzik (PEO 3) became our Interim CEO beginning on September 11, 2023. The individuals comprising the Non-PEO NEOs for each year presented are listed below.
2023 Potential Payments Upon Termination or Change in Control
| 2020 | 2021 | 2022 | 2023 | | Douglas C. Rice | Douglas C. Rice | Douglas C. Rice | Geoffrey C. Gillespie | | Kimberley A. Elting | Kimberley A. Elting | Kimberley A. Elting | Kimberley A. Elting | | Kevin J. Kenny | Kevin J. Kenny | Kevin J. Kenny | Kevin J. Kenny | | Paul W. Gonsalves | Paul W. Gonsalves | Paul W. Gonsalves | John Bostjancic | | Davide Bianchi | | | Douglas C. Rice | | | | | Puja Leekha | | | | | Patrick L. Keran |
2023 Potential Payments Upon Termination or Change in Control
(2) The amounts shown for “Compensation Actually Paid” have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote (3) below. (3) “Compensation Actually Paid” reflects the exclusions and inclusions of certain amounts for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards column are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table.
2023 Potential Payments Upon Termination or Change in Control
| Year | Summary Compensation Table Total for PEO 1 | Exclusion of Stock Awards and Option Awards for PEO 1 | Inclusion of Equity Values for PEO 1 | Compensation Actually Paid to PEO 1 | | | ($) | ($) | ($) | ($) | | 2023 | 15,628,123 | (11,442,550) | (1,846,550) | 2,339,023 |
2023 Potential Payments Upon Termination or Change in Control
| Year | Summary Compensation Table Total for PEO 2 | Exclusion of Stock Awards and Option Awards for PEO 2 | Inclusion of Equity Values for PEO 2 | Compensation Actually Paid to PEO 2 | | | ($) | ($) | ($) | ($) | | 2023 | 6,484,267 | (5,873,274) | (1,810,918) | (1,199,925) |
2023 Potential Payments Upon Termination or Change in Control
| Year | Summary Compensation Table Total for PEO 3 | Exclusion of Stock Awards and Option Awards for PEO 3 | Inclusion of Equity Values for PEO 3 | Compensation Actually Paid to PEO 3 | | | ($) | ($) | ($) | ($) | | 2023 | 2,615,890 | (1,870,633) | 1,833,416 | 2,578,673 |
2023 Potential Payments Upon Termination or Change in Control
| Year | Average Summary Compensation Table Total for Non-PEO NEOs | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs | Average Inclusion of Equity Values for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | | | ($) | ($) | ($) | ($) | | 2023 | 2,275,647 | (1,740,265) | (14,348) | 521,034 |
2023 Potential Payments Upon Termination or Change in Control
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
2023 Potential Payments Upon Termination or Change in Control
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO 1 | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO 1 | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO 1 | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO 1 | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO 1 | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for PEO 1 | Total - Inclusion of Equity Values for PEO 1 | | | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | 2023 | — | — | — | (1,846,550) | — | — | (1,846,550) |
2023 Potential Payments Upon Termination or Change in Control
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO 2 | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO 2 | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO 2 | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO 2 | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO 2 | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for PEO 2 | Total - Inclusion of Equity Values for PEO 2 | | | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | 2023 | — | — | — | (16,017) | (1,794,901) | — | (1,810,918) |
2023 Potential Payments Upon Termination or Change in Control
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for PEO 3 | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for PEO 3 | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO 3 | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for PEO 3 | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO 3 | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for PEO 3 | Total - Inclusion of Equity Values for PEO 3 | | | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | 2023 | 1,868,584 | (25,068) | — | (10,100) | — | — | 1,833,416 |
2023 Potential Payments Upon Termination or Change in Control
| Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs | Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs | Average Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Included for Non-PEO NEOs | Total - Average Inclusion of Equity Values for Non-PEO NEOs | | | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | 2023 | 443,524 | (269,062) | — | (57,138) | (131,672) | — | (14,348) |
2023 Potential Payments Upon Termination or Change in Control
(4) The Peer Group TSR set forth in this table utilizes the NASDAQ Stocks Surgical, Medical and Dental Instruments Index (“Peer Group”), which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the years ended December 31, 2023. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the Peer Group, respectively. All dollar values assume reinvestment of dividends paid by companies, where applicable, included in the Peer Group. Historical stock performance is not necessarily indicative of future stock performance. (5) We determined Company-Wide Net Sales to be the most important financial performance measure used to link Company performance to “Compensation Actually Paid” to our NEOs in 2023. This performance measure may not have been the most important financial performance measure for prior years and we may determine a different financial performance measure to be the most important financial performance measure in future years.
Relationship between “Compensation Actually Paid” and Performance
Relationship between “Compensation Actually Paid” and Performance The following graph shows the relationship of the average of the “Compensation Actually Paid” to our PEOs and the average of the “Compensation Actually Paid” to our Non-PEO NEOs to our net income. The following graph shows the relationship of the average of the “Compensation Actually Paid” to our PEO and the average of “Compensation Actually Paid” to our Non-PEO NEOs to the TSR performance of our common stock and the TSR performance of the Peer Group. The TSR performance amounts in the graph assume that $100 was invested beginning on December 31, 2019 and that all distributions or dividends were reinvested, where applicable. The following graph shows the relationship of “Compensation Actually Paid” to our PEO and the average of “Compensation Actually Paid” to our Non-PEO NEOs to Company-Wide Net Sales.
Relationship between “Compensation Actually Paid” and Performance
| DIRECTOR COMPENSATION |
Relationship between “Compensation Actually Paid” and Performance
Directors are elected each year at the annual meeting of shareholders, which is usually held in June. Other director appointments occur from time to time as determined by the Board, for instance, in the event of vacancies on the Board resulting from a director’s death, resignation or retirement. Employee directors are not provided any additional compensation for their service as a director.
Non-Employee Director Compensation Program and Guiding Principles
Non-Employee Director Compensation Program and Guiding Principles We compensate our non-employee directors in accordance with the Company’s Director Compensation Guiding Principles. Our compensation program for our non-employee directors is designed to appropriately compensate outside directors for their diverse expertise and time commitment required to serve as a director of a complex and highly regulated global company. The Compensation and Talent Development Committee is responsible for overseeing our non-employee director compensation program. The Compensation and Talent Development Committee’s goal for such oversight is to maintain a program that: • attracts and retains directors with the skills needed to guide the Company in achieving its goals • is competitive with the compensation program provided to directors at other similarly situated medical device companies • directly aligns the interests of the Company’s directors with the interests of its shareholders Unless determined otherwise by the Board of Directors, our non-employee director compensation program each year will consist of an annual cash retainer and annual equity awards, as well as customary and usual expense reimbursement in attending company meetings or attending director training. The Compensation and Talent Development Committee reviews the competitiveness of our non-employee director compensation relative to the same peer group used to review executive officer compensation levels. In addition, all directors have entered into a customary indemnification agreement with the Company. They are also offered an opportunity to participate in the SPP.
Director Compensation Table
Director Compensation Table The following table provides information regarding the 2023 compensation of our non-employee directors.
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Restricted Stock Unit Awards (Number of Shares Granted)(1) | Grant Date Fair Value of Restricted Stock Awards ($)(2) | Option Awards(1) | Grant Date Fair Value of Option Awards ($)(2) | All Other Compensation ($) | Total ($) | | Current Directors: | | | | | | | | | Catherine M. Burzik | 139,538 | 17,943(5) | 370,630 | - | - | - | 510,168 | | Alan L. Bazaar | - | - | - | 47,652(8) | 300,000 | - | 300,000 | | Wayne Burris(3) | 39,695 | 10,163(6) | 200,008 | 47,652(8) | 300,000 | - | 539,703 | | Stuart M. Essig, Ph.D. | 55,417 | 14,354(7) | 299,999 | - | - | - | 355,416 | | Michael M. Finegan | - | - | - | 47,652(8) | 300,000 | - | 300,000 | | Jason M. Hannon | 76,250 | 14,354(7) | 299,999 | - | - | - | 376,249 | | John B. Henneman, III | 55,417 | 14,354(7) | 299,999 | - | | - | 355,416 | | James F. Hinrichs | 88,750 | 14,354(7) | 299,999 | - | - | - | 388,749 | | Charles R. Kummeth | - | - | - | 47,652(8) | 300,000 | - | 300,000 | | Shweta Singh Maniar | 55,417 | 14,354(7) | 299,999 | - | - | - | 355,416 | | Michael E. Paolucci | 76,250 | 14,354(7) | 299,999 | - | - | - | 376,249 | | Former Directors: | | | | | | | | | Lilly Marks(3) | 21,111 | - | | - | - | - | 21,111 | | John E. Sicard(3) | 18,472 | - | | - | - | - | 18,472 | | Keith C. Valentine(4) | 4,484 | - | - | - | - | - | 4,484 | | Thomas A. West(3) | 18,472 | - | | - | - | - | 18,472 |
Director Compensation Table
(1) This column shows the number of shares subject to deferred stock units granted during 2023. (2) Amounts shown reflect the grant date fair value of equity awards, as computed in accordance with ASC 718. (3) Mr. Burris, Ms. Marks, Mr. Sicard, and Mr. West resigned from the Board on January 5, 2023, effective upon and in connection with the consummation of the merger with SeaSpine, and the vesting of all their equity awards was accelerated in connection therewith. Mr. Burris was reelected to the Board on June 19, 2023. (4) Mr. Valentine was compensated as a non-employee director for the period between his termination as an employee on September 12, 2023 and his resignation from the Board on October 4, 2023. (5) Represents a grant of 14,354 deferred stock units on the effective date of the Merger, and an annual grant of 3,589 deferred stock units, each subject to vesting on the earlier of June 30, 2024 or the date of the Annual Meeting. (6) Represents an annual grant of deferred stock units subject to vesting on the earlier of June 30, 2024 or the date of the Annual Meeting. (7) Represents a grant of deferred stock units on the effective date of the Merger subject to vesting on the earlier of June 30, 2024 or the date of the Annual Meeting. (8) Represents a grant of stock options which vest in 25% increments on the first, second, third and fourth anniversaries of the grant date, December 18, 2023. The following table shows the number of shares of common stock subject to (1) outstanding and unexercised stock options and (2) outstanding deferred stock units held by each of the non-employee directors serving during 2023 as of December 31, 2023.
Director Compensation Table
| Director | Number of Shares Subject to Outstanding Stock Options as of 12/31/23 | Number of Shares Subject to Outstanding Deferred Stock Units as of 12/31/23 | | Catherine M. Burzik | 21,361 | 32,763 | | Alan L. Bazaar | 47,652 | - | | Wayne Burris | 47,652 | 10,163 | | Stuart M. Essig, Ph.D. | 54,199 | 14,354 | | Michael M. Finegan | 47,652 | - | | Jason M. Hannon | 24,701 | 29,638 | | John B. Henneman, III | 31,778 | 14,354 | | James F. Hinrichs | 30,000 | 39,548 | | Charles R. Kummeth | 47,652 | - | | Shweta Singh Maniar | - | 14,354 | | Lilly Marks | 30,000 | - | | Michael E. Paolucci | 30,000 | 39,548 | | John E. Sicard | 30,000 | - | | Keith C. Valentine | - | - | | Thomas A. West | 29,450 | - |
Director Compensation Table
| EQUITY COMPENSATION PLAN INFORMATION |
Director Compensation Table
Our primary equity compensation plan is our 2012 Long Term Incentive Plan, as amended, which was approved by our shareholders in 2012. All named executive officers and directors are also eligible at their discretion to acquire shares of common stock pursuant to our SPP. Each of these plans have been approved by our shareholders. In limited cases, we have also made inducement grants of stock options and restricted stock awards to new employees in reliance on the Nasdaq exception to shareholder approval for such grants. For more information on our equity compensation plans, see “—Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Equity-Based Incentives” beginning on page 35. The following table provides aggregate information regarding the shares of our common stock that may be issued upon the exercise of options and rights under all of our equity compensation plans as of December 31, 2023.
Director Compensation Table
| Plan Category | Number of Securities to Be Issued upon Exercise of Outstanding Options and Rights (#) (a) | Weighted- Average Exercise Price of Outstanding Options and Rights ($)(3) (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (#) (c) | | Equity Compensation Plans Approved by Security Holders | 3,236,613(1) | $27.80 | 3,775,036(4) | | Equity Compensation Plans Not Approved by Security Holders | 2,036,579(2) | $33.52 | 1,412,250(5) | | Total | 5,273,192 | $30.64 | 5,187,286 |
Director Compensation Table
(1) Consists of 1,619,966 shares issuable upon the exercise of stock options, 1,514,801 shares issuable pursuant to outstanding RSUs, 94,244 shares issuable pursuant to outstanding deferred stock units, and 7,602 shares issuable pursuant to outstanding PSUs, in each case, as of December 31, 2023. Shares issuable pursuant to outstanding PSUs are shown in the table based on the assumption that all applicable performance targets will be achieved at target levels. All awards were granted pursuant to the 2012 LTIP. (2) Consists of 1,240,995 and 226,912 shares issuable upon the exercise of stock options and pursuant to outstanding RSUs, respectively, under the equity compensation plans assumed under the Merger with SeaSpine; 311,717 and 206,244 shares issuable upon the exercise of stock options and pursuant to outstanding RSUs, respectively, under the SeaSpine Inducement Plan; and 50,711 shares issuable pursuant to an inducement grant stock option granted in 2019 to Mr. Serbousek, in each case, in reliance on the Nasdaq exception to shareholder approval for equity grants to new hires. (3) The weighted-average exercise price in this column only relates to the exercise price of stock options (RSUs, deferred stock units, and PSUs have no exercise price). (4) Consists of 762,228 shares available for issuance under the SPP and 3,012,808 shares available for future award grants under the 2012 LTIP (which assumes that outstanding PSUs are achieved at target levels), in each case, as of December 31, 2023. (5) Consists of 1,412,250 shares available for future award grants under the equity compensation plans assumed under the Merger with SeaSpine (which assumes that outstanding PSUs are achieved at target levels), in each case, as of December 31, 2023.
Director Compensation Table
| PROPOSAL 1: ELECTION OF DIRECTORS |
Director Compensation Table
Our Bylaws provide that the Board shall consist of not less than six and no more than fifteen directors, the exact number to be determined from time to time by resolution of the Board. We have nominated nine of our current directors, Mr. Calafiore, Mr. Bazaar, Mr. Burris, Mr. Finegan, Mr. Hannon, Mr. Henneman, Mr. Kummeth, Ms. Maniar, and Mr. Paolucci to stand for election at the Annual Meeting for a one-year term expiring at the 2025 annual meeting of shareholders and/or until their successors have been elected. Each of Mr. Bazaar, Mr. Finegan, and Mr. Kummeth were appointed to the Board in December 2023 in connection with the Cooperation Agreement with Engine Capital. Mr. Calafiore was appointed to the Board in January 2024 in connection with his appointment as President and Chief Executive Officer. Our director nominees are listed in the table below. The committee composition reflected in the table below represents committee composition as of the date of this proxy statement. Three currently serving directors, Catherine M. Burzik (current Chair of the Board), Stuart M. Essig, Ph.D. and James F. Hinrichs, are not standing for re-election at the Annual Meeting, and the size of the Board is being reduced from 12 to 9 seats as of the date of the Annual Meeting. The Board expects to elect a new Chair of the Board, as well as Chairs of each Standing Committee of the Board, immediately following the occurrence of the Annual Meeting.
Director Compensation Table
| Name | Age | Director Since | Independent | Audit & Finance Committee | Compensation and Talent Development Committee | Compliance & Ethics Committee | Nominating, Governance & Sustainability Committee | | Alan L. Bazaar | 54 | 2023 | | | | | | | Wayne Burris | 69 | 2021(1) | | | | | | | Massimo Calafiore | 52 | 2024 | | | | | | | Michael M. Finegan | 60 | 2023 | | | | | | | Jason M. Hannon | 52 | 2020 | | | | | | | John B. Henneman, III | 62 | 2023(2) | | | | | | | Charles R. Kummeth | 63 | 2023 | | | | | | | Shweta Singh Maniar | 40 | 2023(4) | | | | | | | Michael E. Paolucci | 64 | 2016 | | | | | |
Director Compensation Table
(1) Mr. Burris served as a director from September 2021 until the consummation of the Company’s merger with SeaSpine on January 5, 2023, and rejoined as a director on June 19, 2023 upon his election at the 2023 annual meeting of shareholders. (2) Mr. Henneman was appointed as a director as of January 5, 2023 in connection with the consummation of the Company’s merger with SeaSpine. Prior to such merger, Mr. Henneman had served on SeaSpine’s Board of Directors since July 2015. (3) Ms. Maniar was appointed as a director as of January 5, 2023 in connection with the consummation of the Company’s merger with SeaSpine. Prior to such merger, Ms. Maniar had served on SeaSpine’s Board of Directors since April 2021. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out their term, the Board may fill the vacancy until the next annual meeting of shareholders or reduce the number of directors on the Board.