DEF 14A of LivaNova PLC
Filed Apr 26, 2024 · FY20230001104659-24-052902
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Board Qualifications and Refreshment
Board Qualifications and Refreshment The selection process for directors is set out in LivaNova’s Corporate Governance Guidelines and in the charter of the NCG Committee. These documents are available at https://www.livanova.com/en-us/about-us/board-of-directors. The charter authorizes the NCG Committee to determine the qualifications, qualities, skills and other expertise required to be a director but also sets out certain minimum qualification requirements: • high ethical behavior; • accomplishments within their respective fields; • relevant business and financial expertise and experience; • sound business judgment; and • diversity, including with respect to gender, race/ethnicity, geography, professional experience, skills and tenure, with the charter of the NCG Committee requiring that every slate of directors to be considered include at least one woman and at least one underrepresented minority. The NCG Committee is responsible for recommending director nominees to the Board, including re-nomination of persons who are already directors. In forming their recommendations, the NCG Committee places particular emphasis on the necessary skills for the Board. To that end, the NCG Committee conducts an annual skills analysis and considers that exercise, as well as the results of the Board and its committees’ annual self-assessments, in the context of the Company’s strategic plan, in order to identify the skills and expertise required to lead the Company now and in the future. The combined skills analysis and self-assessments ultimately help to inform the NCG Committee of (1) the qualifications, qualities, skills and other expertise (in addition to the minimum requirements set out above) desired at this juncture in the Company’s development and (2) the relevant considerations associated with Board succession planning, all of which help to drive the NCG Committee’s recommendations for director nominees. The Board does not have formal term or age limits. While term limits may foster fresh ideas and viewpoints, the Board believes that term limits fail to acknowledge the contribution of directors who have been able to develop, over a period of time, increased insight into the Company and its operations and, therefore, provide significant contributions to the Board as a whole. As an alternative to term limits, the NCG Committee reviews each director’s continued tenure on the Board annually. The Company’s Corporate Governance Guidelines provide that the Board will consider rotation of the Chair of the Board and Committee Chairs periodically and when it determines appropriate. As part of its evaluation, the Board reviews all relevant circumstances, including expertise required for the role, qualifications of a successor, and applicable laws and listing standards, to balance the benefits of rotation against the benefits of continuity. The NCG Committee may consider candidates for LivaNova’s Board from any reasonable source, including from a search firm engaged by the NCG Committee and shareholder recommendations subject to the procedures set forth below and the full procedures identified in the Company’s Corporate Governance Guidelines. Any invitation to join the Company’s Board is extended by the Board and by the Chair of the NCG Committee. Mr. Barry, appointed to the Board in October 2023, was recommended to the NCG Committee by a third-party search firm, which was engaged by the NCG Committee to assist in the identification and recruitment of a new Board member. After reviewing Mr. Barry’s qualifications and skills, discussing his potential nomination at several meetings, and meeting with him, the NCG Committee voted unanimously to recommend Mr. Barry as a director of the Board based on his robust experience in commercial and executive leadership roles. Mr. Makatsaria, appointed as CEO and to the Board effective March 2024, was recommended to the NCG Committee by a third-party search firm, which was engaged by the NCG Committee to assist in the identification and recruitment of a new CEO. After reviewing Mr. Makatsaria’s qualifications and discussing his potential appointment at several meetings, the NCG Committee voted unanimously to recommend Mr. Makatsaria for the position of CEO and as a director of the Board based on his extensive global leadership experience and his considerable background in building and driving innovation within the medical technology space. Although LivaNova does not have a formal policy with regard to the consideration of any director nominees recommended by shareholders, a shareholder or group of shareholders may recommend potential candidates for consideration. The Company does not have such a policy because the NCG Committee believes that it can adequately evaluate any such nominees on a case-by-case basis. Nominees for consideration by the NCG Committee may be sent in writing to the Office of the Company Secretary, by mail at 20 Eastbourne Terrace, London W2 6LG, United Kingdom, not less than ninety (90) nor more than one hundred twenty (120) days prior to the first anniversary of the AGM in the previous year. The written nomination must include all information relating to such director nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors, or otherwise required, pursuant to Regulation 14A under the US Securities Exchange Act of 1934, as amended (the “Exchange Act”), including such person’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected. In addition, the nomination must include: • the nominating shareholder’s or shareholders’ name(s) and address(es) as they appear on the Company’s books; • the class and number of shares beneficially owned by the nominating shareholder(s); • a description of all agreements, arrangements and understandings between such shareholder(s), each proposed director nominee and any other person or persons (including their names) in connection with the nomination; • any other information relating to such shareholder(s) that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies pursuant to Regulation 14A under the Exchange Act; and • to the extent known by the shareholder(s) giving notice, the name and address of any other shareholder(s) supporting the election of the nominee. From time to time, the NCG Committee may request additional information from the nominee or the nominating shareholder(s). Potential nominees suggested by shareholders are evaluated by the NCG Committee in the same manner as other potential candidates.
Director Nominees
Director Nominees LivaNova’s Articles of Association provide that the number of directors shall be ten unless otherwise decided by the Board. Upon the recommendation of the Company’s NCG Committee, the Board has nominated the nine persons named below to serve as directors until the 2025 AGM or their earlier resignation or removal. All directors are elected annually. Mr. Moore, a current director who has served on LivaNova’s Board since 2015, was not renominated for election to the Board, and his term will expire at the conclusion of the 2024 AGM.
Director Nominees
| J. CHRISTOPHER BARRY | | | | INDEPENDENT Age 52 Less than one year of service (since 2023) | Chris Barry currently serves as Executive Vice President and Group President of the Medical Solutions Division at 3M Company, a position he assumed in March 2024. He previously served as CEO and a member of the board of NuVasive, Inc., a medical technology company focused on spine technology innovation, from 2018 to 2023, at which point, NuVasive Inc. was acquired by Globus Medical. From 2015 to 2018, Mr. Barry served as Senior Vice President and President of Surgical Innovations at Medtronic after Medtronic acquired Covidien, and, prior to Covidien’s acquisition, Mr. Barry spent more than 15 years in increasing commercial and executive leadership roles at Covidien, rising to vice president of sales for energy-based devices. Mr. Barry has a Bachelor of Science degree in Environmental Science from Texas Tech University. | | | | Committees: • Audit and Compliance Former Public Company Directorships During the Past Five Years: • NuVasive, Inc. | Director Skills and Qualifications: • Mr. Barry is an audit committee financial expert and an analytical leader with robust general management experience. He has proven to be a highly capable executive both in a large strategic environment and as a first-time CEO of NuVasive in a complex and competitive medical technology category at NuVasive. At NuVasive, Mr. Barry is credited with setting evidence-based expectations and identifying the need for partnership to drive long-term growth for the company and aligning the organization accordingly. |
Director Nominees
| FRANCESCO BIANCHI | | | | INDEPENDENT Age 67 Nine years of service (since 2015) | Francesco Bianchi has served as Chair of Seven Capital Partners S.r.l., a financial consulting firm, since June 2018. He previously served as the Chief Executive Officer of Seven Capital Partners and has been with the firm since 2013. Mr. Bianchi has 30 years of mergers and acquisitions and strategic advisory experience working for well-recognized international financial institutions including JPMorgan Chase (Paris), Morgan Grenfell (London), Citi (Milan) and Bankers Trust (Milan), where he served in various roles including general manager and head of the mergers and acquisitions and corporate finance division. He also headed the strategic planning division of Banca-Intesa S.p.A. in Italy and abroad. Mr. Bianchi earned a degree in economic sciences with honors from the University of Florence and is a chartered accountant. | | | | Committees: • Audit and Compliance; Compensation and Human Capital Management | Director Skills and Qualifications: • Mr. Bianchi is an audit committee financial expert and has an extensive professional background working in strategy and mergers and acquisitions. |
Director Nominees
| STACY ENXING SENG | | | | INDEPENDENT Age 59 Five years of service (since 2019) | Stacy Enxing Seng has served as an Operating Partner with Lightstone Ventures, a venture capital group focused on medical technology and biotechnology-related investments, since 2016. Prior to joining Lightstone Ventures, Ms. Enxing Seng was with Covidien, a global health care products company, as its President, Vascular Therapies (2011 to 2014) and President of Peripheral Vascular (2010 to 2011). Ms. Enxing Seng joined Covidien in 2010 through the $2.6 billion acquisition of ev3 Incorporated, where she was a founding member and executive officer responsible for leading its Peripheral Vascular division (2001 to 2010). Prior to ev3, Ms. Enxing Seng held positions of increasing responsibility with Boston Scientific, SCIMED, Baxter and American Hospital Supply. She holds a B.A. in Public Policy from Michigan State University and an M.B.A. from Harvard University. | | | | Committees: • Compensation and Human Capital Management (Chair) Other Current Public Company Directorships: • Sonova Holding AG Former Public Company Directorships During the Past Five Years: • Hill-Rom Holdings, Inc. | Director Skills and Qualifications: • Ms. Enxing Seng has broad experience as a former senior executive responsible for a worldwide business unit of a major medical device company. In addition, she has significant experience as a co-founder of a successful medical device start-up. Her operational experience at both large and small medical device companies, combined with her first-hand experience gained from building ev3 from the ground up, provide the Board with valuable insights into strategy, marketing, sales, innovation, mergers and acquisitions and a variety of other medical device-related areas. |
Director Nominees
| WILLIAM KOZY | | | | CHAIR Age 72 Six years of service (since 2018) | William Kozy is the Chair of the Board of Directors of LivaNova. Mr. Kozy served as Interim Chief Executive Officer of the Company from April 2023 to February 2024. Prior to that, Mr. Kozy retired from Becton, Dickinson and Company, a global medical technology company, in 2016 where Mr. Kozy served as Executive Vice President and Chief Operating Officer from 2011 to 2016. At Becton Dickinson, he also served as a member of the corporate Leadership Team and in various executive roles since 1988, including head of BD Medical (2009 to 2011), President of the BD Biosciences segment (2006 to 2009), President of BD Diagnostics (2002 to 2006) and Senior Vice President of Company Operations (1998 to 2002). Mr. Kozy holds a B.A. from Kenyon College. | | | | Committees: • None, as Chair of the Board Other Current Public Company Directorships: • Cooper Companies, Inc. | Director Skills and Qualifications: • Mr. Kozy has more than 40 years of experience with global medical device companies. Prior to serving as COO for Becton Dickinson, Mr. Kozy’s key business worldwide leadership roles included responsibility for the Biosciences, Diagnostic and Medical segments of Becton Dickinson. During his time at Becton Dickinson, he was responsible for all worldwide businesses of the company with leadership emphasis on profitable revenue growth and talent development. He also brings a depth of corporate leadership experience in the areas of innovation systems, operations, manufacturing and ERP implementation as well as his broad and relevant experience in global strategy, mergers and acquisitions, technology and product development. |
Director Nominees
| VLADIMIR A. MAKATSARIA | | | | CHIEF EXECUTIVE OFFICER Age 51 (since 2024) | Vladimir Makatsaria is Chief Executive Officer and Board Member of LivaNova. Building great teams and driving innovation and growth in the healthcare field has been Mr. Makatsaria’s focus throughout his entire career. Prior to LivaNova, he worked for 27 years at Johnson & Johnson (J&J), a multinational pharmaceutical and medical technologies corporation, in executive leadership roles, spanning various technologies and geographies. He most recently served as Company Group Chairman at J&J MedTech where he led Ethicon, a global leader in the surgical technologies market. Other executive positions throughout his J&J tenure include leading J&J China, J&J MedTech APAC, Ethicon EMEA, among others. He also served on Ethicon, DePuy and total MedTech global leadership teams. He served as Chairman of the Board of the Asia Pacific Medical Technology Association (APACMed) and as an Advisory Board Member to Singapore Management University. Mr. Makatsaria holds three degrees from the University of Minnesota: a bachelor’s degree in physiology, an MBA and a master’s in healthcare administration. | | | | Committees: • None, as Chief Executive Officer | Director Skills and Qualifications: • Mr. Makatsaria has extensive experience in executive leadership roles within global medical device companies. He is an inquisitive leader with a variety of leadership experience, ranging from startups to managing a global 10-billion-dollar business. Mr. Makatsaria has considerable international experience and is credited as being a key component in establishing culture, talent and innovation expectations in his previous positions. |
Director Nominees
| DR. SHARON O’KANE | | | | INDEPENDENT Age 56 Nine years of service (since 2015) | Dr. Sharon O’Kane serves as a non-executive director and member of the Audit and Risk Committee of Health Products Regulatory Authority Board in Ireland and has a Visiting Professorship at Ulster University where she advises the Faculty of Life and Health Sciences. She has also served as an Entrepreneur in Residence at University College Dublin since 2015. She was an expert advisor to the Stevenage Bioscience Catalyst Facility at GlaxoSmithKline, a global healthcare company (2012 to 2019) and a Commercial Mentor to Queen’s University, Belfast (2016 to 2019). Previously, Dr. O’Kane served as Entrepreneur in Residence at the University of Manchester Intellectual Property Company UMIP (2009 to 2014). Dr. O’Kane co-founded and, from 1998 to 2010, was the Chief Scientific Officer, and a Director of Renovo Group Plc, a UK biotech company. Dr. O’Kane earned a Bachelor of Science(Honours) First Class in Biomedical Sciences from the University of Ulster from which she also earned a Ph.D. in Biomedical Sciences. She also earned a Diploma in Company Direction from the Institute of Directors. | | | | Committees: • Nominating and Corporate Governance (Chair) | Director Skills and Qualifications: • Dr. O’Kane has extensive experience in healthcare, both in the academic and government realms and in research and development (R&D) capacities. She has served on the board of directors of several biotech and healthcare companies and organizations and has held numerous positions advising healthcare and biotech companies, governmental bodies and universities. Dr. O’Kane was also a co-founder, Chief Scientific Officer and executive director of Renovo Group Plc and was responsible for growing the university spin-out to a public company, and a non-executive director of Iomet Pharma Ltd. Dr. O’Kane received corporate director governance training at the Institute of Directors and Harvard Business School. |
Director Nominees
| TODD SCHERMERHORN | | | | INDEPENDENT Age 63 Four years of service (since 2020) | Todd Schermerhorn served as the Senior Vice President and Chief Financial Officer of C. R. Bard, Inc., a multinational developer, manufacturer and marketer of life-enhancing medical technologies, from 2003 until his retirement in 2012. Prior to that, he had been Vice President and Treasurer of C. R. Bard (1998 - 2003). From 1985 to 1998, Mr. Schermerhorn held various other management positions with C. R. Bard. Mr. Schermerhorn received a BS from the University of Lowell and an MBA from Babson College. | | | | Committees: • Audit and Compliance (Chair) Other Current Public Company Directorships: • The Travelers Companies, Inc. Former Public Company Directorships During the Past Five Years: • The Spectranetics Corporation. | Director Skills and Qualifications: • Mr. Schermerhorn served as the Chief Financial Officer of a publicly traded company and has significant experience and expertise in management, accounting and business operations. Mr. Schermerhorn is also an audit committee financial expert. |
Director Nominees
| BROOKE STORY | | | | INDEPENDENT Age 52 Two years of service (since 2022) | Brooke Story served as the Worldwide President, Surgery at Becton, Dickinson and Company from July 2023 to March 2024 and Worldwide President, Integrated Diagnostics Solutions at Becton, Dickinson and Company from April 2021 to July 2023. Prior to that, Ms. Story spent 15 years at Medtronic, where she held a variety of roles in finance, sales and business unit leadership, culminating in her tenure as President, Pelvic Health and Gastric Therapies. Ms. Story began her career in sales at Johnson & Johnson and as a consultant for Accenture. Ms. Story holds a BS in industrial engineering from the University of Tennessee and an MBA from the University of Michigan. | | | | Committees: • Nominating and Corporate Governance Former Public Company Directorships During the Past Five Years: • Sigilon Therapeutics | Director Skills and Qualifications: • Ms. Story has over 20 years of experience in the global medical technology industry. Throughout her career, she has excelled in helping large medical device corporations inspire teams, mentor and development talent and deliver economic value. |
Director Nominees
| PETER WILVER | | | | INDEPENDENT Age 64 Two years of service (since 2022) | Peter Wilver served as Senior Vice President and Chief Financial Officer of Thermo Fisher Scientific Inc., a leading provider of laboratory products and services, from November 2006 to July 2015 and as Executive Vice President and Chief Administrative Officer from August 2015 until his retirement in March 2017. He served as Vice President and Chief Financial Officer of Thermo Electron from 2004 to 2006 and as Thermo Electron’s Vice President, Financial Operations from 2000 to 2004. Before joining Thermo Electron, Mr. Wilver held financial leadership roles at Honeywell International, Grimes Aerospace Company and General Electric Company. Mr. Wilver holds a BS in Business Administration in Accounting from The Ohio State University and is a certified public accountant. | | | | Committees: • Audit and Compliance; Compensation and Human Capital Management Other Current Public Company Directorships: • Baxter International Inc. and Shoals Technologies Group, Inc. Former Public Company Directorships During the Past Five Years: • CIRCOR International, Inc. and Evoqua Water Technologies Corp. | Director Skills and Qualifications: • Mr. Wilver served as the Chief Financial Officer of a publicly traded company and has significant experience and expertise in strategic planning and business development, as well as in leading the financial, accounting and investor functions of large, multinational manufacturing companies. Mr. Wilver is also an audit committee financial expert. |
Director Compensation
Director Compensation Overview. The CHCM Committee reviews the total compensation paid to the Company’s non-employee directors on an annual basis. The purpose of the review is to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform the Board’s duties and to compensate LivaNova’s directors fairly for their services. The review includes the consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the CHCM Committee considers the factors set out in the Company’s remuneration policy which govern payments to all directors, including non-executive directors. Some of the factors considered include: the time and effort involved in preparing for Board and committee meetings and the additional duties assumed by committee Chairs, the Chair of the Board (if a non-executive director) and the Lead Director (if the Chair of the Board is an executive director); the level of continuing education required to remain informed of broad corporate governance trends and material developments relevant to strategic initiatives within the Company; and the compensation paid to directors at a peer group of companies as determined by the CHCM Committee with advice from its independent compensation consultant. 2023 Director Compensation. Non-employee directors who served on the Company’s Board received the following fees paid in cash for their service on the Board in 2023: • annual Board retainer fee of $110,000 ($185,000 for the Board Chair) • annual committee Chair fees: ◦ $20,000 (NCG Committee) ◦ $20,000 (CHCM Committee) ◦ $30,000 (AC Committee) • annual committee member fees (for members other than the committee Chairs): ◦ $8,000 (NCG Committee) ◦ $8,000 (CHCM Committee) ◦ $15,000 (AC Committee) In 2023, each of the Company’s non-executive directors was also granted RSUs with a grant date fair market value of $130,000. These are service-based awards that vest after one year, subject to prorated vesting in the event of separation prior to the end of a director’s term. Additionally, in 2023, upon the recommendation of the NCG Committee, the Board established the Lead Director role in light of Mr. Kozy’s assumption of the additional role of Interim CEO. Based on the increased responsibilities and time commitment assumed by the Lead Director, and on the advice of Pearl Meyer, the CHCM Committee recommended, and the Board approved, an annual retainer for the Lead Director role of $30,000. The CHCM Committee did not recommend any additional changes to the compensation of the non-executive directors in 2023. During the period of his employment as Interim CEO, Mr. Kozy was deemed to waive any entitlement to director fees and awards that he would otherwise have received in his capacity as a non-executive director and Chair of the Board. The following table sets forth a summary of the compensation due to the non-employee directors in the year ended December 31, 2023:
Director Compensation
| Name(1) | Fees Earned in Cash ($) | Stock Awards ($)(2) | Total ($) | | J. Christopher Barry | 29,552 | 88,329 | 117,881 | | Francesco Bianchi | 133,000 | 130,000 | 263,000 | | Stacy Enxing Seng | 130,000 | 130,000 | 260,000 | | Daniel Moore | 118,000 | 130,000 | 248,000 | | Dr. Sharon O’Kane(3) | 151,429 | 130,000 | 281,429 | | Andrea Saia(4) | 133,000 | 130,000 | 263,000 | | Todd Schermerhorn | 140,000 | 130,000 | 270,000 | | Brooke Story | 118,000 | 130,000 | 248,000 | | Peter Wilver | 133,000 | 130,000 | 263,000 |
Director Compensation
(1) Mr. Kozy is not included in this table as he was an employee of the company for a portion of fiscal 2023. See “Compensation Discussion & Analysis — Compensation Tables — Summary Compensation Table” for information about the compensation earned by Mr. Kozy in fiscal 2023 in his capacity as both a non-employee director and Interim Chief Executive Officer of the Company. (2) Amounts reflect the full grant date fair value of RSUs granted in 2023 computed in accordance with FASB ASC Topic 718, rather than the amounts paid to or realized by the named individual. The Company provides information regarding the assumptions used to calculate the value of all stock awards and option awards made to its directors in “Note 15. Stock-Based Incentive Plans” in the Company’s US Annual Report on Form 10-K for the year ended December 31, 2023. The RSUs shown in the table will generally vest on the earlier of (i) the anniversary of the grant date and (ii) the date of a Change in Control (as defined in the relevant RSU agreement). As of December 31, 2023, all RSU awards reflected in the column were unvested. The stock award values shown above correspond to 2,680 RSUs, except for Mr. Barry, who received a pro-rated grant award of 1,709 RSUs in connection with his appointment to the Board on October 6, 2023. (3) Dr. O’Kane served for a portion of fiscal 2023 as Lead Director. (4) Ms. Saia retired from the Board, effective December 31, 2023. 2024 Director Compensation. In February 2024, based on benchmarking data and upon the advice of its independent compensation consultant, Pearl Meyer, the CHCM Committee recommended to the Board an increase of $50,000 to the grant value of the annual service-based share awards for non-employee directors (to $180,000 for non-employee directors other than the Chair of the Board, and to $255,000 for the Chair) and a corresponding $50,000 decrease in the non-employee director cash retainer (to $60,000 for non-employee directors other than the Chair of the Board, and to $135,000 for the Chair of the Board). In February 2024, the Board approved these changes, to take effect at the 2024 AGM. No other changes were made to director compensation in 2024.
Interim CEO Employment Agreement
Interim CEO Employment Agreement On April 14, 2023, the Company announced that William Kozy, Chair of the Company’s Board, had been appointed Interim Chief Executive Officer. On April 19, 2023, the Company entered into an offer letter with Mr. Kozy which set forth the terms and conditions of his employment as Interim Chief Executive Officer and which was reviewed and approved by the CHCM Committee, as advised by its independent compensation consultant, Pearl Meyer. Mr. Kozy’s offer letter provided for an annual base salary of $975,000 and eligibility for an annual performance bonus, with each year’s annual bonus having a target of 110% of Mr. Kozy’s base salary, pro-rated and payable based on the number of days Mr. Kozy was employed during 2023 and 2024 based on the Company’s actual full year performance and relative to the established metrics as described below. Additionally, in connection with his appointment as Interim Chief Executive Officer, Mr. Kozy was granted a one-time award of time-based restricted stock units with a grant date fair value of $500,000 on June 15, 2023, which award vested on October 14, 2023, the six-month anniversary of his start date. In connection with the extension of his term as Interim Chief Executive Officer and consistent with the provisions of his offer letter, on October 19, 2023, the CHCM Committee determined to grant Mr. Kozy an additional one-time award of time-based restricted stock units with a grant date fair value of $750,000, effective as of December 15, 2023, in accordance with the Company’s next predetermined equity grant date, which vested upon the commencement of Mr. Makatsaria’s employment as Chief Executive Officer on March 1, 2024.
2023 Short-Term and Long-Term Incentive Payouts
2023 Short-Term and Long-Term Incentive Payouts
2023 Short-Term and Long-Term Incentive Payouts
| 2023 Short-Term Incentive Plan | 2021-2023 rTSR PSUs(1) | | 137.5% of target Reflects performance against a set of financial and non-financial objectives | 115% of target Reflects 59th percentile |
2023 Short-Term and Long-Term Incentive Payouts
In 2021, in addition to the PSUs awarded based on relative Total Shareholder Return (“rTSR”), LivaNova granted PSUs based on Adjusted Free Cash Flow and Return on Invested Capital (“ROIC”). Given the uncertainty due to the pandemic, these PSUs had a one-year performance period and required two additional years of service in order to vest. Further details regarding these plans, the bonuses paid to LivaNova’s NEOs, and the elements of the Company’s pay-for-performance compensation program are described more fully later in this CD&A.
Executive Compensation Pay Practices
| What LivaNova DOES: | What LivaNova DOES NOT DO: | | Target NEO pay within a competitive range of the market median to attract, motivate, and retain talented executive officers with the skills and experience to ensure its long-term success | Pay excise tax gross-ups | | Use multiple pay elements that work together to reward performance and retain talent, while maintaining alignment with shareholder interests | Reprice stock options or award discounted stock option grants | | Use multiple, balanced performance measures to determine compensation awards | Allow its officers or directors to pledge Company securities | | Balance the components of compensation so that short-term (annual) and long-term (multi-year) performance objectives are recognized because its success depends on its executive officers being focused on critical strategic and operational objectives, both in the short-term and long-term | Allow hedging transactions for any type of Company security, including without limitation puts, calls, equity swaps, collars, exchange funds, prepaid variable forwards or other financial instruments or derivative securities | | Pay a substantial portion of each NEO’s compensation as variable pay contingent upon the achievement of its business objectives | | | Require NEOs to have a meaningful ownership interest in the Company with stock ownership requirements | | | Vest equity awards over time to promote retention and mitigate risk | | | Retain the ability to recoup awards in specified situations through its LivaNova Compensation Recoupment Policy and Incentive Clawback Policy | | | Engage an independent Compensation Consultant to advise the CHCM Committee | | | Include maximum payout caps on LivaNova’s Short-Term Incentive and Performance Stock Units (“PSUs”) payouts | | | Grant equity awards with a double trigger acceleration feature upon a Change in Control for awards starting in 2023 | |
Role of the Compensation Consultant
Role of the Compensation Consultant For 2023, the CHCM Committee directly engaged an independent compensation consultant, Pearl Meyer, to advise on competitive pay practices, recommend a peer group for compensation purposes, provide market data, and assist the CHCM Committee in the analysis of that data and attend all regular meetings of the CHCM Committee. During 2023, Pearl Meyer did not perform any services for the Company or any of its executive officers or other employees. Based on these factors, the CHCM Committee’s evaluation of Pearl Meyer’s independence pursuant to the requirements approved and adopted by the SEC and Nasdaq, and information provided by Pearl Meyer, the CHCM Committee determined that the work performed by Pearl Meyer did not raise any conflicts of interest.
How LivaNova Establishes Executive Compensation Levels
How LivaNova Establishes Executive Compensation Levels In making executive compensation determinations, the CHCM Committee relies on several factors to set compensation elements and compensation targets consistent with LivaNova’s executive compensation program objectives. These factors include: • Assessment of Company Performance. The CHCM Committee establishes specific, objectively measurable company financial and non-financial performance goals that the Board, the CHCM Committee and management believe will drive shareholder value. The relative achievement of the performance objectives determines substantially all of the pay-outs under the STIP and the performance-based equity incentive awards portion under the LTIP. • Assessment of Individual Performance. Individual performance is a key consideration in LivaNova’s compensation decisions. CEO. The CHCM Committee meets with the Company’s CEO at the end of each fiscal year to agree on the CEO’s performance objectives for the next year. Thereafter, the CHCM Committee and the Chair of the Board or the Lead Director (if the Chair of the Board is an executive director) meet in executive session to assess the CEO’s performance against their objectives, their degree of contribution to LivaNova’s performance, their ethics and integrity, and other leadership attributes. Other NEOs. For all other NEOs, the CHCM Committee receives performance assessments and compensation recommendations from the CEO and also exercises its judgment based on the Board’s interactions with the individuals. As with the CEO, an executive officer’s performance assessment is based on individual achievements and contributions, contribution to Company performance, ethics and integrity, and other leadership accomplishments. • Benchmarking Analysis. The CHCM Committee reviews peer group data based on benchmark analysis provided by its independent compensation consultant, Pearl Meyer, who compares individual pay to comparable roles among LivaNova’s peer group. To perform the benchmark analysis, Pearl Meyer uses data from a pre-established peer group selected by the CHCM Committee, as well as compensation survey data that reflects companies of comparable size and industry where available, collectively referred to as “market data”. Companies included in the peer group are in the healthcare industry and have revenues between $350 million and $2 billion, market capitalization between $750 million and $12 billion and number of employees between 900 and 9,000 people. The peer group used to benchmark executive compensation for the year ended December 31, 2023 remained unchanged compared to the prior year and consisted of the following companies selected by the CHCM Committee based upon the recommendation of its independent compensation consultant, Pearl Meyer:
Short-Term Incentives: 2023 Short-Term Incentive Plan (the “2023 STIP”)
Short-Term Incentives: 2023 Short-Term Incentive Plan (the “2023 STIP”) Purpose: LivaNova’s STIP provides incentives that compensate the Company’s executive officers for achieving certain short-term objectives intended to enhance shareholder value. In addition, the STIP is designed to aid in attracting highly qualified executive officers, and to promote their retention. In particular, the STIP provides formulaic incentives to achieve or exceed a predetermined set of financial objectives, with the final payout for LivaNova’s NEOs modified on the basis of the achievement of non-financial goals. In establishing the target STIP percentages, the CHCM Committee considers the following factors: • Responsibilities, including any recent changes in those responsibilities; • Market data; • Level of expertise and experience of the NEO; • Strategic importance of the NEO’s position; and • Internal pay equity among positions. The financial objectives established by the CHCM Committee for the 2023 STIP were Net Sales and Adjusted Net Income. For purposes of the 2023 STIP: • “Net Sales” is defined as LivaNova’s net sales for 2023 at budgeted currency exchange rates adjusting for the effects of from any acquisitions and divestitures in 2023. • “Adjusted Net Income” is defined as net income at reported currency exchange rates, after adjustments for the effects of acquisitions, divestitures, restructuring, integration, product remediation, purchase price allocation and intangible amortization, significant litigation, equity compensation, significant non-cash adjustments and other infrequent, unusual, or non-recurring items not incurred in the ordinary course of business. The CHCM Committee established the STIP financial targets after an analysis of market conditions, financial projections, and strategic goals. • After considering the achievement of the financial objectives under the STIP, final payouts for LivaNova’s NEOs eligible to participate in the plan are subject to a modifier (±25%) based on non-financial objectives. For the 2023 STIP, the following non-financial objectives were combined to create a payout modifier: ◦ Difficult-to-Treat Depression (DTD) and Obstructive Sleep Apnea (OSA): Clinical Study project milestones; ◦ Epilepsy: Product Development and Regulatory objectives related to key milestones for new product development as well as a commercial objective related to key milestone for new patient implants; ◦ ACS and CP: Product Development and Regulatory objectives related to key milestones for new product development; and ◦ Capability objectives related to the implementation of a new financial system. In 2023, the CHCM Committee set a number of non-financial goals with respect to the 2023 STIP that were deemed to be challenging yet individually achievable, with the maximum scoring for each independent goal set at 100%. Given its determination that achievement of all of the non-financial goals in the year would be especially difficult and the maximum 100% scoring for each goal, the CHCM Committee set up the modifier to allow for positive modification in the event most but not all non-financial goals were achieved, up to positive modification of 25% in the event all goals were achieved. Similarly, if most non-financial goals were not achieved, the CHCM Committee designed the 2023 STIP to allow for a downward adjustment with respect to the non-financial goals, capped at 25%. Further, the Non-Financial Goals Modifier can be capped at 100% if the Adjusted Net Income target is not achieved. Annual cash-based bonus plan expressed as a target percentage of the NEO’s weighted average base salary conditioned on achievement of certain financials and non-financial metrics, per the following formulas. For all of LivaNova’s eligible NEOs, the calculation is based on the following formula: Where BPF stands for Business Performance Factor (“BPF”), a formulaic calculation based on financial and non-financial objectives. The BPF is calculated as follows: Where FPF stands for Financial Performance Factor (“FPF”) and is calculated based on the above-described financial metrics per the following formula, and NFG Modifier stands for Non-Financial Goals Modifier and is the above-described modifier based on Non-Financial Objectives. * The Non-Financial Goals Modifier is subject to a forecast accuracy assessment mechanism and can be capped at 100% if the Adjusted Net Income target is not achieved. ** Linear interpolation is used to calculate payouts for achievements between the levels indicated in the above table. As a result of their departures from the Company, Messrs. McDonald and Dolci were not eligible to receive a payout under the 2023 STIP. The table below shows the minimum, target, and maximum short-term incentive payment under the 2023 STIP for each of the remaining NEOs:
Short-Term Incentives: 2023 Short-Term Incentive Plan (the “2023 STIP”)
| Name | 2023 STIP Minimum (Percentage of Base Salary) | 2023 STIP Target (Percentage of Base Salary) | 2023 STIP Maximum (Percentage of Base Salary)(1) | | William Kozy | 0% | 110% | 200.0% | | Alex Shvartsburg | 0% | 65% | 121.9% | | Michael Hutchinson | 0% | 65% | 121.9% | | Trui Hebbelinck | 0% | 65% | 121.9% |
Short-Term Incentives: 2023 Short-Term Incentive Plan (the “2023 STIP”)
These percentages represent 181.82% of the target bonus opportunity for Mr. Kozy and 187.5% of the target bonus opportunity for the other NEOs.
2023 Short-Term Incentive Plan Pay-out
2023 Short-Term Incentive Plan Pay-out Bonuses are based on performance over the calendar year, which is also LivaNova’s financial year, and are generally paid in April of the following year after completion of the audit of the Company’s annual financial statements. The Company’s performance in 2023, as defined by the 2023 STIP, was as follows: Financial Objectives:
2023 Short-Term Incentive Plan Pay-out
| | Weight (%) | Target ($M) | Achievement ($M) | Achievement (%) | Financial Payout (%) | | Net Sales | 60 | 1,113.7 | 1,215.4 | 109.1 | 145.65% | | Adjusted Net Income | 40 | 138.1 | 152.0 | 110.1 | 125.16% | | | | | | FPF | 137.5% |
2023 Short-Term Incentive Plan Pay-out
Non-Financial Objectives: Performance against LivaNova’s 2023 non-financial goals is summarized in the table below and yielded 70% achievement. Due to the “stretch” nature of these goals, this resulted in a preliminary +10% modification to financial funding for the Company’s STIP payout.
2023 Short-Term Incentive Plan Pay-out
| Business Area | Description | Achievement | Achievement description | Weight (%) | Achievement (%)(1) | | DTD | 500th Unipolar (UP) patient randomized into the study by target date, completing recruitment for UP cohort | Achieved | 500th Unipolar patient randomized into the study by target date | 15% | 15% | | | First interim analysis initiated for Bipolar cohort in the RECOVER study upon randomizing target number of bipolar patients by target date | Achieved | Target number of bipolar Patients achieved on June 13, 2023. | 10% | 10% | | OSA | Target number of randomized patients by target date and program assessment completion by target date | Not Achieved | Target number of patients not achieved by the target date and program assessment completed | 10% | 0% | | Epilepsy | Target% of New Patient Implants (“NPIs”) growth year over year | Not Achieved | Achieved high single digit NPI year-over-year growth, slightly behind target% | 20% | 0% | | | Two key milestones in Regulatory and R&D to be completed by target date, each weighted 5%. | Achieved | All milestones achieved by the target date | 10% | 10% | | CP | Software release for Europe commercialization by target date | Achieved | Software release completed by target date | 15% | 15% | | ACS | One key milestone in Regulatory and target number of critical product development projects to be completed by target date, each weighted 5%. | Achieved | Both regulatory and product development goal achieved | 10% | 10% | | Capability | Financial system deployed by target date | Achieved | Financial system went live by the target date | 10% | 10% | | Total | | | | 100% | 70% |
2023 Short-Term Incentive Plan Pay-out
Achievement for each goal is capped at 100% of its assigned weight. STIP Payout: Based on the scoring of the 2023 non-financial objectives as well as an overall assessment of Company performance, the CHCM Committee determined to utilize negative discretion to cap the Non-Financial Goals Modifier at 100%. Consequently, as a result of achieving LivaNova’s 2023 STIP financial and non-financial objectives, the STIP produced a payout of 137.5% of target for all of the eligible NEOs. The following table shows the target bonus amount, the payout % (BPF), and amount paid to each eligible NEO under the 2023 STIP:
2023 Short-Term Incentive Plan Pay-out
| | 2023 STIP Target ($)(1) | STIP Payout % | 2023 STIP Payout ($)(1) | | William Kozy(2) | 769,849 | 137.5% | 1,058,542 | | Alex Shvartsburg(3) | 349,442 | 137.5% | 480,483 | | Michael Hutchinson | 328,308 | 137.5% | 451,424 | | Trui Hebbelinck | 257,661 | 137.5% | 354,284 |
2023 Short-Term Incentive Plan Pay-out
(1) For payout amounts, LivaNova used an exchange rate of $1.24305 per British Pound reflecting the applicable period average published rate from the Company’s BOPC Accounting System between January 1, 2023 and December 31, 2023. (2) The 2023 STIP Target and Payout for Mr. Kozy is calculated on a prorated basis using his starting date of April 14, 2023. (3) The 2023 STIP Target Payout for Mr. Shvartsburg is calculated as the sum of two portions: a prorated amount from January 1, 2023 until October 31, 2023, equal to £232,789 ($289,369) and a prorated amount from November 1, 2023 until December 31, 2023, equal to $60,072.
Long-Term Incentives: 2023 Long-Term Incentive Plan (the “2023 LTIP”)
Long-Term Incentives: 2023 Long-Term Incentive Plan (the “2023 LTIP”) Purpose: Promote LivaNova’s long-term success and enhance the Company’s value by providing employees with an incentive for outstanding performance that generates superior returns for its shareholders. The plan also provides flexibility as LivaNova seeks to motivate, attract and retain the Company’s NEOs, upon whom LivaNova’s success is largely dependent. Key Features: • Service-Based Awards: ◦ Restricted Stock Units generally vest in substantially equal amounts on each of the first four anniversaries of the grant date ◦ Stock Appreciation Rights vest in substantially equal amounts on each of the first four anniversaries of the grant date and expire ten (10) years from the grant date. • Performance-Based Awards: ◦ Relative Total Shareholder Return (rTSR) Performance Stock Units are subject to a three-year relative total shareholder return market condition (weighted 50% of the total PSU value) ◦ Adjusted Free Cash Flow (FCF) Performance Stock Units are subject to achievement of a three-year cumulative adjusted free cash flow target (weighted 25% of the total PSU value) ◦ Return on Invested Capital (ROIC) Performance Stock Units are subject to achievement of a three-year cumulative Return on Invested Capital target (weighted 25% of the total PSU value) LivaNova typically grants equity awards to executive officers under the 2023 LTIP on the same date the Company grants annual equity awards for other employees, or, in the event of an executive who joins after approval of the annual awards, at the first predetermined equity award grant date following the commencement of their employment with the Company. The predetermined quarterly grant dates are March 30, June 15, September 15, and December 15. There is no formal policy providing any affirmative right to an LTIP award.
2023 LTIP Design
2023 LTIP Design On March 27, 2023, the CHCM Committee approved LivaNova’s 2023 LTIP in which all NEOs other than Mr. Kozy participated. Pursuant to the 2023 LTIP, the CHCM Committee approved an equity award value for each of the five award vehicles for each participant. In establishing the grant date fair value of equity awards made to the NEOs under the 2023 LTIP, the CHCM Committee considered the following factors: • Responsibilities, including any recent changes in those responsibilities; • Market data; • Level of expertise and experience of the NEO; • Strategic importance of the NEO’s position; and • Internal pay equity among positions. The grant date fair value of equity awards made to the NEOs under the 2023 LTIP were as follows:
2023 LTIP Design
| | RSUs ($) | SARs ($) | rTSR PSUs ($) | FCF PSUs ($) | ROIC PSUs ($) | Total Award Value ($) | | Damien McDonald(1) | 1,625,000 | 1,625,000 | 1,625,000 | 812,500 | 812,500 | 6,500,000 | | Alex Shvartsburg | 400,000 | 400,000 | 400,000 | 200,000 | 200,000 | 1,600,000 | | Marco Dolci | 250,000 | 250,000 | 250,000 | 125,000 | 125,000 | 1,000,000 | | Michael Hutchinson | 250,000 | 250,000 | 250,000 | 125,000 | 125,000 | 1,000,000 | | Trui Hebbelinck | 225,000 | 225,000 | 225,000 | 112,500 | 112,500 | 900,000 |
2023 LTIP Design
(1) As a result of his resignation from the Company on April 14, 2023, Mr. McDonald forfeited all of his awards under the 2023 LTIP. Service-Based Elements: Restricted Stock Units (“RSUs”) Each NEO other than Mr. Kozy received an award of service-based RSUs vesting in substantially equal amounts on each of the first four anniversaries of the grant date. The CHCM Committee determined the number of RSUs awarded to each participant by dividing the award value by the most recent closing price of an Ordinary Share of LivaNova’s stock on Nasdaq as of the grant date and rounding down to the nearest whole unit. The first vesting occurred on March 30, 2024. Stock Appreciation Rights (“SARs”) Each NEO other than Mr. Kozy received an award of SARs vesting in substantially equal amounts on each of the first four anniversaries of the grant date. The CHCM Committee determined the number of SARs awarded to each participant by dividing the award value by the Black-Scholes value of a SAR based on the closing price of an Ordinary Share of LivaNova’s stock on Nasdaq as of the grant date and rounding down to the nearest whole unit. The first vesting occurred on March 30, 2024. Performance-Based Elements: Relative Total Shareholder Return Performance Stock Units (“2023 rTSR PSUs”) Each NEO other than Mr. Kozy received an award of PSUs subject to a three-year rTSR market condition. At the end of calendar year 2025, LivaNova’s total shareholder return for the three-year period from 2023 through 2025 will be compared to the total shareholder return for the same period for a group of companies (the “2023 rTSR Comparator Group”) selected by the CHCM Committee in consultation with its independent compensation consultant, Pearl Meyer. The number of shares of the Company’s stock actually delivered to the participants will be determined by the following chart, with linear interpolation applied between specified levels.
2023 LTIP Design
| TSR Performance Percentile Rank | Percent of Target PSUs Earned | | ≥90th | 200% | | 80th | 150% | | 50th | 100% | | 30th | 40% | | <30th | 0% |
2023 LTIP Design
The following companies comprise the 2023 rTSR Comparator Group:
2023 LTIP Design
| Avanos Medical, Inc. | iRhythm Technologies, Inc | | Boston Scientific Corporation | Masimo Corporation | | CONMED Corporation | Medtronic plc | | DexCom, Inc. | Merit Medical Systems, Inc. | | Edwards Lifesciences Corporation | Nevro Corp. | | Globus Medical, Inc. | NuVasive, Inc. | | Haemonetics Corporation | Orthofix Medical Inc. | | Hologic, Inc. | Penumbra Inc. | | ICU Medical, Inc | ResMed Inc. | | Insulet Corporation | Smith & Nephew plc | | Integer Holdings Corporation | Tandem Diabetes Care, Inc | | Integra LifeSciences Holdings Corp. | Teleflex Incorporated | | Intuitive Surgical, Inc. | Zimmer Biomet Holdings, Inc. | | Invacare Corporation | |
2023 LTIP Design
The 2023 rTSR Comparator Group was the same as the 2022 rTSR Comparator Group, with the exception of the removal of Abiomed and Natus Medical Incorporated, which were acquired in 2022 respectively by Johnson & Johnson and Archimed. Companies included in the 2023 rTSR Comparator Group are in the healthcare industry and have revenue in excess of $500 million, with the exception of iRhythm Technologies, Nevro Corp. and Orthofix. These companies were chosen because they are comparable in size and are generally in the same sector as the Company, which supports the purpose of the rTSR metric, which is to measure LivaNova’s performance against peers in the Company’s area of business. Adjusted Free Cash Flow PSUs (“FCF PSUs”) Each NEO other than Mr. Kozy received an award of PSUs subject to achievement of a three-year cumulative adjusted free cash flow target. The FCF PSUs are subject to three-year service-based cliff vesting, with performance-based vesting contingent on the Company achieving threshold and target levels of FCF. The CHCM Committee determined the number of FCF PSUs awarded to each participant by dividing the award value by the most recent closing price of an Ordinary Share of LivaNova’s stock on Nasdaq as of the grant date and rounding down to the nearest whole unit. The FCF PSUs are scheduled to vest or lapse on March 30, 2026, based on how the Company’s cumulative adjusted FCF for the three-year performance period ended December 31, 2025 compares to target, the number of shares of the Company’s stock actually delivered to the participants will be determined by the following chart, with linear interpolation applied between specified levels:
2023 LTIP Design
| FCF Achievement Relative to FCF Target(1) | Percent of PSUs Earned | | ≥150% | 200% | | 125% | 150% | | 100% | 100% | | 60% | 20% | | <60% | 0% |
2023 LTIP Design
Adjusted free cash flow is defined as net cash provided by operating activities less cash used for the purchase of property, plant and equipment excluding the impact of 3T litigation settlement payments, net costs related to financing and cash held as collateral for the SNIA Litigation Guarantee, CARES Act tax stimulus benefits, and gains related to dividends received from investments, and further adjusted as needed for other one-time, nonrecurring, unusual or infrequent charges, expenses or gains, including associated expenses, that may not be indicative of the Company’s core business. In the event there are items that differ from the Company’s non-GAAP reported results, management will seek approval from the CHCM Committee of such potential adjustments in the regularly scheduled quarterly meeting after such adjustment is identified. Return on Invested Capital PSUs (“ROIC PSUs”) Each NEO other than Mr. Kozy received an award of PSUs subject to achievement of a three-year average minimum threshold return on invested capital target (“ROIC Target”). The ROIC measure is designed to estimate core operating performance, excluding the impact of financing and capital structure decisions, and encourages effective financial stewardship. The ROIC PSUs are subject to a three-year cliff vesting period, with performance-based vesting contingent on the Company achieving threshold and target ROIC. The CHCM Committee determined the number of ROIC PSUs awarded to each participant by dividing the award value by the most recent closing price of an Ordinary Share of LivaNova stock on Nasdaq as of the grant date and rounding down to the nearest whole unit. The ROIC PSUs are scheduled to vest or lapse on March 30, 2026, based on how the Company’s average ROIC calculated for the three-year performance period ended December 31, 2025 compares to a target ROIC level. The number of shares of the Company’s stock actually delivered to the participants will be determined by the following chart, with linear interpolation applied between specified levels:
2023 LTIP Design
| ROIC Achievement Relative to ROIC Target(1) | Percent of Target PSUs Earned | | Target ≥ +250 bps | 200% | | Target +125 bps | 150% | | Target | 100% | | Target – 125 bps | 50% | | Target ≤ 250 bps | 0% |
2023 LTIP Design
(1) ROIC is defined as net operating profits divided by invested capital. The numerator, net operating profits, is defined as the Company’s adjusted operating income less share-based compensation expense and is tax affected by LivaNova’s adjusted tax rate. Adjusted operating income and adjusted tax rate are non-GAAP measures, provided in conjunction with the issuance of the Company’s quarterly earnings press release, while the denominator, invested capital, is defined as operating working capital plus other net operating assets. It excludes restricted cash, derivative assets and liabilities, long-term debt and accrued legal settlements related to LivaNova’s 3T matter.
Special RSU Grants for Interim CEO
Special RSU Grants for Interim CEO As discussed above, under the terms of his offer letter, in connection with his appointment as Interim CEO, Mr. Kozy was granted a one-time award of time-based restricted stock units with a grant date fair value of $500,000 on June 15, 2023, which award vested on October 14, 2023, the six-month anniversary of his start date, in line with his initial term. In connection with the extension of his term as Interim CEO and consistent with the terms of his offer letter, the CHCM Committee of the Board determined to grant Mr. Kozy an additional one-time award of time-based restricted stock units with a grant date fair value of $750,000, effective as of December 15, 2023, in accordance with the Company’s next predetermined equity grant date (contingent upon Mr. Kozy’s continued employment as Interim Chief Executive Officer through such date), which vested upon the commencement of Mr. Makatsaria’s employment as Chief Executive Officer on March 1, 2024.
Vesting in 2023 of Performance Awards Made in Previous Years
Vesting in 2023 of Performance Awards Made in Previous Years Vesting of rTSR PSUs Granted in 2021 The rTSR PSUs granted in March 2021 (the “2021 rTSR PSUs”) were subject to a three-year cliff vesting period with vesting contingent on the Company achieving a three-year (2021-2023) rTSR threshold level of at least the 30th percentile of the 2021 rTSR comparator group. The Company ranked at the 59th percentile of that group, and accordingly 115% of the 2021 rTSR PSUs vested.
Summary Compensation Table
Summary Compensation Table The following table contains information about the compensation earned by each of LivaNova’s NEOs during each of the last three financial years unless such individual was an NEO for fewer than three years.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(1)(4) | All Other Compensation ($)(1)(5) | Total | | William Kozy, Former Interim CEO(6) | 2023 | 697,500 | — | 1,249,961 | — | 1,058,542 | 54,722 | 3,060,725 | | Damien McDonald, Former CEO(7) | 2023 | 286,826 | — | 4,746,297 | 1,624,996 | — | 1,552,221 | 8,210,340 | | | 2022 | 967,450 | — | 4,883,235 | 1,249,995 | 1,105,422 | 359,443 | 8,565,545 | | | 2021 | 1,056,456 | — | 5,349,239 | 1,249,971 | 1,884,453 | 540,525 | 10,080,644 | | Alex Shvartsburg, CFO | 2023 | 536,885 | — | 1,168,289 | 399,992 | 480,483 | 185,531 | 2,771,180 | | | 2022 | 434,231 | — | 976,502 | 299,966 | 258,051 | 159,916 | 2,128,666 | | | 2021 | 431,476 | — | 891,335 | 249,988 | 314,453 | 142,107 | 2,029,359 | | Marco Dolci, Former President, Cardiopulmonary BU(8) | 2023 | 571,833 | — | 2,094,554 | 1,046,774 | — | 1,089,127 | 4,802,288 | | | 2022 | 537,617 | — | 813,760 | 249,978 | 407,944 | 198,728 | 2,208,027 | | | 2021 | 591,140 | — | 891,335 | 249,988 | 506,134 | 190,807 | 2,429,404 | | Michael Hutchinson, Senior Vice President, Chief Legal Officer and Company Secretary | 2023 | 505,077 | 100,000 | 730,181 | 249,983 | 451,424 | 35,686 | 2,072,351 | | Trui Hebbelinck, CHRO | 2023 | 396,347 | — | 657,120 | 224,994 | 354,284 | 144,415 | 1,777,160 | | | 2022 | 377,873 | — | 732,378 | 224,966 | 224,516 | 129,018 | 1,688,751 | | | 2021 | 412,638 | — | 713,172 | 199,973 | 382,742 | 149,940 | 1,858,465 |
Summary Compensation Table
(1) For amounts reported in 2023, LivaNova used an exchange rate of $1.24305 per British Pound and $1.08124 per Euro. These exchange rates reflect the applicable period average published rate between January 1 and December 31 from the Company’s BOPC Accounting System which uses Bloomberg as a source to obtain exchange rates. (2) Per his offer letter, dated November 2, 2022, Mr. Hutchinson was eligible to receive a one-time cash bonus in the amount of $200,000 (less applicable withholdings and deductions) to be paid in three installments: 50% on the first payroll date after his start date; 25% on the first payroll date six months after his start date; and 25% on the first payroll date after the first anniversary of his start date, subject to his continued employment through the applicable vesting date. The amount reflected in this column for Mr. Hutchinson represents the portion of his new-hire cash bonus award paid in 2023. If Mr. Hutchinson was to terminate his employment with the Company within one (1) year of his start date, the Company had the right to seek a pro rata repayment of this one-time bonus. (3) Amounts reflect the full grant-date fair value of PSUs, RSUs and SARs granted and computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, rather than the amounts paid to or realized by the named individual. LivaNova provides information regarding the assumptions used to calculate the value of all PSUs, RSUs and SARs awards made to executive officers in Notes 2 and 15 to LivaNova audited financial statements in the Company’s US Annual Report on Form 10-K for the year ended December 31, 2023. Under the terms of LivaNova’s PSU awards at grant, between 0% and 200% of the target number of shares subject to the awards can vest based on performance and the other vesting conditions applicable to the awards. For the PSUs awarded to LivaNova’s NEOs in 2023, the table below sets forth (i) the grant-date fair value of the awards determined in accordance with FASB ASC Topic 718, with these values determined based on a Monte Carlo simulation pricing model (included in the “Probable Outcome” column below) for the relative TSR PSUs and based on the last available stock price at grant date for the Adjusted Free Cash Flow and the ROIC PSUs, and (ii) the grant-date fair value of these awards assuming that the maximum level of performance was achieved.
Summary Compensation Table
| Name | PSUs — Probable Outcome of Performance Conditions PSUs Grant-Date Value ($) | PSUs — Maximum Outcome of Performance Conditions Grant-Date Fair Value ($) | | Damien McDonald | 3,121,300 | 6,500,000 | | Alex Shvartsburg | 768,300 | 1,600,000 | | Marco Dolci | 480,188 | 1,000,000 | | Michael Hutchinson | 480,188 | 1,000,000 | | Trui Hebbelinck | 432,126 | 900,000 |
Summary Compensation Table
In granting equity awards, the CHCM Committee values PSUs at the most recent closing price of an Ordinary Share of LivaNova stock on Nasdaq as of the grant date with the value of PSUs based at the “target” level of performance. Under applicable accounting rules, however, the grant-date fair value of the rTSR PSUs awarded to LivaNova’s NEOs is calculated using a Monte Carlo simulation pricing model. The rTSR PSUs are included as compensation for LivaNova’s NEOs in the “Summary Compensation Table” based on this valuation methodology. The following chart shows the values of the rTSR PSU awards approved by the CHCM Committee in 2023 that were used to determine the number of shares subject to the awards at “target” without taking the Monte Carlo simulation pricing model into account, as well as the accounting grant-date fair value of the rTSR PSUs required to be use under applicable SEC rules to report in the “Summary Compensation Table” (including the impact of the Monte Carlo simulation pricing model).
Summary Compensation Table
| Name | rTSR PSUs Value Based on Grant Date Stock Price ($) | rTSR PSUs — Value included in Summary Compensation Table ($) | | Damien McDonald | 1,625,000 | 1,496,303 | | Alex Shvartsburg | 400,000 | 368,311 | | Marco Dolci | 250,000 | 230,195 | | Michael Hutchinson | 250,000 | 230,195 | | Trui Hebbelinck | 225,000 | 207,175 |
Summary Compensation Table
(4) Values in this column reflect payments in respect of the relevant year’s short-term incentive plan. (5) The amounts reported in the “All Other Compensation” column represent the aggregate dollar amount for all other benefits and payment received by LivaNova’s NEOs. The following table shows the nature of the benefits and payments and specific amounts for each of the Company’s NEOs in 2023:
Summary Compensation Table
| Name | Supplemental Health Insurance ($)(a) | Car Allowance ($)(b) | Contribution Plan — Registrant Contributions ($)(c) | Cash in lieu of pension ($)(d) | Other ($)(e) | Total ($) | | William Kozy | — | — | — | — | 54,722 | 54,722 | | Damien McDonald | 61,177 | 6,435 | 12,431 | 37,807 | 1,434,371 | 1,552,221 | | Alex Shvartsburg | 27,028 | 13,674 | 2,297 | 113,454 | 29,078 | 185,531 | | Marco Dolci | 5,979 | 15,570 | 69,134 | — | 998,444 | 1,089,127 | | Michael Hutchinson | 22,486 | — | 13,200 | — | — | 35,686 | | Trui Hebbelinck | 14,219 | 16,408 | 112,595 | — | 1,193 | 144,415 |
Summary Compensation Table
(a) Represents the private medical insurance provided for Messrs. McDonald (for 2023 and the amount in cash paid in replacement of health insurance until April 14, 2024), Shvartsburg (including both the UK and US medical and dental insurance premium), Hutchinson and Dolci, and Ms. Hebbelinck. (b) Represents the car allowance for each of Messrs. McDonald (prorated until April 14, 2023), Shvartsburg (prorated for his period under a UK service agreement until October 31, 2023) and Dolci and Ms. Hebbelinck; these allowances are customary for UK and Italian executive compensation packages. (c) Represents Company-matching contributions to a defined contribution plan equal to the amount of contributions made by the executive officer (see — 2023 Nonqualified Deferred Compensation). For Mr. Dolci, includes the Italian qualified end of service fund (so called TFR) which is equal to 1/13.5 of his recurring compensation item (salary and bonus) and additional supplementary pension per national collective agreement, customary for an executive in Italy. For Mr. McDonald and Ms. Hebbelinck, includes £10,000 ($12,430) and £90,579 ($112,595), respectively, of Company contributions into a personal pension plan sponsored by the Company. For Messrs. Shvartsburg and Hutchinson, includes $2,297 and $13,200, respectively, of Company contributions into the Company sponsored 401K plan. (d) Represents cash received in lieu of pension (see — 2023 Nonqualified Deferred Compensation). (e) For Mr. Kozy, represents his prorated non-executive prorated director fees paid until April 13, 2023 ($52,857) plus his tax assistance ($1,865). For Mr. McDonald, represents his base salary, pension and car allowance for April (since April 14) and May 2023 plus his notice payment that the company began paying in instalments from June 2023 for a total of £1,062,139 ($1,320,296), in accordance with the terms of his previously disclosed service agreement and release agreement, legal fees associated with the negotiation of his release agreement of £25,000 ($31,076), executive coaching for £20,000 ($24,861), tax preparation and filing assistance for filing in the UK, US and Australia ($20,000) and cash in lieu of untaken annual leave for £30,681 ($38,138). For Mr. Shvartsburg, represents relocation benefits ($17,204), relocation allowance ($6,874), and tax preparation and filing assistance ($5,000). For Mr. Dolci, represents his severance pay earned in 2023 ($929,870) a flexible benefit ($1,892), meal voucher ($559), travel allowance ($3,691), cash in lieu of vacation paid in 2023 ($24,712) and cash in lieu of vacation accrued in 2023 and paid in 2024 ($34,955) and tax preparation and filing assistance ($2,765). For Ms. Hebbelinck, represents tax preparation and filing assistance ($1,193). Mr. Kozy served as Board Chair and Non-Executive Director until April 13, 2023 From April 14, 2023, to March 1, 2024 he served as the Company’s Board Chair and Interim Chief Executive Officer. (7) Mr. McDonald resigned as Chief Executive Officer of the Company and as a member of the Company’s Board of Directors, effective April 14, 2023, with his employment by the Company ceasing on May 31, 2023. All unvested equity awards held by Mr. McDonald were forfeited on the last day of his employment. See — “Potential Payments Upon Termination or Change in Control — Damien McDonald — Settlement Agreement — Damien McDonald” for more information. Furthermore, per the terms of LivaNova’s equity incentive award agreements, Mr. Dolci’s retirement was deemed an “Approved Retirement” for purposes of the treatment of his outstanding and unvested equity awards upon the termination of his employment. Therefore, any outstanding and unvested equity awards that Mr. Dolci held as of December 31, 2023 will continue to vest pursuant to the terms of their respective award agreements. Under applicable accounting rules, the determination to treat Mr. Dolci’s retirement as an “Approved Retirement” constituted a modification of his outstanding and unvested equity awards. Accordingly, the amounts set forth in the table above for Mr. Dolci include the incremental fair value change of his outstanding stock awards ($1,364,374) and outstanding option awards ($796,791) as a result of such modifications. The modification value does not represent or reflect additional awards granted to Mr. Dolci. Mr. Dolci served as the Company’s President, Cardiopulmonary until December 31, 2023.
2023 Grants of Plan-Based Awards Table
2023 Grants of Plan-Based Awards Table
2023 Grants of Plan-Based Awards Table
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan: Performance Stock Units (PSUs) (#) | | | All Other Stock Awards: Number of Shares of Service Based RSUs (#) | All Other Option Awards: Number of Securities Underlying SARs (#) | Exercise or Base Price of SAR Awards ($/S) | | Grant Date Fair Value of Stock and SAR Awards(1) ($) | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | | | | | | | William Kozy | | — | 769,849 | 1,399,739 | | | | | | | | | | | 06/15/2023 | | | | | | | 14,512 | | | | 749,981 | | | 12/15/2023 | | | | | | | 10,311 | | | | 499,980 | | Damien McDonald | | — | — | — | | | | | | | | | | | 3/30/2023 | | | | | 19,208 | 38,416 | | | | (2),(5) | 812,498 | | | 3/30/2023 | | | | | 19,208 | 38,416 | | | | (3),(5) | 812,498 | | | 3/30/2023 | | | | | 38,416 | 76,832 | | | | (4),(5) | 1,496,303 | | | 3/30/2023 | | | | | | | 38,416 | | | (5) | 1,624,997 | | | 3/30/2023 | | | | | | | | 81,613 | 42.71 | (5) | 1,624,996 | | Alex Shvartsburg | | — | 349,442 | 655,204 | | | | | | | | | | | 3/30/2023 | | | | | 4,728 | 9,456 | | | | (2) | 199,994 | | | 3/30/2023 | | | | | 4,728 | 9,456 | | | | (3) | 199,994 | | | 3/30/2023 | | | | | 9,456 | 18,912 | | | | (4) | 368,311 | | | 3/30/2023 | | | | | | | 9,456 | | | | 399,989 | | | 3/30/2023 | | | | | | | | 20,089 | 42.71 | | 399,982 | | Marco Dolci | | — | — | — | | | | | | | | | | | 3/30/2023 | | | | | 2,955 | 5,910 | | | | (2) | 124,997 | | | 3/30/2023 | | | | | 2,955 | 5,910 | | | | (3) | 124,997 | | | 3/30/2023 | | | | | 5,910 | 11,820 | | | | (4) | 230,195 | | | 3/30/2023 | | | | | | | 5,910 | | | | 249,993 | | | 3/30/2023 | | | | | | | | 12,555 | 42.71 | | 249,983 | | | 12/31/2023 | | | | | | | | | | (6) | 2,161,165 | | Michael Hutchinson | | — | 328,308 | 615,578 | | | | | | | | | | | 3/30/2023 | | | | | 2,955 | 5,910 | | | | (2) | 124,997 | | | 3/30/2023 | | | | | 2,955 | 5,910 | | | | (3) | 124,997 | | | 3/30/2023 | | | | | 5,910 | 11,820 | | | | (4) | 230,195 | | | 3/30/2023 | | | | | | | 5,910 | | | | 249,993 | | | 3/30/2023 | | | | | | | | 12,555 | 42.71 | | 249,983 | | Trui Hebbelinck | | — | 257,661 | 483,114 | | | | | | | | | | | 3/30/2023 | | | | | 2,659 | 5,318 | | | | (2) | 112,476 | | | 3/30/2023 | | | | | 2,659 | 5,318 | | | | (3) | 112,476 | | | 3/30/2023 | | | | | 5,319 | 10,618 | | | | (4) | 207,175 | | | 3/30/2023 | | | | | | | 5,319 | | | | 224,994 | | | 3/30/2023 | | | | | | | | 11,300 | 42.71 | | 224,994 |
2023 Grants of Plan-Based Awards Table
(1) The amounts reported represent the fair value of the RSU and SARs awards computed in accordance with FASB ASC Topic 718 on the grant date. The fair value for RSU awards is calculated by multiplying the number of units in each award by the closing price of an Ordinary Share of LivaNova’s stock on Nasdaq on the grant date, eventually discounted in case of a market price condition. The fair value for SARs awards is calculated by multiplying the number of rights subject to the award by the Black-Scholes value of an option for an Ordinary Share of LivaNova’s stock on the grant date. For a further discussion of the accounting treatment of the RSU and SAR awards, see “Note 15. Stock Based Incentive Plans” included in the consolidated financial statements accompanying LivaNova’s US Annual Report on Form 10-K for the year ended December 31, 2023. (2) Represents award of Adjusted FCF PSUs. (3) Represents award of ROIC PSUs. (4) Represents award of rTSR PSUs. The amounts reported represent the fair value of the PSU awards computed in accordance with FASB ASC Topic 718 on the grant date. The Company received a computed Monte Carlo fair value from an outside source that computed the fair value of the PSU contracts using the risk-neutral approach (i.e., assuming hedging and selling of the contract). (5) Mr. McDonald forfeited all his 2023 awards as a result of his resignation on April 14, 2023. Represents the fair value of outstanding equity awards granted in fiscal 2019, 2020, 2021, 2022, and 2023 respectively that were modified pursuant to Mr. Dolci’s retirement.
2023 Outstanding Equity Awards at Year End
2023 Outstanding Equity Awards at Year End
2023 Outstanding Equity Awards at Year End
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | William Kozy | | | | | | | 14,512 | 750,851 | | Alex Shvartsburg | 4,874 | 0 | 97.25 | 3/30/2029 | | | | | | | 2,129 | 6,386 | 82.04 | 3/30/2032 | | | | | | | 4,219 | 4,218 | 73.25 | 3/30/2031 | | | | | | | 5,833 | 0 | 80.26 | 12/17/2027 | | | | | | | 5,076 | 0 | 88.38 | 3/15/2028 | | | | | | | 5,879 | 1,959 | 43.57 | 3/30/2030 | | | | | | | 0 | 20,089 | 42.71 | 3/30/2033 | | | | | | | | | | | 705(5) | 36,477 | | | | | | | | | 1,576(18) | 81,542 | | | | | | | | | 613(19) | 31,717 | | | | | | | | | 1,706(6) | 88,268 | | | | | | | | | 2,742(7) | 141,871 | | | | | | | | | 9,456(8) | 489,253 | | | | | | | | | (9) | | 3,412 | 176,537 | | | | | | | (10) | | 2,581 | 133,541 | | | | | | | (11) | | 3,923 | 202,976 | | | | | | | (12) | | 1,828 | 94,581 | | | | | | | (13) | | 1,828 | 94,581 | | | | | | | (14) | | 3,656 | 189,161 | | | | | | | (15) | | 4,728 | 244,627 | | | | | | | (16) | | 4,728 | 244,627 | | | | | | | (17) | | 9,456 | 489,253 |
2023 Outstanding Equity Awards at Year End
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Marco Dolci | 7,262 | 0 | 88.38 | 3/15/2028 | | | | | | | 6,379 | 0 | 97.25 | 3/30/2029 | | | | | | | 7,852 | 3,925 | 43.57 | 3/30/2030 | | | | | | | 4,219 | 4,218 | 73.25 | 3/30/2031 | | | | | | | 1,774 | 5,322 | 82.04 | 3/30/2032 | | | | | | | 0 | 12,555 | 42.71 | 3/30/2033 | | | | | | | | | | | 1,434(5) | 74,195 | | | | | | | | | 1,706(6) | 88,268 | | | | | | | | | 2,285(7) | 118,226 | | | | | | | | | 5,910(8) | 305,783 | | | | | | | | | (9) | | 3,412 | 176,537 | | | | | | | (10) | | 2,581 | 133,541 | | | | | | | (11) | | 3,923 | 202,976 | | | | | | | (12) | | 1,523 | 78,800 | | | | | | | (13) | | 1,523 | 78,800 | | | | | | | (14) | | 3,047 | 157,652 | | | | | | | (15) | | 2,955 | 152,892 | | | | | | | (16) | | 2,955 | 152,892 | | | | | | | (17) | | 5,910 | 305,783 | | Michael Hutchinson | 0 | 12,555 | 42.71 | 3/30/2033 | | | | | | | | | | | 6,761(20) | 349,814 | | | | | | | | | 5,910(8) | 305,783 | | | | | | | | | (15) | | 2,955 | 152,892 | | | | | | | (16) | | 2,955 | 152,892 | | | | | | | (17) | | 5,910 | 305,783 |
2023 Outstanding Equity Awards at Year End
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Trui Hebbelinck | 5,183 | 0 | 97.25 | 3/30/2029 | | | | | | | 9,422 | 3,140 | 43.57 | 3/30/2030 | | | | | | | 3,375 | 3,374 | 73.25 | 3/30/2031 | | | | | | | 1,597 | 4,789 | 82.04 | 3/30/2032 | | | | | | | 0 | 11,300 | 42.71 | 3/30/2033 | | | | | | | | | | | 1,147(5) | 59,346 | | | | | | | | | 1,365(6) | 70,625 | | | | | | | | | 2,056(7) | 106,377 | | | | | | | | | 5,319(8) | 275,205 | | | | | | | | | (9) | | 2,730 | 141,250 | | | | | | | (10) | | 2,065 | 106,843 | | | | | | | (11) | | 3,139 | 162,412 | | | | | | | (12) | | 1,371 | 70,936 | | | | | | | (13) | | 1,371 | 70,936 | | | | | | | (14) | | 2,742 | 141,871 | | | | | | | (15) | | 2,659 | 137,577 | | | | | | | (16) | | 2,659 | 137,577 | | | | | | | (17) | | 5,319 | 275,205 |
2023 Outstanding Equity Awards at Year End
The SARs may be exercised up to three months after a termination and in no event (even with continued employment) after the expiration date. (2) All SARs vest 25% per year on each of the first four anniversaries of the grant date and have a 10-year term. (3) All RSUs vest 25% per year on each of the first four anniversaries of the grant date. (4) Market value of the outstanding RSUs. Amounts calculated using $51.74, the closing price of LivaNova’s Ordinary Shares on December 31, 2023, multiplied by the number of units that have not yet vested. (5) Service-based RSUs granted on March 30, 2020. (6) Service-based RSUs granted on March 30, 2021. (7) Service-based RSUs granted on March 30, 2022. (8) Service-based RSUs granted on March 30, 2023. (9) FCF PSUs granted on March 30, 2021, subject to achievement of a one-year cumulative adjusted FCF Target with three-year cliff vesting. The number in the column represents the results of the target units granted multiplied by the achievement of 200% based on the 2021 FCF results (10) ROIC PSUs granted on March 30, 2021, subject to achievement of a one-year cumulative adjusted ROIC Target with three-year cliff vesting. The number in the column represents the results of the target units granted multiplied by the achievement of 151.3% based on the 2021 ROIC results. (11) rTSR PSUs granted on March 30, 2021, subject to a market condition based on rTSR with three-year cliff vesting. The number in the column represents the results of the target units granted multiplied by the achievement of 115% based on the 2021 rTSR results. (12) FCF PSUs granted at target on March 30, 2022, subject to achievement of a three-year cumulative adjusted FCF Target with three-year cliff vesting. ROIC PSUs granted at target on March 30, 2022, subject to achievement of a three-year cumulative adjusted ROIC Target with three-year cliff vesting. rTSR PSUs granted at target on March 30, 2022, subject to a market condition based on rTSR with three-year cliff vesting. (15) FCF PSUs granted at target on March 30, 2023, subject to achievement of a three-year cumulative adjusted FCF Target with three-year cliff vesting. (16) ROIC PSUs granted at target on March 30, 2023, subject to achievement of a three-year cumulative adjusted ROIC Target with three-year cliff vesting. (17) rTSR PSUs granted at target on March 30, 2023, subject to a market condition based on rTSR with three-year cliff vesting. (18) Service-based RSUs granted on June 15, 2020. (19) Service-based RSUs granted on December 15, 2020. (20) Service-based RSUs granted on December 15, 2022.
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested
| | Stock Options/SARs | | Stock Shares | | | Name | Number of Options/SARs Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | William Kozy | — | — | 13,595 | 653,255 | | Damien McDonald | 189,558 | $1,575,629 | 57,210 | 2,631,935 | | Alex Shvartsburg | — | — | 5,054 | 229,341 | | Marco Dolci | — | — | 9,512 | 437,668 | | Michael Hutchinson | — | — | 2,254 | 112,858 | | Trui Hebbelinck | — | — | 8,132 | 379,085 |
2023 Option Exercises and Stock Vested
(1) Value determined based on fair market value of shares on date of vesting before withholding for taxes.
2023 Pension Benefits
2023 Pension Benefits The Company has no defined benefit plan applicable to LivaNova’s NEOs.
2023 Non-Qualified Deferred Compensation
2023 Non-Qualified Deferred Compensation Each of LivaNova’s NEOs is eligible to participate in a supplemental pension plan that is a tax-qualified defined contribution plan, operated in accordance with local country rules and regulations. In the US, LivaNova provides all the Company’s employees with the opportunity to contribute to a 401K plan that provides an employer match of 100% of the first three percent of their eligible compensation, and 50% of the next two percent of eligible compensation, subject to an employee contribution of five percent up to the limit of total eligible compensation of $330,000 on both base salary and STIP payout. In addition, for employees from Director level and above, the Company provides the opportunity to join a Non-Qualified Deferred Contribution plan that provides for an employer match of 100% of the first three percent of the eligible compensation, and 50% of the next two percent of eligible compensation, subject to an employee contribution of five percent, on both base salary and STIP payout. Mr. Kozy opted out of LivaNova’s 401K plan and its Non-Qualified Deferred Compensation plan in the US. Both Messrs. Shvartsburg, for the period from November 1, 2023, and Hutchinson joined LivaNova’s 401K plan in 2023 and opted out of the Non-Qualified Deferred Contribution plan. In addition, for the period from January 1, 2023, to October 31, 2023, Mr. Shvartsburg opted out of LivaNova’s defined contribution plan in the UK, choosing a cash allowance in lieu thereof, equal to 15% of compensation (consisting of base and bonus), net of a deduction to compensate for the UK employer national insurance burden. For Mr. McDonald and Ms. Hebbelinck, LivaNova accrued an amount equal to 15% of compensation during 2023 (consisting of base and bonus) for the purpose of supplemental pension plan contribution. For Mr. McDonald, a portion ($12,431) was paid in 2023 to a qualified pension plan under UK tax legislation, with the difference paid as cash in lieu thereof, net of a deduction to compensate for the UK employer national insurance burden. For Ms. Hebbelinck, the accrued amount was contributed to a defined contribution plan. Mr. Dolci participated in a defined contribution plan in which the employee may defer an unlimited amount of base salary and bonus to the plan. LivaNova matches up to four percent of employee deferrals, and the Company makes contributions mandated under the Italian legislation and applicable collective agreement under the so-called Trattamento di fine rapporto. Payout and withdrawal rights are established under Italian law. The plan is managed by an independent third party, and LivaNova does not have access to the employee’s investment choices, aggregate earnings, withdrawals, distributions, or aggregate balance, which are subject to privacy restrictions.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control The post-separation treatment of outstanding equity held by an executive officer depends upon the specific circumstances surrounding the separation of an executive officer from the Company. • Death or disability. Upon death or disability, all outstanding SARs vest immediately and expire three months following termination based upon the terms of the plan from which they were awarded. All RSUs granted since 2023 under the 2022 LivaNova Incentive plan vest immediately. All PSUs granted since 2023 under the 2022 LivaNova Incentive plan continue to vest until the original vesting date or become vested (assuming 100% achievement) based on the CHCN Committee’s discretion. The CHCM Committee in exercising its discretion will consider factors as appropriate including the percentage of the Performance Period elapsed until the termination of service and the expected performance achievement. • Approved retirement. The service-based SARs, RSUs and PSUs granted in 2020, 2021, 2022 and 2023 are subject to an “approved retirement” clause that allows the award to continue to vest in the event the recipient incurs a termination of service due to an approved retirement. Outstanding SARs, RSUs and PSUs will not be forfeited upon such an approved retirement, but instead, outstanding RSUs and PSUs shall continue to vest on the date(s) and in the amount(s) set out in the applicable grant notice, provided that all other terms that apply to the RSUs and PSUs are met, including the terms regarding restricted activities set forth in the award agreements. • Change of control. On February 15, 2023, the CHCM Committee approved amended forms of award agreements under the Company’s 2022 Incentive Award Plan providing for accelerated vesting upon certain terminations of employment in connection with an acquisition of the Company, i.e., a double trigger vesting. Awards granted in 2023 will therefore now vest following a change in control of the Company only in the event of a participant’s termination of service by the Company without “cause” or due to a resignation for “good reason” within 24 months. Awards granted in 2020, 2021 and 2022 are instead subject to the following treatment: (1) any outstanding SAR shall become fully vested and exercisable immediately prior to, but subject to the consummation of, such change in control and (2) any outstanding RSU, to the extent not forfeited or otherwise vested immediately prior to such change in control, shall become fully vested immediately prior to, but subject to the consummation of, such change in control, in each case subject to the executive officer’s continuous employment with the company or a subsidiary through such change in control. At times, as circumstances dictate, LivaNova also enters into additional separation arrangements with departing executive officers. Employment agreements and any additional separation arrangements for departing NEOs are set out below.
CEO Pay Ratio
CEO Pay Ratio SEC regulations require the Company to report the ratio of the CEO’s total annual compensation to the compensation of the median employee at LivaNova. For the year ended December 31, 2023: • the median annual total compensation of all employees of the Company (other than Mr. Kozy, LivaNova’s former Interim CEO who was serving as LivaNova’s CEO as of October 1, 2023), was $84,510; and • the annualized total compensation of Mr. Kozy was $4,308,294. Based on this information, the ratio of the former Interim CEO, Mr. Kozy, to the median of the annual total compensation of all employees was 51 to 1. The methodology and material assumptions, adjustments, and estimates that were used to identify the median of the annual total compensation of all employees, as well as to determine the annual total compensation of the median employee are as follows: As of October 1, 2023, the Company’s employee population, excluding the former Interim CEO, consisted of 3,056 individuals working at the parent company and consolidated subsidiaries, with approximately 43% of these individuals located in the US and 57% located outside of the US (of the total number of employees, 45% were located in Europe, and 12% were located in various countries in Asia and the Americas and Middle East). The Company selected October 1, 2023 as the determination date to allow sufficient time to identify the median employee given the global scope of LivaNova’s operations. • The employee population, after taking into consideration the adjustments permitted by SEC rules (as described below) consisted of 2,915 individuals, including regular and temporary employees. • Using the de minimis exception, the Company limited the employee population to individuals residing in Europe, North America, China, Singapore, Japan and Australia. The countries excluded were Brazil (58 employees), Chile (4 employees), Colombia (14 employees), Hong Kong (4 employees), India (14 employees), Malaysia (4 employees), Russian Federation (8 employees), Taiwan (4 employees), Thailand (14 employees), Türkiye (5 employees) and United Arab Emirates (12 employees), totaling 141 employees. • The global distribution of the employee population leads to a variety of pay elements in the compensation arrangements of the employees. For example, while most of the employees participate in LivaNova’s STIP, the incentive compensation element for some of the employees residing in the US and Europe is based on commissions and not participation in the STIP. Consequently, the Company selected base salary or wages as the most appropriate consistently applied compensation measure to identify the median employee. • The Company annualized the compensation of all permanent employees who were hired in fiscal 2023 but did not work for the Company or the consolidated subsidiaries for the entire fiscal year. The Company annualized the base salary of hourly employees assuming standard yearly hours. The Company annualized employee base salary assuming 100% full time equivalency. • The Company did not make any cost-of-living adjustments in identifying the median employee. With respect to the annual total compensation of the former Interim CEO, LivaNova annualized the amount reported in the “Total” column of LivaNova’s 2023 Summary Compensation Table included in this proxy statement, consistent with SEC rules. The Company applied the same approach in calculating “Total” compensation for purposed of the Summary Compensation Table to determine the annual total compensation of the identified median employee.
PAY VERSUS PERFORMANCE DISCLOSURE
PAY VERSUS PERFORMANCE DISCLOSURE In accordance with Item 402(v) of Regulation S-K, the Company is providing the following information regarding the relationship between compensation of LivaNova’s former, former Interim CEO, and the Company’s named executive officers (NEOs) and certain financial performance measures of LivaNova. For further information on LivaNova’s pay-for-performance philosophy and how executive compensation aligns with the Company’s performance, refer to the “Compensation Discussion and Analysis” section of this proxy statement.
Pay vs. Performance Table
Pay vs. Performance Table
Pay vs. Performance Table
| Year | Summary Compensation Table Total for Former PEO(1) | Compensation Actually Paid to Former PEO(2) | | Summary Compensation Table Total for Former Interim PEO(3) | Compensation Actually Paid to Former Interim PEO(3) | Average Summary Compensation Table Total for Non-PEO NEOs(5) | Average Compensation Actually Paid to Non-PEO NEOs(6) | Value of Initial Fixed $100 Investment Based On: | | Net Income (millions)(9) | | Adjusted Net Income (millions)(10) | | | | | | | | | | Total Shareholder Return(7) | Peer Group Total Shareholder Return(8) | | | | | (a) | (b) | (c) | | (d) | (e) | (f) | (g) | (h) | (i) | (j) | | (k) | | 2023 | $8,210,340 | -$ | 7,774,064 | $3,060,725 | $3,032,476 | $2,855,745 | $2,417,932 | $68.59 | $124.22 | -$ | 82 | $148 | | 2022 | $8,565,545 | | 2,575,035 | N/A | N/A | $2,076,241 | $178,933 | $73.63 | $113.92 | -$ | 86.2 | $129.2 | | 2021 | $10,080,644 | | 15,281,126 | N/A | N/A | $2,161,897 | $3,038,616 | $115.91 | $140.40 | -$ | 135.8 | $106.7 | | 2020 | $6,902,353 | | 5,689,235 | N/A | | $1,730,387 | $1,334,414 | $87.78 | $117.63 | -$ | 348.8 | $59.0 |
Pay vs. Performance Table
(1) Amounts reflect the total compensation reported for Mr. McDonald in the “Total” column in the “Summary Compensation Table” for each corresponding year. (2) Amount for 2023 represents “compensation actually paid” to Mr. McDonald by applying the following adjustments to Mr. McDonald’s total compensation, as computed in accordance with Item 402(v). Amounts do not reflect actual compensation earned by or paid to Mr. McDonald during the applicable year.
Pay vs. Performance Table
| Year | Reported Summary Compensation Table Total for PEO | Reported Value of Equity Awards(a) | Equity Award Adjustments(b) | | Compensation Actually Paid to PEO | | | 2023 | $8,210,340 | $6,371,293 | -$ | 9,613,111 | -$ | 7,774,064 |
(b)
| Year | Reported Summary Compensation Table Total for Second PEO | Reported Value of Equity Awards | Equity Award Adjustments(a) | Compensation Actually Paid to Second PEO | | 2023 | $3,060,725 | $1,249,961 | $1,221,712 | $3,032,476 |
Pay vs. Performance Table Discussion and Analysis
Pay vs. Performance Table Discussion and Analysis In accordance with the requirements of Item 402(v) of Regulation S-K, LivaNova is providing the following charts to describe the relationships between information presented in the Pay vs. Performance table.
Relationship Between Compensation Actually Paid (CAP) for CEO and Non-CEO NEOs (Average) vs. Cumulative TSR of Company and the Peer Group
Relationship Between Compensation Actually Paid (CAP) for CEO and Non-CEO NEOs (Average) vs. Cumulative TSR of Company and the Peer Group The following chart shows the relationship between Compensation Actually Paid to the CEO and the average Compensation Actually Paid to the non-CEO NEOs relative to the Company’s TSR as well as the TSR of the performance graph peer group. As the chart demonstrates, historically, Compensation Actually Paid has been directionally aligned with the movement of rTSR, predominantly as a result of the fact that a substantial portion of executive officer compensation is in the form of long-term incentives where value is tied directly to the Company’s share price. In 2023, Compensation Actually Paid reflects the impact of the CEO’s departure as well as the pay for the new CEO. Compensation actually paid in 2022 reflected a decrease due to the large decrease in stock price that is no longer as pronounced in 2023.
Relationship Between Compensation Actually Paid for CEO and Non-CEO NEOs (Average) vs. Net Income
Relationship Between Compensation Actually Paid for CEO and Non-CEO NEOs (Average) vs. Net Income The following chart shows the relationship between net income and Compensation Actually Paid to the CEO and the average Compensation Actually Paid to the non-CEO NEOs. Net income does not play a direct role in determining compensation for LivaNova short- and long-term incentive plans. To the extent that net income drives stock price performance and returns value to the Company shareholders, it would be expected that net income to impact compensation through the equity instruments included in the Company long-term incentive plan.
Relationship Between Compensation Actually Paid for CEO and Non-CEO NEOs (Average) vs. Adjusted Net Income
Relationship Between Compensation Actually Paid for CEO and Non-CEO NEOs (Average) vs. Adjusted Net Income The following chart shows the relationship between adjusted net income and Compensation Actually Paid to the CEO and the average Compensation Actually Paid to the non-CEO NEOs. Adjusted net income is one of the two financial metrics used in the Company’s short-term incentive plan and is one of the factors that the CHCM Committee considers when reviewing the compensation of the NEOs annually. Although there was meaningful correlation between CAP and adjusted net income for 2020 and 2021, Compensation Actually Paid in 2022 decreased significantly relative to 2021 despite a significant improvement in adjusted net income in 2022. In a volatile stock market, the CAP for the NEOs is strongly impacted by the LivaNova Stock price, which aligns with shareholders’ interests, although the stock price at the end of 2022 did not necessarily reflect the Company’s improved adjusted net income performance. In 2023, the stock price decrease was not nearly as steep as in 2022, causing the CAP to increase as well.
Proposal No. 1 — Election of Directors
Proposal No. 1 — Election of Directors
Proposal No. 1 — Election of Directors
| The selection of qualified directors is critical to the long-term success of the Company and its shareholders. Director nominees must be able to contribute significantly to the Board’s discussion and decision-making on the broad array of complex issues facing the Company. The Board’s established process for director selection begins with an assessment of LivaNova’s strategic objectives and the skills, experience and qualifications needed to further those objectives. Through that process, the Board has determined that its nominees for election as directors at the AGM collectively represent the best mix of experience, qualifications and skills to further the long-term interests of all shareholders. The Board is unclassified. Directors are elected for one-year terms. You are being asked to vote, by separate ordinary resolutions, on the election of the following nine (9) director nominees, each for a one-year term J. Christopher Barry Francesco Bianchi Stacy Enxing Seng William Kozy Vladimir Makatsaria Dr. Sharon O’Kane Todd Schermerhorn Brooke Story Peter Wilver Detailed information about each director nominee’s background, skill sets and areas of expertise can be found beginning on page 19 of this proxy statement. | Vote Required: Each director nominee is elected by a simple majority of the total votes cast. Election is by a majority of the votes cast in an uncontested election such as this one. In a contested election, directors are elected by a plurality of the votes case. Board Recommendation: FOR the election to the Board of each of the director nominees. |