UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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COLFAX CORPORATION
(Name of Registrant as Specified In Its Charter)
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Proxy Statement
and
Notice of Special Meeting
February 28, 2022 at 9:00 a.m. ET
January 18, 2022
Dear Stockholders of Colfax Corporation:
On behalf of the Board of Directors (the “Board”) of Colfax Corporation (“Colfax” or the “Company”), you are cordially invited to virtually attend a Special Meeting of Stockholders (the “Special Meeting”) to be held at 9:00 a.m. Eastern Time, on February 28, 2022, at www.virtualshareholdermeeting.com/CFX2022SM.
At the Special Meeting, stockholders will consider and vote on a proposal to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation that effects (a) a reverse stock split of our outstanding shares of common stock, at one of three reverse stock split ratios, one-for-two,one-for-three or one-for-four, with the exact ratio to be determined by our Board at a later date, and (b) if and when the reverse stock split is effected, a corresponding reduction in the number of authorized shares of our common stock by the selected reverse stock split ratio.
Colfax intends to effect the reverse stock split and authorized share count reduction in connection with and immediately following the previously announced separation (the “Spin-off”) of its existing fabrication technology business, which will operate as ESAB Corporation (“ESAB”), and its specialty medical technology businesses, which will operate under the new name Enovis Corporation (“Enovis”). If the Spin-off is completed, then the market price and trading ranges of Enovis’s common stock will no longer reflect the value of the ESAB business. With a reverse stock split, the price of each common share is expected to increase so that a stockholder would have fewer but higher priced shares. A reverse stock split would not have any impact on the voting and other rights of stockholders, and would have no impact on the Company’s business operations or any of its outstanding indebtedness.
Even if the reverse stock split proposal is approved by the Company’s stockholders, the Board may delay or abandon the reverse stock split at any time prior to the effective time of the reverse stock split if the Board determines that the reverse stock split is no longer in the best interests of the Company or its stockholders.
The proxy statement attached to this letter provides you with information about the proposed reverse stock split amendment. Please read the entire proxy statement carefully. You may obtain additional information about the Company from documents we file with the Securities and Exchange Commission.
It is important that your shares be represented and voted at the meeting. Please submit your proxy as soon as possible even if you plan to attend the Special Meeting. We appreciate your continued ownership of Colfax shares and your support regarding this matter.
Sincerely
Matthew L. Trerotola
President and Chief Executive Officer
Notice of
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Monday, February 28, 2022
Thursday, May 21, 2020
3:9:00 p.m. Locala.m. Eastern Time
Via live webcast at
Maryland Conference Center, 2720 Technology Drive, Annapolis Junction, Maryland 20701www.virtualshareholdermeeting.com/CFX2022SM
To Our Stockholders:
Notice is hereby given that the 2020 Annuala Special Meeting of Stockholders (the “Annual“Special Meeting”) of Colfax Corporation will be held via live webcast at the Maryland Conference Center locatedwww.virtualshareholdermeeting.com/CFX2022SM on Monday, February 28, 2022 at 2720 Technology Drive, Annapolis Junction, Maryland 20701* on Thursday, May 21, 2020 at 3:9:00 p.m., local time,a.m. Eastern Time, for the following purposes:
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To approve one or more adjournments of the | |
Even if the reverse stock split proposal is approved by the Company’s stockholders, the Board may delay or abandon the reverse stock split at any time prior to the effective time of the reverse stock split if the Board determines that the reverse stock split is no longer in the best interests of the Company or its stockholders.
The accompanying proxy statement describes the matters to be considered at the AnnualSpecial Meeting. Only stockholders of record at the close of business on April 2, 2020January 10, 2022 are entitled to notice of, and to vote at, the AnnualSpecial Meeting and at any adjournments or postponements thereof.
We are pleased to take advantage of the Securities and Exchange Commission (“SEC”) rules that allow us to furnish our proxy materials and our annual report to stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide our stockholders with the information that they need more quickly while lowering our costs of printing and delivery and reducing the environmental impact of our AnnualSpecial Meeting.
Due to continuing concerns relating to the coronavirus (COVID-19) pandemic and to support the health and well-being of our stockholders, directors, officers, employees and other meeting attendees, the Special Meeting will be completely virtual. To attend, participate in, and vote during the Special Meeting, stockholders of record must go to the meeting website at www.virtualshareholdermeeting.com/CFX2022SM and enter the 16-digit control number found on their proxy card or Notice of Internet Availability of Proxy Materials (the “Notice”). If you are a beneficial stockholder who owns common stock in street name, meaning through a bank, broker or other nominee, and your voting instruction form or Notice indicates that you may vote those shares through the http://www.proxyvote.com website, then you may attend, participate in, and vote during the Special Meeting using the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, stockholders who hold their shares in street name should contact their bank, broker or other nominee and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Special Meeting. A list of stockholders of record as of the Record Date will be available for inspection during ordinary business hours at our corporate headquarters located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, for 10 days prior to the date of our Special Meeting. The list will also be available for inspection at the Special Meeting at www.virtualshareholdermeeting.com/CFX2022SM.
As a stockholder of Colfax Corporation, your vote is important. Whether or not you plan to attend the AnnualSpecial Meeting in person,virtually, we urge you to votesubmit your sharesproxy at your earliest convenience and thank you for your continued support of Colfax Corporation.
Dated: April 9, 2020
January 18, 2022
By Order of the Board of Directors
Bradley J. Tandy
Secretary
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This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find further information in this proxy statement.
AnnualSpecial Meeting of Stockholders
Date and Time: | Monday, February 28, 2022 at | |
Location: | Via live webcast at www.virtualshareholdermeeting.com/CFX2022SM | |
Record Date: | January 10, 2022 |
Availability of Proxy Materials – Use of Notice and Access
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Heldheld on May 21, 2020: Our Annual Report to Stockholders and this Proxy Statement areFebruary 28, 2022: This proxy statement is available atwww.proxyvote.comwww.proxyvote.com..
Pursuant to the “notice and access” rules adopted by the U.S. Securities and Exchange Commission, we have elected to provide stockholders access to our proxy materials primarily over the Internet. Accordingly, on or about April 9, 2020,January 18, 2022, we sent a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders entitled to vote at the AnnualSpecial Meeting as of the close of business on April 2, 2020,January 10, 2022, the record date of the meeting. The Notice includes instructions on how to access our proxy materials over the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis.
Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail prior to our next yearannual meeting with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
Who May Vote
You may vote if you were a stockholder of record at the close of business on the April 2, 2020,January 10, 2022, the record date.
How to Cast Your Vote
You can vote or submit your proxy by any of the following methods:
Via the internet (www.proxyvote.com) through | ||
By telephone (1-800-690-6903) through | ||
By completing, signing and returning your proxy by mail in the envelope provided or to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, | ||
Via |
If you are a beneficial stockholder who owns your shares in street name, the ability to provide your voting instructions online or by telephone may depend on the voting procedures of the organization that holds your shares.
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Voting Matters
We are asking you to vote on the following proposals at the AnnualSpecial Meeting:
Proposal | Board Vote Recommendation | Page Reference | ||
Proposal 1 – Authorized Share Reduction | FOR | |||
Proposal 2 – Approval of | FOR | |||
Board and Governance Highlights
Board Nominees (page 12)
The following table provides summary information about each director nominee:
Name | Age | Director Since | Occupation | Independent | Committee Memberships | Other Public Boards | ||||||
Mitchell P. Rales | 63 | 1995 | Chairman of the Board,Colfax Corporation
Chairman of the Executive Committee, Danaher Corporation | N/A | Danaher Corporation; Fortive Corporation | |||||||
Matthew L. Trerotola | 52 | 2015 | President and Chief ExecutiveOfficer, Colfax Corporation | N/A | None | |||||||
Patrick W. Allender | 73 | 2008 | Former Executive Vice Presidentand Chief Financial Officer, Danaher Corporation | Nominating(Chair) Audit | Brady Corporation; Diebold Nixdorf, Inc. | |||||||
Thomas S. Gayner | 58 | 2008 | Co-Chief Executive Officer,Markel Corporation | Audit | Markel Corporation; Cable One, Inc.; Graham Holdings, Inc. | |||||||
Rhonda L. Jordan | 62 | 2009 | Former President, Kraft Foods Inc. | Compensation(Chair)Nominating | Ingredion, Inc. | |||||||
Liam J. Kelly | 53 | 2020 | President and CEO of TeleflexIncorporated | N/A | Teleflex Incorporated | |||||||
A. Clayton Perfall | 61 | 2010 | Operating Executive, TailwindCapital | Audit (Chair) | None | |||||||
Didier Teirlinck | 63 | 2017 | Former Executive Vice President,Climate Segment, Ingersoll Rand | Audit | None | |||||||
Rajiv Vinnakota | 49 | 2008 | President, Woodrow Wilson NationalFellowship Foundation | CompensationNominating | None | |||||||
Sharon Wienbar | 58 | 2016 | Former Venture Partner, ScaleVenture Partners | Compensation | Resideo Technologies,Inc. |
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Of our 10 director nominees:
In accordance with the Company’s Amended and Restated Bylaws (the “Bylaws”), to be elected each director nominee must receiveaffirmative vote of holders of a majority of the votes cast with respect to that director’s election. Incumbent directors nominatedoutstanding shares of our common stock is required for election by the Board are required, as a condition to such nomination, to submit a conditional letter of resignation to the Chairmanapproval of the Board. InReverse Stock Split Proposal. Abstentions and broker non-votes, if any, will have the event that a nominee for director does not receivesame effect as votes against the Reverse Stock Split Proposal. The affirmative vote of the holders of a majority of the votes castoutstanding shares of our common stock present in person or represented by proxy at the AnnualSpecial Meeting with respectand entitled to his or her election,vote on the Boardmatter is required for the approval of the Adjournment Proposal. Abstentions will promptly consider whether to accept or rejecthave the conditional resignationsame effect as a vote against the Adjournment Proposal and broker non-votes, if any, will have no effect on the outcome of that nominee, or whether other action should be taken. The Board will then take action and will publicly disclose its decision and the rationale behind it no later than 90 days following the certification of election results.Adjournment Proposal.
Corporate Social Responsibility and Sustainability
Our corporate sustainability program is organized around identifying, assessing and managing on an ongoing basis the environmental, social and governance (“ESG”) factors that are relevant to our long-term financial performance. Our sustainability program takes into account the interests of our key stakeholder constituencies, including employees, customers, our communities and our shareholders. ESG issues that we focus on across the Company include workplace health and safety, energy efficiency, waste management, climate risk, human capital management, diversity and inclusion, supply chain management, business ethics and compliance, and data privacy and protection. Selected aspects of our program are discussed below.
About Colfax Corporation
Colfax Corporation is a leading diversified technology company that provides orthopedicfabrication technology and fabricationmedical technology products and services to customers around the world, principally under the ESAB and DJO and ESAB(as defined below) brands. Our business hasWe have been built through a series of acquisitions as well asand organic growth, since its founding in 1995.
Our January 2012 acquisition of Charter International plc transformed Colfax from a fluid handling business into a diversified industrial enterprise with a broad global footprint that encompassed fabrication technology (operating primarily under the ESAB brand name), fluid handling products, and air & gas handling products (operating principally under the Howden brand name). In the years following that acquisition, we completed 24 acquisitions to grow and strengthen our business across our three major business lines. In December 2017, we completed the divestiture of our fluid handling business. This represented a strategic milestone in the development and transformation of our business portfolio and strengthened our balance sheet, providing more flexibility to execute our strategic growth strategy. In November 2018, we entered into a definitive agreement to acquire DJO Global Inc. (“DJO”) for $3.2 billion in cash and this acquisition was completed in February 2019. DJO is a global leader in orthopedic solutions, providing orthopedic devices, reconstructive implants, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation. The acquisition is expected to evolve the Company to higher margins, faster growth, and lower cyclicality, while providing opportunities for significant bolt-on and adjacent acquisitions over time. In May 2019, we signed a purchase agreement to sell our Air & Gas Handling business for an attractive valuation.growth. We completed the divestiture in September 2019 and used the proceeds to pay-down our debt and position us to pursue strategic bolt-on acquisitions for our remaining businesses.
As discussed in our annual report on Form 10-K, we seek to build an enduring premier global enterprise by applying the Colfax Business System, (“CBS”)a comprehensive set of tools and processes, to create superior value for customers, stockholders and associates, to continuously improve our company and pursue growth in revenues and improvements in profit and cash flow. CBS is our business management system. It is a repeatable, teachable process that we use to create superior value for our customers, stockholders, and associates. Rooted in our core values, it is our culture. CBS provides the tools and techniques to ensure that we are continuously improving our ability to meet or exceed customer requirements on a consistent basis.
Our principal executive office is located at 420 National Business Parkway, 5thFloor, Annapolis Junction, MD, 20701. Our telephone number is (301) 323-9000 and our website is located atwww.colfaxcorp.com. Our common stock trades on the New York Stock Exchange (NYSE) under the symbol CFX.
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Proposal 1 Election of Directors
Ten director nominees will be elected at the Annual Meeting, each to serve until the next annual meeting of the Company and until his or her successor is duly elected and qualified. At the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the following persons to serve as directors for the term beginning at the Annual Meeting on May 21, 2020: Mitchell P. Rales, Matthew L. Trerotola, Patrick W. Allender, Thomas S. Gayner, Rhonda L. Jordan, Liam J. Kelly, A. Clayton Perfall, Didier Teirlinck, Rajiv Vinnakota, and Sharon Wienbar. All nominees are currently serving on the Board.
Nominating Committee Criteria for Board Members
The Nominating and Corporate Governance Committee considers, among other things, the following criteria in selecting and reviewing director nominees:
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Pursuant to its charter, the Nominating and Corporate Governance Committee also reviews, among other qualifications, the perspective, broad business judgment and leadership, business creativity and vision, and diversity of potential directors, all in the context of the needs of the Board at that time. We believe that Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, and ethnicity, and we seek independent directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions.
General
The charter of the Nominating and Corporate Governance Committee affirmatively recognizes diversity as one of the criteria for consideration in the selection of director nominees, and in its deliberations and discussions concerning potential director appointments the Nominating and Corporate Governance Committee has paid particular attention to diversity together with all other qualifying attributes. In addition, the Nominating and Corporate Governance Committee annually considers its effectiveness in achieving these objectives as a part of its assessment of the overall composition of the Board and as part of the annual Board evaluation process described further below, which includes a director skills matrix to identify areas of director knowledge and experience that may benefit the Board in the future. That information is used as a part of the director search and nomination process. The Nominating and Corporate Governance Committee looks for candidates with the expertise, skills, knowledge and experience that, when taken together with that of other members of the Board, will lead to a Board that is effective, collegial and responsive to the needs of the Company. As further discussed below, certain members of our Board have experience with the business systems that are an integral part of our Company culture. In addition, we feel that the familiarity of certain Board members with our business system from their work experiences at Danaher Corporation and at our Company, combined with strong input from varied and sophisticated business backgrounds, provides us with a Board that is both functional and collegial while able to draw on a broad range of expertise in the consideration of complex issues.
Board Member Service
The biographies of each of the nominees below contain information regarding the experiences, qualifications, attributes or skills that the Nominating and Corporate Governance Committee and the Board considered in determining that the person should serve as a director of the Company. The Board has been informed that all of the nominees listed below are willing to serve as directors, but if any of them should decline or be unable to act as a director, the individuals named in the proxies may vote for a substitute designated by the Board. The Company has no reason to believe that any nominee will be unable or unwilling to serve.
In determining to nominate Mr. Gayner for re-election, the Nominating and Corporate Governance Committee and the Board carefully evaluated and took into account that Mr. Gayner serves as an executive officer at Markel Corporation and serves on the boards of Markel Corporation, Graham Holdings Co. and Cable One Inc. (which was a wholly-owned subsidiary of Graham Holdings
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until July 2015). The Nominating and Corporate Governance Committee determined, and the Board concurred, that Mr. Gayner is a valuable, productive and fully engaged director who should be re-elected to the Board. In reaching this conclusion, the Nominating and Corporate Governance Committee took note of Mr. Gayner’s valuable role on the Board and stellar attendance record. As a result of his experience as an executive officer at Markel Corporation, Mr. Gayner provides the Board with substantial knowledge regarding business operations strategy, as well as valuable financial and investment expertise. Moreover, Mr. Gayner has continued to be an active participant in all Colfax Board matters and is well-prepared for Board and Committee meetings, and played an important role in the Audit Committee’s discussions and decision-making regarding Colfax’s acquisition of DJO and sale of the Air & Gas Handling business. During the last three years, Mr. Gayner has attended all of the meetings of the Board and the Committees on which he served, except for one Board of Directors meeting and one Audit Committee meeting. Based on these factors, Mr. Gayner was unanimously recommended and re-nominated for election to our Board of Directors.
The names of the nominees for director, their ages as of April 9, 2020, principal occupations, employment and other public company board service during at least the last five years, periods of service as a director of the Company, and the experiences, qualifications, attributes and skills of each nominee are set forth below:
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The affirmative vote of the holders of a majority of the votes cast is required for election of each director.
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Our Corporate Governance Guidelines require that a majority of our Board members be “independent” under the NYSE’s listing standards. In addition, the respective charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee require that each member of these committees be “independent” under the NYSE’s listing standards and, with respect to the Audit Committee, under the applicable SEC rules. In order for a director to qualify as “independent,” our Board must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. Our Board undertook its annual review of director independence in February 2020. The Board has determined that Mr. Allender, Mr. Gayner, Ms. Jordan, Mr. Kelly, Mr. Perfall, Mr. Teirlinck, Mr. Vinnakota, and Ms. Wienbar each qualify as “independent” under the NYSE’s listing standards. In reaching a determination on these directors’ independence, the Board considered that during fiscal 2019, Mr. Kelly was the chief executive officer of Teleflex, which does business with Colfax. The amount received by Colfax or Teleflex in each of the last three fiscal years did not exceed the greater of $1 million or 1% of either Colfax’s or Teleflex’s consolidated gross revenues. None of the other independent directors nor their immediate family members have within the past three years had any direct or indirect business or professional relationships with the Company other than in their capacity as directors.
The independent members of our Board must hold at least two “executive session” meetings each year without the presence of management. If the Chair of the Board is not an independent director, the independent directors select an independent director to serve as Chairperson for each executive session. In general, the meetings of independent directors are intended to be used as a forum to discuss such topics as they deem necessary or appropriate. Mr. Allender serves as the presiding director of the independent director executive sessions and as such leads the independent directors during these sessions.
Board of Directors and its Committees
The Board and its committees meet regularly throughout the year, and may also hold special meetings and act by written consent from time to time. The Board held a total of five meetings during the year ended December 31, 2019. In aggregate, during this time our directors attended over 95% of our Board meetings and meetings of the committees of the Board on which such directors served. During 2019, no director attended fewer than 75% of the total number of meetings of the Board and committees of the Board on which such director served. Our Corporate Governance Guidelines request Board members to make every effort to attend our annual meeting of stockholders. Eight of the nine directors then serving attended our annual meeting of stockholders in 2019.
The Board has a standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. The charters for the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are available on the Company’s website atwww.colfaxcorp.com on the Investors page under the Corporate Governance tab. These materials also are available in print to any stockholder upon request to: Corporate Secretary, Colfax Corporation, 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701. The Board committees review their respective charters on an annual basis. The Nominating and Corporate Governance Committee oversees an annual evaluation of the Board and each committee’s operations and performance.
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Audit Committee
Our Audit Committee met 13 times during the year ended December 31, 2019. The Audit Committee is responsible, among its other duties and responsibilities, for overseeing our accounting and financial reporting processes, the audits of our financial statements, the qualifications of our independent registered public accounting firm, and the performance of our internal audit function and independent registered public accounting firm. The Audit Committee reviews and assesses the qualitative aspects of our financial reporting, our processes to manage business and financial risks, and our compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. The members of our Audit Committee are Mr. Perfall, Chair, Mr. Allender, Mr. Gayner, and Mr. Teirlinck. The Board has determined that each of Mr. Perfall and Mr. Allender qualify as an “audit committee financial expert,” as that term is defined under the SEC rules. The Board has determined that each member of our Audit Committee is independent and financially literate under the NYSE’s listing standards and that each member of our Audit Committee is independent under the standards of Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”).
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee met six times during the year ended December 31, 2019. The Nominating and Corporate Governance Committee is responsible for recommending candidates for election to the Board. In making its recommendations, the committee will review a candidate’s qualifications and any potential conflicts of interest and assess contributions of current directors in connection with his or her renomination. The committee is also responsible, among its other duties and responsibilities, for making recommendations to the Board or otherwise acting with respect to corporate governance policies and practices, including Board size and membership qualifications, new director orientation, committee structure and membership, related person transactions, and communications with stockholders and other interested parties. The Nominating and Corporate Governance Committee is also responsible for reviewing the Company’s undertakings with respect to environmental, social, and governance matters, including the Company’s role as a corporate citizen and the Company’s policies and programs relating to health, safety and sustainability matters. The members of our Nominating and Corporate Governance Committee are Mr. Allender, Chair, Ms. Jordan and Mr. Vinnakota. The Board has determined that each member of our Nominating and Corporate Governance Committee is independent under the NYSE’s listing standards.
Compensation Committee
Our Compensation Committee met six times during the year ended December 31, 2019. The Compensation Committee is responsible, among its other duties and responsibilities, for determining and approving the compensation and benefits of our Chief Executive Officer and other executive officers, monitoring compensation arrangements applicable to our Chief Executive Officer and other executive officers in light of their performance, effectiveness and other relevant considerations and adopting and administering our equity and incentive plans. The members of our Compensation Committee are Ms. Jordan, Chair, Mr. Vinnakota, and Ms. Wienbar. The Board has determined that each member of our Compensation Committee is a “non-employee director” within the meaning of SEC Rule 16b-3, and is independent under the NYSE’s listing standards for directors and compensation committee members.
The Compensation Committee annually reviews and approves the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates his performance in light of those goals and objectives, and determines his compensation level based on that analysis. The Compensation Committee also annually reviews and approves all elements of the compensation of our other executive officers. Our Chief Executive Officer plays a significant role in developing and assessing achievement against the goals and objectives for other executive officers and makes compensation recommendations to the Compensation Committee based on these evaluations. The Compensation Committee also administers all of the Company’s incentive compensation plans and equity-based compensation plans. The Compensation Committee makes recommendations to the Board regarding compensation of all executive officer hires, all elements of director compensation, and the adoption of certain amendments to incentive or equity-based compensation plans. The Compensation Committee also assists the Board in its oversight of risk related to the Company’s compensation policies and practices applicable to all Colfax associates. Additionally, the Compensation Committee periodically reviews the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development and retention. For further information on our compensation practices, including a description of our processes and procedures for determining compensation, the scope of the Compensation Committee’s authority and management’s role in compensation determinations, please see the Compensation Discussion and Analysis section of this Proxy Statement, which begins on page 26.
Since April 2009, our Compensation Committee has engaged Frederic W. Cook & Co. as its independent compensation consultant to, among other things, formulate an appropriate peer group to be used by the Compensation Committee and to provide competitive comparison data and for other compensation consulting services as requested by the Compensation Committee. Additional information on the nature of the information and services provided by this independent compensation consultant can be found below in the Compensation Discussion and Analysis.
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Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has ever been an officer or an employee of the Company or any of its subsidiaries, and no Compensation Committee member has any interlocking or insider relationship with the Company which is required to be reported under the rules of the SEC.
Identification of Director Candidates and Director Nomination Process
The Nominating and Corporate Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as by management and stockholders. The Nominating and Corporate Governance Committee may also use outside consultants to assist in identifying candidates and during 2019 used third-party recruiters to identify and provide background information on possible candidates. Mr. Kelly was first recommended to the Nominating and Corporate Governance Committee by a third-party recruiter. The Nominating and Corporate Governance Committee is responsible for assessing whether a candidate may qualify as an independent director. Each possible candidate is discussed and evaluated in detail before being recommended to the Board. The Nominating and Corporate Governance Committee utilizes the same criteria for evaluating candidates regardless of the source of the referral.
The Nominating and Corporate Governance Committee recommends, and the Board nominates, candidates to stand for election as directors. Stockholders may nominate persons to be elected as directors and, as noted above, may suggest candidates for consideration by the Nominating and Corporate Governance Committee. If a stockholder wishes to suggest a person to the Nominating and Corporate Governance Committee for consideration as a director candidate, he or she must provide the same information as required of a stockholder who intends to nominate a director pursuant to the procedures contained in Section 3.3 of our Bylaws, in accordance with the same deadlines applicable to director nominations, as described below under “General Matters—Stockholder Proposals and Nominations.”
Our Corporate Governance Guidelines specify that the positions of Chairman of the Board and Chief Executive Officer shall be held by separate persons. We believe that this structure is appropriate given the differences between the two roles in our current management structure. Our Chief Executive Officer, among other duties, is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of our Board, among other responsibilities, provides guidance to the Chief Executive Officer, takes an active role in setting the agenda for Board meetings and presides over meetings of the full Board. Our current Chairman, Mr. Rales, is not an independent director and, as noted above in “Director Independence,” Mr. Allender serves as the presiding director for independent director executive sessions and as such leads the independent directors during these sessions.
The Board and its Committees conduct self-assessments annually at their February meetings. The Chair of the Nominating and Governance Committee oversees the process. The annual evaluation procedure is summarized below.
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Board’s Role in Risk Oversight
The Board maintains responsibility for oversight of risks that may affect the Company. The Board discharges this duty primarily through its standing committees and also considers risk in its strategic planning for the Company and in its consideration of acquisitions. The Board engages in discussions about risk at each quarterly meeting, where it receives reports from its committees, as applicable, about the risk oversight activities within their respective areas of responsibility. Specifically, the Audit Committee (i) receives reports from and discusses with management, our internal audit team, and our independent registered public accounting firm all major risk exposures (whether financial, operating or otherwise), (ii) reviews the Company’s policies with respect to risk assessment and enterprise risk management, including with respect to cybersecurity risks, and (iii) oversees compliance with legal and regulatory requirements and our ethics program, including our Code of Business Conduct and Ethics. In addition, the Nominating and Corporate Governance Committee oversees the corporate governance principles and governance structures that contribute to successful risk oversight and management. The Compensation Committee oversees certain risks associated with compensation policies and practices, as discussed below.
The Audit, Nominating and Corporate Governance and Compensation Committees each make full reports to the Board of Directors at each regularly scheduled meeting regarding each committee’s considerations and actions, and risk considerations are presented to and discussed with the Board by management as part of strategic planning sessions and when considering potential acquisitions.
Corporate Governance Guidelines and Pledging
The Board has adopted Corporate Governance Guidelines, which set forth a framework to assist the Board in the exercise of its responsibilities. The Corporate Governance Guidelines cover, among other things, the composition and certain functions of the Board and its committees, executive sessions, Board responsibilities, expectations for directors, director orientation and continuing education, and our policy prohibiting pledging.
In February 2014, the Board amended the Corporate Governance Guidelines to prohibit any future pledging of Colfax’s common stock as security under any obligation by our directors and executive officers. The Board excepted from the policy shares of Colfax common stock that were already pledged at the time the policy was adopted, but any additional share pledges are prohibited. Pledged shares of Colfax common stock do not count toward our stock ownership requirements.
Certain shares of common stock owned by Mitchell Rales, Chairman of our Board, that were pledged at the time that the policy was adopted were grandfathered from the policy. Notwithstanding that the existing pledge was grandfathered under our policy, as part of its risk oversight function the Audit Committee of the Board reviews Mr. Rales’ share pledges on a quarterly basis to assess whether such pledging poses an undue risk to the Company. In evaluating Mr. Rales’ pledge of Colfax shares, the Audit Committee considered that Mr. Rales acquired these shares with his own funds in connection with founding the Company and did not receive them as compensation from Colfax; that, as a founder of Colfax and dedicated long-term stockholder, he has (as with many institutional stockholders) pledged a portion of his shares instead of selling shares for liquidity; and that Mr. Rales, as a founder or significant investor in other public companies (including Danaher Corporation and Fortive Corporation), has significant personal assets. In addition to taking into account the number of shares and percentage of outstanding shares pledged, the Audit Committee has also considered the degree of overcollateralization (the amount by which the market value of the shares pledged as collateral exceeds the amount of secured indebtedness), as the Committee believes this is a key factor in assessing the degree of risk posed by the pledging arrangements. Based on its evaluation, the Committee has concluded that the existing pledge arrangements do not pose an undue risk to the Company. The Audit Committee will continue to periodically review the shares pledged as part of its risk oversight function.
Code of Business Conduct and Ethics
As part of our system of corporate governance, the Board has also adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which was updated in 2019, that is applicable to all directors, officers and employees of the Company. The Code of Ethics sets forth Company policies, expectations and procedures on a number of topics, including but not limited to conflicts of interest, compliance with laws, rules and regulations (including insider trading laws), honesty and ethical conduct, and quality. The Code of Ethics also sets forth procedures for reporting violations of the Code and investigations thereof. If the Board grants any waivers from our Code of Ethics to any of our directors or executive officers, or if we amend our Code of Ethics, we will, if required, disclose these matters through our website within four business days following such waiver or amendment.
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Policies on Insider Trading, Hedging and Stock Ownership
The Company has a Policy on Insider Trading and Compliance which, in addition to mandating compliance with insider trading laws, prohibits any director, officer or employee of the Company from engaging in short sales, transactions in derivative securities (including put and call options), or other forms of hedging and monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, that allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities. Further, we have stock ownership policies applicable to our directors and executives to promote alignment of interests between our stockholders, directors and management.
Where to Find Our Key Governance Policies
The Corporate Governance Guidelines and Code of Ethics are available on the Company’s website atwww.colfaxcorp.com on the Investors page under the Corporate Governance tab. These materials also are available in print to any stockholder upon request to: Corporate Secretary, Colfax Corporation, 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701.
Certain Relationships and Related Person Transactions
Policies and Procedures for Related Person Transactions
We have adopted a written Policy Regarding Related Person Transactions pursuant to which our Nominating and Corporate Governance Committee or a majority of the disinterested members of our Board generally must approve related person transactions in advance. The policy applies to any transaction or series of similar transactions involving more than $120,000 in which the Company is a participant and in which a “related person” has a direct or indirect material interest. “Related persons” include the Company’s directors, nominees for director, executive officers, and greater than 5% stockholders, as well as the immediate family members of the foregoing. In approving or rejecting the proposed transaction, our Nominating and Corporate Governance Committee takes into account, among other factors it deems appropriate, whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the person’s interest in the transaction and, if applicable, the impact on a director’s independence. Under the policy, if we discover related person transactions that have not been approved, the Nominating and Corporate Governance Committee is to be notified and will determine the appropriate action, including ratification, rescission or amendment of the transaction.
Related Person Transactions
Set forth below is a summary of certain transactions since January 1, 2019 in which (i) the Company was or is a participant, (ii) any of our directors, executive officers, beneficial owners of more than 5% of our common stock, or the immediate family members of any of the foregoing had or will have a direct or indirect material interest and (iii) the amount involved exceeds or will exceed $120,000:
Transactions with Fortive Corporation
Certain of our subsidiaries purchase products from and sell products to Fortive Corporation (“Fortive”) from time to time in the ordinary course of business and on an arms’-length basis. Such transactions are pre-approved under our Policy Regarding Related Person Transactions. In 2019, our subsidiaries purchased approximately $243,000 of products from, and sold approximately $81,000 of products to, Fortive, which is less than 0.01% of our, and of Fortive’s, gross revenues for 2019. Our subsidiaries intend to purchase products from and sell products to Fortive in the future in the ordinary course of their businesses and on an arms’-length basis. Mitchell P. Rales and Steven M. Rales are each members of Fortive’s Board of Directors, and both are the beneficial owners of at least 5% of Fortive’s outstanding common stock and our outstanding common stock.
Issuance and Sale of Tangible Equity Units
As previously reported, on January 11, 2019, we issued $460 million in 5.75% tangible equity units. Each unit is comprised of (i) a prepaid stock purchase contract issued by us to purchase a number of shares of the Company’s common stock equal to a specified settlement rate and (ii) a senior amortizing note due January 15, 2022. For additional information relating to the terms of the units, please refer to the “Description of
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Securities registered under Section 12 of the Exchange Act” included as an exhibit to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2020. As part of this transaction, one or more entities affiliated with Mitchell P. Rales, Chairman of our Board and a beneficial owner of at least 5% of our outstanding common stock, purchased an aggregate of 400,000 5.75% tangible equity units for an aggregate purchase price of $40.0 million and one or more entities affiliated with Steven M. Rales, a beneficial owner of at least 5% of our outstanding common stock, purchased an aggregate of 100,000 5.75% tangible equity units for an aggregate purchase price of $10.0 million.
Contacting the Board of Directors
The Board of Directors has established a process for stockholders and interested parties to communicate with the Board and to report complaints or concerns relating to our accounting, internal accounting controls or auditing matters. Stockholders and interested parties wishing to communicate with our Board may do so by writing to any of the members of the Board, the Chairman of the Board, or the non-management members of the Board as a group, at:
Colfax Corporation420 National Business Parkway, 5thFloorAnnapolis Junction, Maryland 20701Attn: Corporate Secretary
Complaints or concerns relating to our accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee. Other correspondence will be referred to the relevant director or group of directors. Our Policy on Stockholder and Interested Party Communications with the Board of Directors (the “Board Communications Policy”) requires that any stockholder communication to members of the Board prominently display the legend “Board Communication” in order to indicate to the Corporate Secretary that it is communication subject to our policy and will be received and processed by the Corporate Secretary’s office. Each communication received by the Corporate Secretary is copied for our files and promptly forwarded to the addressee. In our Board Communications Policy, the Board has requested that certain items not related to the Board’s duties and responsibilities be excluded from forwarded communications, such as mass mailings and business advertisements. In addition, the Corporate Secretary is not required to forward any communication that the Corporate Secretary, in good faith, determines to be frivolous, unduly hostile, threatening, illegal or similarly unsuitable. However, the Corporate Secretary maintains a list of each communication subject to this policy that is not forwarded, and on a quarterly basis delivers the list to the Chairman of the Board. In addition, each communication subject to this policy that is not forwarded because it was determined by the Secretary to be frivolous, commercial advertising, irrelevant or similarly unsuitable is nevertheless retained in our files and made available at the request of any member of the Board to whom such communication was addressed.
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Our Board, at the recommendation of our Compensation Committee, sets the compensation program for non-employee directors. The Compensation Committee reviews this program on an episodic basis and recommends director compensation levels based on its evaluation of competitive levels for director compensation, utilizing data drawn from our current list of peer companies and its reasoned business judgment. See “Role of Compensation Consultants and Peer Data Review” on page 36. The compensation program was last revised in 2019.
Our non-employee Board members receive the following:
As part of the changes made in 2019, Directors no longer receive an initial equity grant, but instead receive a pro-rated portion of the annual equity award.
Our non-executive Chairman of the Board is entitled to receive an annual cash retainer of $1 and does not receive any other cash fees or the initial or annual equity awards described above.
The Board has also approved a stock ownership policy for our directors. Each director is required to own shares of our common stock (including shares issuable upon exercise of stock options and shares underlying restricted stock units) with a value equal to five times the annual cash retainer within five years of joining the Board. All of our directors except for Mr. Teirlinck and Mr. Kelly, who were appointed during 2017 and 2020, respectively, have achieved these ownership targets as of the date of this Proxy Statement.
Further, our Board has adopted a policy prohibiting any director (or executive officer) from pledging as security under any obligation any shares of Colfax common stock that he or she directly or indirectly owns and controls (other than shares already pledged as of February 17, 2014), and providing that pledged shares of Colfax common stock do not count toward our stock ownership requirements.
The Board has adopted a Director Deferred Compensation Plan which permits non-employee directors to receive, at their discretion, deferred stock units, or DSUs, in lieu of their annual cash retainers and committee chairperson retainers. A director who elects to receive DSUs receives a number of units determined by dividing the cash fees earned during, and deferred for, the quarter by the closing price of our common stock on the date of the grant, which is the last trading day of the quarter. A non-employee director also may convert director restricted stock unit grants to DSUs under the plan. DSUs granted to our directors convert to shares of our common stock after termination of service from the Board, based upon a schedule elected by the director in advance. In the event that a director elects to receive DSUs, the director will receive dividend equivalent rights on such DSUs to the extent dividends are issued on our common stock. Dividend equivalents are deemed reinvested in additional DSUs (or fractions thereof) at the dividend payment date.
We also reimburse all directors for travel and other necessary business expenses incurred in the performance of their services on our Board and the committees thereof and extend coverage to them under our directors’ and officers’ indemnity insurance policies.
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The following table sets forth information regarding compensation paid to our non-employee directors during 2019:
DIRECTOR COMPENSATION FOR 2019
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($) | (3) | Option Awards ($) | (5) | Total ($) | ||||||||||
Mitchell P. Rales | 1 | — | — | 1 | ||||||||||||
Patrick W. Allender | 98,173 | (2) | 65,010 | (4) | 65,009 | 228,192 | ||||||||||
Thomas S. Gayner | 83,173 | (2) | 65,010 | (4) | 65,009 | 213,192 | ||||||||||
Rhonda L. Jordan | 98,173 | 65,010 | (4) | 65,009 | 228,192 | |||||||||||
A. Clayton Perfall | 103,173 | (2) | 65,010 | (4) | 65,009 | 233,192 | ||||||||||
Didier Teirlinck | 83,173 | (2) | 65,010 | (4) | 65,009 | 213,192 | ||||||||||
Rajiv Vinnakota | 83,173 | 65,010 | 65,009 | 213,192 | ||||||||||||
Sharon Wienbar | 83,173 | (2) | 65,010 | (4) | 65,009 | 213,192 |
As of December 31, 2019, the aggregate number of unvested stock awards and unexercised options outstanding held by each of our non-employee directors was as follows:
Name | Restricted Stock Units | Stock Options | ||||||
Mitchell P. Rales | — | — | ||||||
Patrick W. Allender | 2,213 | 27,903 | ||||||
Thomas S. Gayner | 2,213 | 27,903 | ||||||
Rhonda L. Jordan | 2,213 | 27,903 | ||||||
A. Clayton Perfall | 2,213 | 27,903 | ||||||
Didier Teirlinck | 4,065 | 12,240 | ||||||
Rajiv Vinnakota | 2,213 | 27,903 | ||||||
Sharon Wienbar | 2,213 | 16,478 |
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We are asking our stockholders to ratifyapprove a series of three proposed amendments to our Amended and Restated Certificate of Incorporation to effect the Audit Committee’s selectionReverse Stock Split and the Authorized Share Reduction (the “Amendments”). Our Board has unanimously approved and declared advisable the Amendments, and recommends that our stockholders approve and adopt the Amendments. The foregoing description of Ernst & Young LLPthe Amendments is a summary and is subject to the full text of the Amendments, which is attached to this Proxy Statement as Annex A.
If our independent registered public accounting firm forstockholders approve this proposal, the fiscal year ending December 31, 2020. The Audit Committee is directly responsible forBoard will determine the appointment, compensation, retention,reverse stock split ratio from among the proposed ratios and oversightcause a certificate of amendment to our independent auditors. Ernst & Young LLP has served as our independent auditor since its appointment in 2002. Although stockholder ratification is not required,Amended and Restated Certificate of Incorporation setting forth the appointmentAmendment with the selected ratio (the “Certificate of Ernst & Young LLP is being submitted for ratification as a matterAmendment”) to be filed with the Delaware Secretary of good corporate practice with a view towards soliciting stockholders’ opinions whichState to effect the Audit Committee will take into consideration in future deliberations. IfReverse Stock Split and the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. EvenAuthorized Share Reduction only if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if itBoard determines that such a changethe Reverse Stock Split and the Authorized Share Reduction would be in the best interests of the CompanyColfax and ourits stockholders. The Board of Directorswill abandon the other Amendments. The Board also may determine in its discretion not to effect the Reverse Stock Split and the Audit Committee believeAuthorized Share Reduction and abandon the Amendments, which means that the retentionCertificate of Ernst & Young LLPAmendment will not be filed with the Delaware Secretary of State. Colfax will not affect the Reverse Stock Split without also effecting the Authorized Share Reduction, and vice versa. Subject to stockholder approval, the Board currently expects and intends to file the Certificate of Amendment to implement the Reverse Stock Split and Authorized Share Reduction such that they become effective immediately following the intended Spin-off transaction as described above. No further action on the Company’spart of stockholders will be required to either implement or abandon the Reverse Stock Split or the Authorized Share Reduction.
The Amendments, if effected, will effect a Reverse Stock Split of the outstanding shares of Colfax’s common stock at one of three Reverse Stock Split ratios, one-for-two,one-for-three or one-for-four, as shown in Amendment A, Amendment B and Amendment C, respectively, to the Certificate of Amendment that is attached as Annex A hereto, with an exact ratio to be determined by our Board, in its sole discretion, at a later date. As of December 31, 2021, 156,249,234 shares of our common stock were issued and outstanding. Based on such number of shares of our common stock issued and outstanding, immediately following the effectiveness of the Reverse Stock Split (and without giving any effect to the payment of cash in lieu of fractional shares), we will have, depending on the Reverse Stock Split ratio selected by our Board, issued and outstanding shares of stock as illustrated in the table under the caption “—Effects of the Reverse Stock Split and the Authorized Share Reduction—Effect on Shares of Common Stock.”
The Amendments, if effected, will also result in a corresponding reduction of the total number of shares of our common stock by the selected Reverse Stock Split ratio, as shown in Amendment A, Amendment B and Amendment C, to the Certificate of Amendment that is attached as Annex A hereto. See “—Effects of the Reverse Stock Split and the Authorized Share Reduction—Effect on Shares of Common Stock” for the number of shares of common stock authorized but not outstanding or reserved that will remain available for issuance immediately following the effectiveness of the Reverse Stock Split and the Authorized Share Reduction.
All holders of Colfax’s common stock will be affected proportionately by the Reverse Stock Split and the Authorized Share Reduction.
No fractional shares of common stock will be issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to receive a fractional share as a result of the Reverse Stock Split will receive cash payments in lieu of such fractional shares. Each stockholder will hold the same percentage of the outstanding common stock immediately following the Reverse Stock Split as that stockholder did immediately prior to the Reverse Stock Split, except to the extent that the Reverse Stock Split results in stockholders receiving cash in lieu of fractional shares. The par value of our common stock will continue to be $0.001 per share (see “—Effects of the Reverse Stock Split and the Authorized Share Reduction—Accounting Matters”).
Background
We have been built through a series of acquisitions, as well as organic growth, since our founding in 1995. We seek to build an enduring premier global enterprise by applying the Colfax Business System to continuously improve our Company and pursue growth in revenues and improvements in profit and cash flow. On February 22, 2019, we completed our acquisition of DJO Global, Inc. (“DJO”), a global developer, manufacturer and distributor of high-quality medical devices with a broad range of products used for orthopedic bracing, reconstructive implants, rehabilitation, pain management and physical therapy. DJO products address the high-margin orthopedic continuum of patient care from injury prevention to rehabilitation from injury or degenerative disease, enabling people to regain or maintain their natural motion.
- 2022 Special Meeting Proxy Statement | 4 |
We are currently a leading diversified technology company that provides fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. We conduct operations through two operating segments, “Fabrication Technology”, which incorporates the operations of ESAB and its related brands, and “Medical Technology”, which incorporates the operations of DJO and its related brands.
On March 4, 2021, we announced our intention to separate our fabrication technology and specialty medical technology businesses into two differentiated, independent, auditorand publicly traded companies. We intend to enter into a Separation and Distribution Agreement, effective prior to the Spin-off (the “Separation Agreement”), with our wholly owned subsidiary, ESAB, which will hold our fabrication technology business. Pursuant to the Separation Agreement, we expect to distribute all or a portion of the shares of common stock of ESAB owned as of the record date (as defined in the Separation Agreement) on a pro rata basis to the holders of our common stock. Pursuant to the Separation Agreement, we expect to complete the Spin-off near the end of the first quarter of 2022 and immediately prior to the implementation of the Reverse Stock Split and Authorized Share Reduction. We cannot provide any assurance that the Separation Agreement will be entered into or that the spin-off will be completed, as it is subject to certain conditions precedent. Following the spin-off, we will continue to hold our specialty medical technology business and will operate under the name Enovis Corporation. For additional details on the intended distribution, please see the preliminary Form 10 Registration Statements that ESAB will file with the U.S. Securities and Exchange Commission (the “SEC”), as may be amended from time to time in future filings.
We expect that the Spin-off will allow each company to: (1) improve both investor alignment with its clear value proposition and the ability for investors to value each company based on its distinct strategic, operational and financial characteristics; (2) tailor capital structure and allocation of capital to its specific business profile and strategic priorities in the most efficient manner possible; (3) increase operating flexibility and resources to capitalize on growth opportunities in its respective markets; and (4) sharpen strategic focus in pursuit of its distinct operating priorities and strategies. The Spin-off would also provide each company with an appropriately valued acquisition currency that could be used for larger, transformational transactions.
We continue to make progress on the Spin-off and are targeting its completion near the end of the first quarter of 2022 and immediately prior to the implementation of the Reverse Stock Split and Authorized Share Reduction. Completion of the Spin-off is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Spin-off as a tax-free transaction for U.S. federal income tax purposes, receipt of regulatory approvals, a favorable tax opinion and/or Internal Revenue Service ruling and final approval from our Board. There can be no assurance regarding the form and timing of the Spin-off or its completion. Details of the Spin-off will be included in future filings with the SEC.
Reasons for the Reverse Stock Split and the Authorized Share Reduction
Reverse Stock Split
The Board believes that it is in the best interests of the Company and its stockholders.
Representatives for Ernst & Young LLP are expectedstockholders to reduce the number of issued and outstanding shares at one of three Reverse Stock Split ratios, one-for-two,one-for-three or one-for-four, with an exact ratio to be presentdetermined by the Board at a later date, through the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Independent Registered Public Accounting Firm Fees and Services
The following table sets forth the aggregate fees for services rendered by Ernst & Young LLP for the Company for the fiscal years ended December 31, 2019 and 2018:
Fee Category (fees in thousands) | 2019 | 2018 | ||||||
Audit Fees | $ | 7,417 | $ | 5,827 | ||||
Audit-Related Fees | 1,628 | — | ||||||
Tax Fees | 1,023 | 1,146 | ||||||
All Other Fees | 4 | 2 | ||||||
TOTAL | $ | 10,072 | $ | 6,975 |
Audit Fees
This category of the table above includes fees for the fiscal years ended December 31, 2019 and 2018 that were for professional services rendered (including reimbursement for out-of-pocket expenses) for the integrated audits of our annual consolidated financial statements, for reviews of the financial statements included in our Quarterly Reports on Form 10-Q, and for statutory audits.
Audit-Related Fees
This category of the table above includes the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” For 2019, Audit-Related Fees included fees related to services renderedReverse Stock Split implemented in connection with audited carve-out financial statementsand subsequent to the previously announced intended Spin-off. Immediately following the completion of the Reverse Stock Split, the number of shares of our Air & Gas Handling businesscommon stock issued and outstanding will be reduced proportionately based on the selected reverse stock split ratio as determined by our Board at a later date.
The proposed Reverse Stock Split is in connection with the disposition of that business in September 2019 and services rendered in connection with the acquisition of DJO. There were no Audit-Related Fees incurred for 2018.
Tax Fees
This categoryrecognition of the table above includes fees billed for tax compliance, tax preparation, tax planningfact that if the Spin-off is completed, then the market price and trading ranges of Enovis’s common stock will no longer reflect the value of the ESAB business. With a reverse stock split, the price of each common share is expected to increase so that a stockholder would have fewer but higher priced shares. A reverse stock split would not have any impact on the voting and other tax services. For 2019, Tax Fees included approximately $1,004,038 for tax compliancerights of stockholders, and tax preparation and approximately $19,000 for tax planning and other tax services. For 2018, Tax Fees included approximately $910,555 for tax compliance and tax preparation and approximately $234,920 for tax planning and other tax services.
All Other Fees
This categorywould have no impact on the Company’s business operations or any of its outstanding indebtedness. Further, brokerage commissions, as a percentage of the table above includes fees billedtotal transaction, tend to be higher for productslower-priced stocks. As a result, certain investors may also be dissuaded from purchasing lower-priced stocks. A higher stock price after the Reverse Stock Split may reduce this concern.
Authorized Share Reduction
As a matter of Delaware law, the implementation of the Reverse Stock Split does not require a reduction in the total number of authorized shares of our common stock. However, if stockholders approve the Reverse Stock Split Proposal and services other than those described above under Audit Fees, Audit-Related Fees and Tax Fees. For 2019 and 2018, these included fees incurred for Ernst & Young LLP’s online accounting information tool.
The Audit Committee has considered whether the services renderedReverse Stock Split is implemented, the authorized number of shares of our common stock also would be reduced by the independent registered public accounting firm with respectcorresponding, selected Reverse Stock Split ratio. The actual number of authorized shares after giving effect to the fees described above are compatible with maintainingReverse Stock Split, if implemented, will depend on the independent registered public accounting firm’s independenceReverse Stock Split ratio that is ultimately determined by the Board. See the table set forth in the subsection entitled, “—Effects of the Reverse Stock Split and has concluded that such services do not impair its independence.the Authorized Share Reduction—Effect on Shares of Common Stock,” which shows the three possibilities for the number of authorized shares of common stock under each of the Reverse Stock Split ratios.
- Meeting Proxy Statement
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Audit Committee’s Pre-Approval Policies and Procedures
Pursuant to its charter, the Audit Committee must pre-approve all auditing services, review and attest services, internal control related services and non-audit services provided to the Company by the independent registered public accounting firm and all fees payable by the Company to the independent registered public accounting firm for such services. The Audit Committee also is responsible for overseeing the audit fee negotiations associated with the retention of Ernst & Young LLP for the audit of our financial statements. The Audit Committee has adopted a pre-approval policy to promote compliance with the NYSE’s listing standards and the applicable SEC rules and regulations relating to auditor independence. In accordance with the Audit Committee charter and the pre-approval policy, the Audit Committee reviews with Ernst & Young LLP and management the plan and scope of Ernst & Young LLP’s proposed annual financial audit and quarterly reviews, including the procedures to be utilized and Ernst & Young LLP’s compensation, and pre-approves all auditing services, review and attest services, internal control related services and permitted non-audit services (including the fees and terms thereof) to be performed for us by Ernst & Young LLP. The Audit Committee may delegate pre-approval authority to one or more members of the Audit Committee consistent with the pre-approval policy, provided that the decisions of such Audit Committee member or members must be presented to the full Audit Committee at its next scheduled meeting. Pre-approval of permitted non-audit services can only be approved by the full Audit Committee.
The affirmative vote of the holders of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote is required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2020.
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The Audit Committee consists of A. Clayton Perfall, Patrick Allender, Thomas Gayner, and Didier Teirlinck, who are all non-management directors. The members Determination of the Audit Committee meet the independence and financial literacy requirements of the NYSE and the additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. In 2019, the Audit Committee held 13 meetings. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors, which it annually reviews. The charter, which complies with all current regulatory requirements, is available on the Company’s website atwww.colfaxcorp.comon the Investors page under the Corporate Governance tab. During 2019, at each of its regularly scheduled meetings, the Audit Committee met with senior members of the Company’s finance team. Additionally, the Audit Committee has separate private sessions, during its regularly scheduled meetings, with the Company’s independent registered public accounting firm and head of internal audit, respectively. The Audit Committee is updated periodically on management’s process to assess the adequacy of the Company’s system of internal control over financial reporting, the framework used to make the assessment, and management’s conclusions on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee has also discussed with the independent registered public accounting firm, their evaluation of the Company’s system of internal control over financial reporting.
The Audit Committee evaluates the performance of the Company’s independent registered public accounting firm each year and determines whether to reengage the current independent registered accounting firm or consider other independent registered accounting firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered accounting firm, the firm’s global capabilities, and the firm’s technical expertise, tenure as the Company’s independent registered accounting firm and knowledge of the Company’s global operations and businesses. In connection with the applicable audit partner rotation requirements, the Audit Committee also is involved in considering the selection of the auditors’ lead engagement partner when rotation is required. Based on this evaluation, the Audit Committee decided to engage Ernst & Young LLP as our independent registered accounting firm for the year ended December 31, 2020. The Audit Committee reviews with the independent registered accounting firm and management the overall audit scope and plans, as well as the results of internal and external audit examinations and evaluations by management and the independent registered accounting firm of the Company’s internal controls over financial reporting and the quality of the Company’s financial reporting. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee recommends that the Board ask stockholders, at the Company’s annual meeting, to ratify the appointment of the independent registered accounting firm (see Proposal 2 beginning on page 23).
The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2019 with management and with the Company’s independent registered public accounting firm, including a discussion of the quality and suitability of the accounting principles, the reasonableness of significant accounting judgments and estimates, and the clarity of disclosures in the financial statements. In addressing the quality of management’s accounting judgments, members of the Audit Committee are apprised of certifications prepared by the Chief Executive Officer and the Chief Financial Officer that the unaudited quarterly and audited annual consolidated financial statements of the Company fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company.
In performing all of these functions, the Audit Committee acts in an oversight capacity. The Audit Committee reviews the Company’s quarterly and annual reports on Form 10-Q and Form 10-K prior to filing with the SEC. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for establishing and maintaining adequate internal control over financial reporting and for preparing the financial statements, and other reports, and of the independent registered public accounting firm, which is engaged to review the quarterly consolidated financial statements of the Company, and audit and report on the annual consolidated financial statements of the Company and the effectiveness of the Company’s internal control over financial reporting as of the Company’s year-end.
The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC. The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence. On the basis of the reviews and discussions referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2019 be included in the Company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
Audit Committee of the Board of Directors
A. Clayton Perfall, Audit Committee Chair
Patrick Allender
Thomas Gayner
Didier Teirlinck
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The following discussion and analysis of compensation arrangements of our named executive officers for 2019 should be read together with the compensation tables and related disclosures set forth under the section heading “Executive Compensation.”
Named Executive Officers
The following discussion provides details regarding our executive compensation program and the compensation of our named executive officers in 2019. Our named executive officers (“NEOs”) for 2019 are:
Our Compensation Philosophy and Guiding Principles
Our executive compensation approach links compensation to Company and individual performance while aligning the long-term interests of management and stockholders. We strive to create a compensation program for our associates, including our executives, that provides a compelling and engaging opportunity to attract, retain and motivate the best talent. We believe that our compensation programs motivate performance-driven leadership that is aligned to achieve our financial and strategic objectives with the intention to deliver superior long-term returns to our stockholders. Utilizing this philosophy, our executive compensation program has been designed to:
Fiscal 2019 Pay for Performance Alignment and Compensation Overview
Fiscal 2019 was a transformational year for Colfax, as we completed significant transactions that marked a strategic shift to diversify end-market exposure, reduce cyclicality, and increase profitability and cash flow, positioning us for continued growth. In February 2019, we completed the acquisition of DJO Global, Inc. (“DJO”) and related financing. DJO is a global leader in orthopedic solutions, providing orthopedic devices, reconstructive implants, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation. DJO has approximately 5,000 employees across 18 locations around the world. The acquisition is expected to evolve the Company to higher margins, faster growth, and lower cyclicality, while providing opportunities for significant bolt-on and adjacent acquisitions over time.
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In May 2019, we signed a purchase agreement to sell our Air & Gas Handling business for an attractive valuation. We completed the divestiture in September 2019 and used the proceeds to pay-down our debt and position us to pursue strategic bolt-on acquisitions for our remaining businesses. The divestiture reduced our exposure to cyclical end markets and improved our profit margin and cash generation profile.
Our strong operational performance in 2019 reflected improvements in our Fabrication Technology business that enabled it to increase its market share while sharply improving margins. DJO rapidly returned to healthy growth levels following investments and improvements in its operating and innovation capabilities. Consolidated net sales of over $3.3 billion reflected only 10 months of DJO results, and Colfax delivered full year organic growth despite dynamic industrial markets. Excluding costs associated with portfolio changes, exiting certain pension obligations, and restructuring charges primarily related to DJO, our core operating metric, adjusted EBITA, and adjusted earnings per share (“EPS”) showed strong growth.
We achieved and exceeded many of our internal corporate financial and operational goals, leading to an overall corporate bonus achievement under our Annual Incentive Plan (“AIP”) of 100% for Messrs. Trerotola, Hix, and Pryor.
In 2019, Fabrication Technology net sales increased 2.5%, including the successful integration of businesses acquired in 2018. Fabrication Technology achieved organic growth in 2019 at rates higher than the growth rates of competitors, increasing its market share. Overall, the business improved its cost position and achieved its commercial objectives, but the business was below threshold achievement on its working capital metric. These results were reflected in a company-wide/business specific achievement under our AIP with an 88% blended company factor (weighted 30% Colfax corporate and 70% ESAB) for Mr. Kambeyanda.
For the 10-month period in 2019 since being acquired by Colfax in February 2019, DJO achieved net sales of $1.1 billion, with $333.7 million in the fourth quarter of 2019. Since we acquired DJO, we have made significant investments to support operating improvements throughout the business and completed many of the transformational projects that had been started in 2017, enabling the business to better serve its customers. Organic growth improved throughout the year, delivering strong year-on-year organic growth in the fourth quarter of fiscal 2019, and revenue for 2019 came in above target while EBITDA was below threshold. These results were reflected in a company-wide/business specific achievement under our AIP with an 83% blended company factor (weighted 30% Colfax corporate and 70% DJO) for Mr. Shirley.
Further, the Compensation Committee took the following actions during 2019:
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2019 Say-On-Pay Vote
At our 2019 Annual Meeting, approximately 99% of the stockholder votes cast on our advisory proposal to approve the compensation of our NEOs were voted in favor of our executive compensation proposal. Our Compensation Committee considered the outcome of this vote in the context of our prior and on-going engagement with stockholders and accordingly did not make any additional changes to our executive compensation policies and program elements (other than the redesign of our PRSUs described above). The Compensation Committee has determined to provide for an annual “say-on-pay” proposal and will continue to carefully evaluate the feedback received from our stockholders in connection with the voting on that proposal.
Our Executive Compensation Program
Our executive compensation program includes elements designed to align executive pay with Company objectives and long-term stockholder returns, including the PRSU grants entirely based on relative Total Shareholder Return as discussed above.
For 2019, the Compensation Committee established the following target compensation program for our CEO:
2019 CEO Incentive Compensation Structure
With respect to our other NEOs, for 2019, the Compensation Committee established the following target compensation program:
2019 Incentive Compensation Structure for Other NEOs (Average)*
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Our 2019 executive compensation structure consists of three core compensation elements–base salary, an annual cash bonus, and long-term incentives. The Compensation Committee reviewed each element individually while also considering the total compensation package provided to create an appropriate mix designed to attract, incentivize, and retain our executives. The following table summarizes the core elements of our 2019 executive compensation program:
The framework of our executive compensation program includes the governance features and other specific elements discussed below:
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Determination of Executive Compensation and Performance Criteria
Our executive compensation program is based on the philosophy and design outlined above with a focus on exceptional performance and continuous improvement from our management team. Within this framework, the Compensation Committee exercises its reasoned business judgment in making executive compensation decisions and takes into account recommendations by our Chief Executive Officer with respect to the compensation of each executive officer, other than himself (see “CEO Recommendations” on page 36). Some of the factors that generally are referenced when making executive compensation decisions, none of which is assigned a particular weight, are as follows:
Further, a substantial percentage of compensation under our Annual Incentive Plan is determined solely by the achievement of annual performance criteria based on Board-approved financial and operational goals for the fiscal year. These goals are then incorporated into the metrics set for our Annual Incentive Plan and approved by the Compensation Committee, as further discussed under “Bonus Calculation and Payment - Financial and Operational Metrics and 2019 Performance Results” on page 32. We believe that this link to our Board-established corporate and business goals reinforces alignment and incents breakthrough results both at the business-unit level and Company-wide.
Elements of Our 2019 Executive Compensation Program
Base Salary
Base salaries are designed to provide compensation that is market competitive so that we can attract the best qualified individuals and retain our senior management. Base salaries are established at an executive’s hire and generally reviewed annually for potential increases. In February 2019, the Compensation Committee set the salary levels for each of our NEOs based on the Compensation Committee’s assessment of the relative roles and responsibilities of management and the results of their individual performance assessments, combined with perspective from competitive compensation data prepared by FW Cook and the Compensation Committee’s reasoned business judgment. Mr. Shirley’s base salary was approved by the Compensation Committee in connection with the DJO acquisition and based upon his historical compensation and a review of competitive compensation data prepared by FW Cook. In December 2019 the Compensation Committee approved promotional increases for Messrs. Hix and Kambeyanda in light of their continuing strong performance, in particular their performance related to the transition of the portfolio, and to maintain market competitiveness. As a result, Mr. Hix’s salary was increased from the base salary of $595,000 set in February 2019 to $650,000, and Mr. Kambeyanda’s salary was increased from the base salary of $550,000 set in February 2019 to $625,000, in each case effective as of December 9, 2019. Messrs. Trerotola and Pryor received modest base salary increases in 2019 primarily reflecting our continued operational improvements and the Compensation Committee’s competitive marketplace review. Mr. Brander’s base salary increase was, in part, based on his engaged and focused leadership while the Company undertook a strategic review of the Air & Gas Handling business, which was first publicly announced in November 2018. A comparison of base salary levels as of December 31, 2019 (or September 30, 2019 for Mr. Brander) and 2018 is set forth below:
2018 Annual | 2019 Annual | Percentage | ||||||||||
Named Executive Officer | Base Salary | Base Salary | Increase | |||||||||
Mr. Trerotola | $ | 1,056,000 | $ | 1,077,000 | 2.0 | % | ||||||
Mr. Hix | $ | 575,000 | $ | 650,000 | (1) | 13.0 | % | |||||
Mr. Pryor | $ | 550,000 | $ | 565,000 | 2.7 | % | ||||||
Mr. Kambeyanda | $ | 510,000 | $ | 625,000 | (1) | 22.6 | % | |||||
Mr. Shirley | — | $ | 850,000 | — | ||||||||
Mr. Brander | £ | 320,000 | £ | 385,000 | 13.0 | % |
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Annual Incentive PlanReverse Stock Split Ratio
The goalratio of the Reverse Stock Split, if approved and implemented, will be at one of three ratios, one-for-two,one-for-three or one-for-four, with an exact ratio to be determined by our Board at a later date. The Board believes that stockholder adoption of three alternatives of reverse stock split ratios (as opposed to adoption of a single reverse stock split ratio) provides maximum flexibility to achieve the purposes of a Reverse Stock Split and, therefore, is in the best interests of the Company. In determining a ratio following the receipt of stockholder adoption, the Board (or any authorized committee of the Board) may consider, among other things, factors such as:
the historical trading price and trading volume of our AIPcommon stock;
the anticipated impact of the Spin-off on our trading price and trading volume of our common stock;
the number of shares of our common stock outstanding;
the then-prevailing market price and trading volume of our common stock and the anticipated impact of the Reverse Stock Split on the trading market for our common stock;
the anticipated impact of the Reverse Stock Split on our ability to raise additional financing;
the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and
prevailing general market and economic conditions.
Certain Risk Factors Associated With the Reverse Stock Split
We cannot assure you that the proposed Reverse Stock Split will increase our stock price.
We expect that the Reverse Stock Split will increase the per share trading price of our common stock. However, the effect of the Reverse Stock Split on the per share trading price of our common stock cannot be predicted with any certainty, and the history of reverse stock splits for other companies is varied, particularly since some investors may view a reverse stock split negatively. It is possible that the per share trading price of our common stock after the Reverse Stock Split will not increase in the same proportion as the reduction in the number of our outstanding shares of common stock following the Reverse Stock Split, and the Reverse Stock Split may not result in a per share trading price that would attract investors who do not trade in lower priced stocks. In addition, although we believe the Reverse Stock Split may enhance the marketability of our common stock to rewardcertain potential investors, we cannot assure you that, if implemented, our executives for achievement in key areascommon stock will be more attractive to investors. Even if we implement the Reverse Stock Split, the per share trading price of Company operationalour common stock may decrease due to factors unrelated to the Reverse Stock Split, including our future performance and financial performancethe Spin-off. If the Reverse Stock Split is consummated and the per share trading price of the common stock declines, the percentage decline as well as each executive’s individual contributions to Company success. Our NEOs are eligible to receive a cash incentive payment that is expressedan absolute number and as a percentage of our overall market capitalization may be greater than would occur in the executive’s base salary (i.e., “target bonus”) underabsence of the Reverse Stock Split.
The proposed Reverse Stock Split may decrease the liquidity of our Annual Incentive Plan. Performance measures include corporate and individual performance against pre-determined financial and operational metrics approvedcommon stock.
The liquidity of our common stock may be negatively impacted by the Compensation Committee atReverse Stock Split, given the beginningreduced number of shares that would be outstanding after the Reverse Stock Split, particularly if the per share trading price does not increase as a result of the fiscal year.Reverse Stock Split. Accordingly, the Reverse Stock Split may not achieve the desired results as described above.
These performance metrics established by the Compensation Committee for business leaders reflect both Company-wide and business-specific performance targets resulting in a company performance factor (“CPF”). The CPF for Messrs. Kambeyanda and Shirley is a weighted average consisting of 70% segment performance and 30% Colfax corporate performance. The amount payable under the AIP can be adjusted upward or downward based on the individual performance factor (“IPF”), which is linked to specific, individualized business goals. Actual bonus amounts are determined following completion of the performance year and are based on performance relative to these pre-established business and individual goals using the following formulas:
As shown in the payout curve that follows, executives can achieve a payout percentage of their target bonus ranging from zero for below-threshold performance to a threshold of 50% to a maximum of 200%, with 100% target goal achievement resulting in 100% payout of the individual’s target bonus for that performance metric, based on the extent to which objective pre-established financial and operational performance goals are achieved; and
The total amount earned is subject to adjustment based on individual achievement as measured by an IPF. The IPF is a multiplier that ranges from 0 to 1.5 (subject to an overall payout cap of 250% of the target bonus). For 2019, IPFs for our NEOs ranged from 1.0 to 1.35. The IPF rating is based on individual performance against pre-established objectives and the embodiment of our Company’s core values and behaviors. The IPF and key performance indicators include both financial and non-financial Company objectives over which the executive has primary control.
2019 Annual Incentive Plan Payout to Performance
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Detail regarding the individual components of these formulas for fiscal year 2019, including a calculation of the payout percentages and description of the IPF component, follows the NEO bonus payout tables below.
Key Executive Team Achievements
Bonus Calculation and Payment – Financial and Operational Metrics and 2019 Performance Results
For corporate executives, the Company performance factors (CPF) consisted of financial targets based on net sales (as adjusted), adjusted EBITA, working capital turns (as adjusted), and adjusted EPS. In 2019, we transitioned from using a financial target based on operating profit (as adjusted) to the financial target based on adjusted EBITA. This was intended to better align with how Colfax management evaluates the business and the Company’s financial reporting practices. The pre-established targets were based upon Board-approved operational and financial goals for 2019. These targets represented significant progress in each category toward the achievement of the Company’s long-term growth objectives and aligned with the Board-approved corporate budget.
For Mr. Shirley, the “target goals” included adjusted EBITDA for the DJO segment, which was pre-established by the Compensation Committee in connection with the acquisition of DJO. His goals were set at levels that would represent significant progress in each category toward the achievement of the Company’s long-term growth objectives with respect to DJO and align with the Board-approved corporate budget.
For Messrs. Kambeyanda and Shirley, Colfax corporate measures constituted 30% of the potential payout factor with their business unit goals consisting of 70% of the total target. These weightings are intended to drive accountability for business operational results while also encouraging thoughtful work and cooperation across the organization.
The financial and operational performance measures and corresponding weightings of these metrics for 2019 were as follows:
Measure | Corporate | ESAB | DJO |
Net sales (as adjusted)(1) | 25% | 30% | 40% |
Adjusted EBITA(2) | 40% | 50% | N/A |
Working Capital Turns (as adjusted)(3) | 20% | 20% | N/A |
Adjusted EPS(4) | 15% | N/A | N/A |
DJO Adjusted EBITDA(5) | N/A | N/A | 60% |
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Bonuses were calculated using the aforementioned formula as shown in the following table. These bonuses are also reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below on page 40.
Bonus | Individual | Executive | ||||||||||||
Target Bonus | Target | before IPF | Performance | Bonus | ||||||||||
NEO | Base Salary | Percentage | Bonus | CPF | application | Factor (IPF) | Payment | |||||||
Mr. Trerotola | $ | 1,077,000 | X | 125% | = | $ | 1,346,250 | X | 100% | 1,346,250 | 110% | = | $ | 1,480,600 |
Mr. Hix | $ | 595,000 | X | 80% | = | $ | 476,000 | X | 100% | 476,000 | 100% | = | $ | 476,000 |
Mr. Pryor | $ | 565,000 | X | 80% | = | $ | 452,000 | X | 100% | 452,000 | 110% | = | $ | 497,200 |
Mr. Kambeyanda* | $ | 550,000 | X | 80% | = | $ | 440,000 | X | 88% | 387,200 | 135% | = | $ | 522,720 |
Mr. Shirley* | $ | 850,000 | X | 100% | = | $ | 850,000 | X | 83% | 702,100 | 100% | = | $ | 702,100 |
In light of Mr. Brander’s execution and effort with respect to the sale of our Air & Gas Handling business, which strengthened our balance sheet and provides more flexibility for our growth strategy, Mr. Brander received a bonus for 2019 of $3,152,585, which is reflected in the “Bonus” column of the Summary Compensation Table below on page 40. The bonus was based upon the performance of the Air & Gas Handling business and his performance through the closing of the transaction.
Bonus Calculation – Target Bonus
The Compensation Committee annually reviews and approves AIP target bonus percentages for each executive officer in alignment with our compensation philosophy and taking into consideration the Compensation Committee’s competitive marketplace review. Targets as a percentage of base salary did not change from prior-year targets, except for Mr. Kambeyanda, whose AIP target increased from 75% to 80% to better align with the Compensation Committee’s evaluation of the competitive market.
In connection with the DJO acquisition, the Compensation Committee set Mr. Shirley’s target bonus at 100% based upon his historical compensation and the Compensation Committee’s competitive marketplace review.
The 2019 corporate performance goals and achievement for each are set forth below. As shown in the table, the weighted average performance result for 2019 corporate metrics was 100% of plan, compared to 121% of plan for 2018 and 83% of plan for 2017.
Measure | Weighting | Target Goal | Threshold Goal | Maximum Goal | Achieved | Company Performance Factor (CPF) | ||||
Net Sales (as adjusted) | 25% | $ | 4,839 billion | $ | 4,355 billion | $ | 5,323 billion | $ | 4,788 billion | 95% |
Adjusted EBITA | 40% | $ | 666 million | $ | 533 million | $ | 799 million | $ | 680 million | 110% |
Working Capital Turns (as adjusted) | 20% | 4.7 | 4.5 | 4.9 | 4.6 | 67% | ||||
Adjusted EPS | 15% | $ | 2.62/share | $ | 2.10/share | $ | 3.14/share | $ | 2.74/share | 123% |
The table below summarizes the 2019 achievement of business goals for Messrs. Kambeyanda and Shirley, which when aggregated with the corporate goal results as shown above, determine their AIP financial and operational performance factor:
Company Performance Factor – DJO and ESAB Segments | ESAB* | DJO* |
Sales (as adjusted) (30% for ESAB and 40% DJO) | 80% | 100% |
Adjusted EBITA/EBITDA (50% for ESAB and 60% DJO) | 117% | 65% |
Working Capital Turns (as adjusted) (20% ESAB) | 0% | — |
Business Achievement (before weighted average with Colfax corporate)* | 83% | 79% |
We do not disclose the specific target goals or achievement applicable to our business segments as they are highly confidential to our businesses. We believe that disclosure of this information would be competitively harmful to us, as it would provide our competitors with strategic information specific to certain businesses, thus providing our competitors insight into our plans and projections for such businesses. As evidenced by our performance this year, these target levels are designed to be difficult to accomplish and are not certain to be met.
Bonus Calculation – Individual Performance Factor
In addition to the target bonus percentages and financial and operational metrics discussed above, the third and final factor under our AIP is the IPF, as described above. The individual performance factors for each executive were determined after evaluating each NEO’s performance, including the collective achievements detailed on page 32 above. For 2019, IPFs for our NEOs ranged from 1.0 to 1.35, as shown above.
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Long-Term IncentivesEffective Time
The goaleffective time of our long-term incentive planthe Reverse Stock Split and the Authorized Share Reduction (the “Effective Time”), if approved by stockholders and implemented by Colfax, will be the time that the Certificate of Amendment is to align the compensation of executivesfiled with the interestsDelaware Secretary of stockholders by encouraging sustained long-term improvementState or at such later time as specified in operational and financial performance and long-term increase in stockholder value. Long-term incentives also serve as retention instruments and provide equity-building opportunities for executives. In recent years, we have granted stock options and PRSUs as our primary formsthe Certificate of equity awards, with service-based RSUs being granted principally as recruitment or promotion awards atAmendment. It is expected that such filing will take place immediately after the time of hire or promotion. The Compensation Committee redesigned our PRSUs in 2019 and transitioned from using an operational improvement metric (adjusted operating margin) and an investor return benchmark (relative TSR vs. the S&P MidCap 400 Industrials Index), each of which was equally weighted and measured over a three-year period, to solely using relative TSR vs. the S&P MidCap 400 Industrials Index, measured over a three-year period. The Compensation Committee believes that using a single investor return benchmark is more appropriate for the Company at this time due to the highly acquisitive nature of our business, which makes it difficult to set meaningful three-year operational improvement metrics. Once vested, at least 50% of the shares delivered pursuant to the PRSUs (net of shares withheld or sold for taxes) must be held for an additional one-year period.
In connection with the acquisition of DJO, Mr. Shirley received an annual equity award consisting of (i) DJO PRSUs, (ii) RSUs that cliff vest after two years and (iii) stock options. The DJO PRSUs are subject to achieving certain adjusted EBITDA targets at DJO, measured over a two-year period, with 50% vesting on the second anniversary of the grant date and 50% vesting on the third anniversary of the grant date. The DJO PRSUs further provided that 50% of the PRSUs may be earned (but not vest) if a specified adjusted EBITDA target was achieved during 2019. However, this target was not achieved during 2019 and such DJO PRSUs remain eligible to vest following completion of the two-year performance period. The award is intended Spin-off. However, the exact timing of the filing of the Certificate of Amendment will be determined by our Board based on its evaluation as to align Mr. Shirley’s compensationwhen such action will be the most advantageous to the Company and our stockholders.
If, at any time prior to the filing of the Certificate of Amendment with the interestsDelaware Secretary of stockholdersState, notwithstanding stockholder approval and incentivize the achievement of certain strategic objectives relating to the acquisition and integration of DJO.
2019 Performance Vesting of Outstanding PRSUs
None of the outstanding PRSUs heldwithout further action by the NEOs were earnedstockholders, the Board, in 2019. In 2017, we transitioned to using a full three-year performance period for measuring PRSUs. Prior toits sole discretion, determines that PRSUs were subject to achieving certain performance targets over any four consecutive quarters during a three-year period.
Annual Grants under Omnibus Incentive Plan
On February 25, 2019,it is in Colfax’s best interests and the Compensation Committee granted annual awards under the 2016 Omnibus Incentive Plan with a target aggregate value as set forth in the table below. Messrs. Trerotola, Hix, Pryor and Kambeyanda received 50% of their annual grant in the form of PRSUs and 50% in the form of stock options. As discussed further above, on December 13, 2019, the Compensation Committee also granted Messrs. Hix and Kambeyanda RSUs with a grant date fair value of approximately $1,000,000 and $500,000, respectively, in recognition for their contributions to the portfolio changes that occurred in 2019. Mr. Shirley received DJO PRSUs with a target grant date fair value of $2,000,000, stock options with a grant date fair value of approximately $500,000, and RSUs with a grant date fair value of $500,000. Mr. Brander’s award consisted solely of stock options with a grant date fair value of approximately $400,000.best
Stock options vest in three equal annual installments beginning on the first anniversary of the grant date and PRSUs cliff vest at the end of the three-year measurement period to the extent of achievement of the relative TSR performance metric based on the following payout scale:
As shown in the table above, the target payout is subject to achieving the relative TSR performance metric at the 55thpercentile, which underscores the Company’s commitment to delivering and incentivizing above-median performance and returns to stockholders.
- 2022 Special
Meeting Proxy
Statement
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The DJO PRSUs vest in two equal installments beginning oninterests of Colfax’s stockholders to delay the second anniversaryfiling of the grant date, toCertificate of Amendment or abandon the extent of achievement ofReverse Stock Split and the DJO adjusted EBITDA target based onAuthorized Share Reduction, the payout scale below.
Resulting | ||
DJO Adjusted EBITDA | Shares Earned | |
(% of target)* | (% of target) | |
Below Threshold | <90% | 0% |
Threshold | 90% | 50% |
Target | 100% | 100% |
Maximum | 120% | 200% |
Additional Compensation InformationReverse Stock Split and the Authorized Share Reduction may be delayed or abandoned.
Other Elements of Compensation–Non-Qualified Deferred Compensation and PerquisitesFractional Shares
The Company doesStockholders will not maintain an active pension plan and instead makes matching contributions to a tax-qualified 401(k) plan and Non-Qualified Deferred Compensation Plan. We established the Non-Qualified Deferred Compensation Plan, which provides participants the opportunity to defer a percentagereceive fractional shares of their compensation without regard to the compensation limits imposed by the Internal Revenue Code under our 401(k) plan, to allow our senior-level executives to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Colfax employees who are not limited by the Internal Revenue Code limits. For additional details concerning the Non-Qualified Deferred Compensation Plan, please see the Non-Qualified Deferred Compensation Table and the accompanying narrative disclosure. With respect to Mr. Brander, who is based in the U.K., as discussed below in the footnotes to the Summary Compensation Table, for 2019 Howden made contributions to the Howden Retirement Plan, a defined contribution plan, on his behalf. In addition, as discussed following the Pension Benefits table below, Mr. Brander maintains a balance in the Howden Group Pension Plan, a frozen defined benefit pension plan. Mr. Brander’s benefits under the Howden Group Pension Plan were frozen in 2006 and he did not accrue any additional benefits after this date. We retained liability with respect to the Howden Group Pension Plancommon stock in connection with the Reverse Stock Split. Instead, the transfer agent will aggregate all fractional shares and sell them as soon as practicable after the Effective Time at the then-prevailing prices on the open market, on behalf of those stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split. We expect that the transfer agent will conduct the sale in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of our Air & Gas Handling business. Additionally,common stock. After the Company also maintains the DJO Global Executive Deferred Compensation Plan (the “DJO Nonqualified Plan”), which was acquired in connection with the acquisitiontransfer agent’s completion of DJO. The DJO Nonqualified Plan was frozensuch sale, stockholders who would have been entitled to new participants and future deferrals on December 31, 2019. Mr. Shirley holds an account balance in this plan.
Asidea fractional share will instead receive a cash payment from the benefits providedtransfer agent in an amount equal to Mr. Trerotola attheir respective pro rata shares of the timetotal proceeds of his hire, which include (i) an automobile allowancethat sale net of $20,000 per year and (ii) personal use of a private aircraft charteredany brokerage costs incurred by the Company and/or personal financial planning services (or any combination thereof) in an aggregate amounttransfer agent to sell such stock.
Stockholders will not be entitled to exceed $100,000 in compensation income (i.e., imputed incomereceive interest for the period of time between the Effective Time and the date payment is made for their fractional share interest. You should also be aware that, under tax rules)the escheat laws of certain jurisdictions, sums due for any calendar year, we provide minimal perquisites to our executives, including up to $10,000 in financial and tax planning services for senior executives, business-related items such as relocation assistance, whichfractional interests that are not timely claimed after the funds are made available may be grossed up consistent with competitive market recruitment practices, and benefits provided in non-U.S. locations in accordance with local practice.
Employment & Service Agreements
Messrs. Trerotola and Pryor are party to the same form of employment agreement. These agreements provide for a two-year initial term, or in the case of Mr. Trerotola, a three-year initial term, with automatic one-year term extensions thereafter, unless our Board or the executive provides written notice in advance to terminate the automatic extension provision. Each executive’s base salary may not be reduced below the amount previously in effect without the written agreement of the executive. In addition, as set forth in their current employment agreements, each of Messrs. Trerotola and Pryor is entitled to participate in our Annual Incentive Plan with a target bonus amount no less than 120% and 50%, respectively, of his base salary then in effect. The employment agreements provide severance benefits and provide change in control benefits only if a termination for “good reason” or other than for “cause” occurs within two years following the change in control (i.e., “double trigger” provisions).
Mr. Hix’s letter agreement entered into upon his hire provides for severance and change in control benefits primarily commensurate with those provided in our employment agreements. Mr. Kambeyanda is party to a letter agreement with the Company that specifies his starting annual salary and a target bonus of at least 70% under the AIP. This agreement also provides for a transition bonus made in connection with his hire that isrequired to be paid in installments over his first five years of employment (with $330,000 payable into the designated agent for each of 2017 and 2018, and $130,000 payable in each of 2019 and 2020). This letter agreement also provides that Mr. Kambeyanda is subject to our Executive Officer Severance Plan.
Mr. Shirley is party to a service agreement with DJO, which he entered into prior to our acquisition of the DJO business in 2019 and which was assumed as part of the purchase. The agreement provides for a four-year initial term, with automatic one-year term extensions commencing November 14, 2020, unless we or Mr. Shirley provides written notice in advance to terminate the automatic extension provision. The agreement provides that Mr. Shirley’s base salary is a specified amount and that he is entitled to such increases as determined by the Board. In addition, Mr. Shirley isjurisdiction. Thereafter, stockholders otherwise entitled to receive an annual bonus of 100% of his base salary. The employment agreement also provides severance benefits, but doessuch funds may have to obtain the funds directly from the state to which they were paid.
If you believe that you may not provide enhanced change in control benefits.
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Mr. Brander’s employment with Colfax was terminated in connection with the completion of the sale of the Air & Gas Handling business. Prior to this, Mr. Brander’s employment agreement was amended on May 7, 2019, in contemplation of such sale. The amended agreement provided that Mr. Brander was eligible to receive a retention bonus upon closing of such sale, subject to his continued employment through closing. The agreement also provided that, in its discretion, the Company could increase the retention bonus based on its assessment of the performance of the Air & Gas Handling business and Mr. Brander through closing. Mr. Brander was awarded a $3,152,585 payment consistent with these arrangements.
Additional details regarding the material terms of these agreements are summarized under “Employment Agreements and Executive Officer Severance Plan” on page 44 and “Potential Payments Upon Termination or Change in Control” on page 47 and a summary of the material terms and eligibility requirements for the Executive Officer Severance Plan is provided under “Potential Payments Upon Termination or Change in Control.”
Stock Ownership Policy and Stock Holding Requirements
Our stock ownership policy further aligns the long-term financial interests of Company executives with those of our stockholders while also serving as a risk mitigation tool. Each executive at a vice president level or higher must retain at least one-half of vested equity awards, less shares withheld or sold for tax withholding obligations, until the executive has accumulatedhold sufficient shares of our common stock or other qualifying forms of equity havingat the value described below. The ownership value thresholds are as follows:Effective Time to receive at least one share in the Reverse Stock Split and you want to continue to hold Colfax’s common stock after the Reverse Stock Split, you may do so by either:
purchasing a sufficient number of | |
All of the Company’s NEOs currently employed with the Company have achieved these ownership targets as of the date of this Proxy Statement.
CEO Recommendations
During 2019, Mr. Trerotola provided recommendations to the Compensation Committee with respect to the compensation levels for our executive officers, other than for himself. These recommendations were based on his assessment of the executive officer’s relative experience, overall performance, and impact on the achievement of our financial and operational goals and strategic objectives, combined with perspective from the competitive review data. While the Compensation Committee took these recommendations under advisement, it independently evaluated the pay recommendations for each executive officer and made all final compensation decisions in accordance with its responsibilities as set forth in the Compensation Committee Charter.
Role of Compensation Consultants and Peer Data Review
Our Compensation Committee also obtains perspective from competitive data reviewed by FW Cook, the independent advisor to the Compensation Committee on matters of executive compensation. The Compensation Committee annually reviews the list of peer companies previously recommended by FW Cook to confirm that such continues to reflect the peers used by financial analysts and governance advisors covering Colfax and to represent our growth trajectory, revenue, market capitalization and overall scope and nature of operations. In light of the DJO acquisition, the peer group was revised to include certain companies in the medical device industry to reflect our current business portfolio. The peer group referenced in 2019 was as follows:
Competitive review data drawn from this group was utilized by the Compensation Committee as one of many reference points to assist in its compensation decisions, and for certain NEOs, competitive review data drawn from this group was used to “benchmark” the amount of compensation paid to such NEOs.
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Independence of Compensation Consultant
In April 2020, the Compensation Committee considered the independence of FW Cook in light of the SEC rules regarding conflicts of interest involving compensation consultants and NYSE listing standards regarding compensation consultant independence. The Compensation Committee requested and received a letter from FW Cook addressing conflicts of interest and independence, including specific factors enumerated in both relevant SEC rules and NYSE listing standards. The Compensation Committee discussed and considered these factors, and other factors it deemed relevant, and concluded that FW Cook is independent and that its work during 2019 did not raise any conflict of interest.
Compensation Program and Risk
As part of our continued appraisal of our compensation program, management, with oversight from the Compensation Committee, annually reviews our compensation policies and practices and the design of our overall compensation program in relation to our risk management practices and any potential risk-taking incentives. This assessment includes a review of the primary elements of our compensation program in light of potential risks:
We have controls and other policies in place that serve to limit excessive risk-taking behavior within our compensation program, including, but not limited to, the following:
The Compensation Committee reviews with management the results of its assessment annually. Based on its most recent review, the Compensation Committee concluded that the risks arising from Company compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company.
Additionally, the Compensation Committee also reviews the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, inclusion, pay equity, corporate culture, talent development and retention.
Hedging Ban
Any director, officer or employee of the Company is prohibited from engaging in short sales, transactions in derivative securities (including put and call options), or other forms of hedging and monetization transactions, such as zero-cost collars, equity swaps, exchange funds and forward sale contracts, that allow the holder to limit or eliminate the risk of a decrease in the value of the Company’s securities.
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Pledging Policy
Our Board has adopted a policy that prohibits any director or executive officer from pledging as security under any obligation any shares of ColfaxColfax’s common stock; or
if you have shares of Colfax’s common stock in more than one account, consolidating your accounts;
in each case, so that he or she directly or indirectly owns and controls (other than shares already pledged as of February 17, 2014). Any shares of Colfax common stock that were pledged prior to February 17, 2014 do not count toward meeting our stock ownership requirements.
Clawback Policy
The Compensation Committee has adopted a clawback policy applicable to our executive officers. Under the policy, in the event the Company is required to restate its financial results due to material non-compliance with any financial reporting requirement under the securities laws as generally applied, the Board will review all bonus payments made, including all bonus payments under our Annual Incentive Plan, and all performance-based equity compensation that was earned or vested on the basis of having met or exceeded financial results during the three years prior to the date that the Company determines such restatement is required.
If the Board determines that such payments or the amount of awards earned/vested would have been lower had they been determined or calculated based on such restated results, the Board will, to the extent permitted by governing law, seek to recoup for the benefit of the Company the value of such excess payments made to and/or equity awards earned by executive officers. The Board maintains discretion, to the extent permitted under applicable law, not to seek such recoupments if the Board determines, in the exercise of its fiduciary duties, that under the specific circumstances it would not be appropriate to seek to recover such amounts. The Company may effect such recoupment by requiring executive officers to pay such amount(s) to the Company, by set-off, by reducing future compensation, or by such other means or combination of means as the Board determines to be appropriate.
Equity Grant Practice
The Compensation Committee has the authority to grant equity awards. The Company does not time the grant of equity awards around material, non-public information. Grant dates are determined either as of the date of Compensation Committee approval or on the date of a specific event, such as the date of hire or promotion, for certain executive officers. The target grant value is translated intoyou hold a number of shares underlying each grant usingof our common stock in your account prior to the Reverse Stock Split that would entitle you to receive at least one share of common stock in the Reverse Stock Split. Shares of our common stock held in registered form and shares of our common stock held in “street name” (that is, through a valuation formula that,broker, bank or other holder of record) for PRSUsthe same stockholder will be considered held in separate accounts and RSUs, incorporates a 20-day average closing price up to and includingwill not be aggregated when effecting the grant date, to avoid the potential volatility impact of using a single-day closing price.Reverse Stock Split.
Effects of the Reverse Stock Split and the Authorized Share Reduction
General
After the Effective Time, each stockholder will own a reduced number of shares of common stock. The Compensation Committee has delegated authorityprincipal effect of the Reverse Stock Split will be to proportionately decrease the number of outstanding shares of our common stock based on one of the three Reverse Stock Split ratios, one-for-two,one-for-three or one-for-four, with the exact ratio to be determined by our Board at a later date. The Authorized Share Reduction will reduce the authorized number of shares of our capital stock by the corresponding, selected Reverse Stock Split ratio that is ultimately determined by our Board.
Voting rights and other rights of the holders of our common stock will not be affected by the Reverse Stock Split, other than as a result of the treatment of fractional shares as described above. For example, a holder of 2% of the voting power of the outstanding shares of our common stock immediately prior to the effectiveness of the Reverse Stock Split will generally continue to hold 2% (assuming there is no impact as a result of the payment of cash in lieu of issuing fractional shares) of the voting power of the outstanding shares of our common stock after the Reverse Stock Split. The number of stockholders of record will not be affected by the Reverse Stock Split (except to the extent any are cashed out as a result of holding fractional shares). If approved and implemented, the Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. Our Board believes, however, that these potential effects are outweighed by the benefits of the Reverse Stock Split.
Effect on Common Stock
On December 30, 2021, the Board adopted resolutions (1) approving and declaring advisable a series of three alternative amendments of our Certificate of Amendment to effect, at the discretion of the Board, a reverse stock split at one of three Reverse Stock Split ratios, one-for-two,one-for-three or one-for-four, and contemporaneously with such Reverse Stock Split, to effect a corresponding reduction in the number of authorized shares of common stock by the corresponding, selected Reverse Stock Split ratio that is ultimately determined by our Board, (2) directing that the Reverse Stock Split Proposal be submitted to the holders of our common stock for their
- 2022 Special Meeting Proxy Statement | 7 |
approval and (3) recommending that the holders of our common stock approve the Reverse Stock Split Proposal. The actual number of authorized shares of our common stock after giving effect to the Reverse Stock Split, if and when effected, will depend on the Reverse Stock Split ratio that is ultimately determined by our Board. The following table contains approximate information, based on share information as of December 31, 2021, relating to our CEOoutstanding common stock and Chief Human Resources Officerinformation regarding our authorized shares for grantseach of equity awardsthe three alternative amendments:
Number of Shares of Common Stock Authorized | Number of Shares of Common Stock Issued and Outstanding | |||
Pre-Reverse Stock Split | 400,000,000 | 156,249,234 | ||
Post-Reverse Stock Split 1:2 | 200,000,000 | 78,124,617 | ||
Post-Reverse Stock Split 1:3 | 133,333,333 | 52,083,078 | ||
Post-Reverse Stock Split 1:4 | 100,000,000 | 39,062,309 |
After the Effective Time, our common stock would have a new committee on uniform securities identification procedures, or CUSIP number, a number used to associates who are non-executive officers. The aggregate grant date valueidentify our common stock.
Our common stock is currently registered under Section 12(b) of such equity awards may not exceed $4,000,000 during the fiscal year period. Such awardsSecurities Exchange Act of 1934 (the “Exchange Act”), and we are subject to further restrictions on individual size,the periodic reporting and awards must be made pursuant toother requirements of the terms of award agreement forms previously approved byExchange Act. The Reverse Stock Split will not affect the Board or the Compensation Committee. The effective grant date of these awards is on the first trading day on or after the date of hire or promotion for newly hired employees following review and approval by the CEO or Chief Human Resources Officer, as applicable. The Compensation Committee receives a report of any grants made pursuant to this delegated authority at each regularly scheduled meeting.
Rule 10b5-1 Trading Plans by Executive Officers
Certainregistration of our executive officers have adopted writtencommon stock trading plans in accordance with Rule 10b5-1 under the Exchange Act and our insider trading policy. A Rule 10b5-1 Trading Plan is a written document that pre-establishes the amount (or ratio), prices, and dates (or range of possible dates) of future purchases or sales of our common stock. These plans are entered into during an open window period in accordance with the terms of our insider trading policy. From time to time, certain NEOs have entered into such plans (i) to sell the percentage of vested shares necessary to satisfy applicable tax withholding obligations upon the vesting and delivery of PRSUs, or (ii) to exercise options that are approaching the end of their term.
Changes to Compensation Program for 2020
As noted above, in recent years, we have granted stock options and PRSUs as our primary forms of annual equity awards, with service-based RSUs being granted principally as recruitment or promotion awards at the time of hire or promotion. Beginning in 2020, annual equity awards will generally consist of 50% PRSUs, 25% stock options, and 25% time vesting RSUs. The Compensation Committee believes this will further align the long-term interests of management and stockholders and promote increased equity ownership among our executive officers.
In April 2020, the Compensation Committee and Board adopted amendments to our Annual Incentive Plan to (i) eliminate language that was no longer necessary due to the repeal of Section 162(m) of the Internal Revenue Code’s exemption from the deduction limit for certain “performance-based” compensation and (ii) add provisions that provide for certain payments of annual awards in the event of death, disability or retirement, as defined in the Annual Incentive Plan.
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The Compensation Committee participated in the preparation of the Compensation Discussion and Analysis, reviewing successive drafts and discussing the drafts with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2020 Proxy Statement and in the Company’s Annual Report on Form 10-K for 2019 by reference to the Proxy Statement.
Compensation Committee of the Board of Directors
Rhonda Jordan, Compensation Committee ChairRajiv VinnakotaSharon Wienbar
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Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) | All Other Compen- sation ($)(6) | Total ($) | ||||||||||
Matthew Trerotola President and Chief Executive Officer | 2019 | 1,071,346 | — | 2,724,996 | 2,724,996 | 1,480,600 | — | 428,088 | 8,430,026 | ||||||||||
2018 | 1,049,000 | — | — | — | 1,676,000 | — | 422,927 | 3,147,927 | |||||||||||
2017 | 1,021,932 | 1,000,000 | — | — | 881,000 | — | 374,184 | 3,277,107 | |||||||||||
Christopher Hix Executive Vice President, Finance and Chief Financial Officer | 2019 | 591,731 | — | 1,999,987 | 999,998 | 476,000 | — | 81,442 | 4,149,158 | ||||||||||
2018 | 570,962 | — | 999,987 | 1,000,002 | 640,000 | — | 29,260 | 3,240,211 | |||||||||||
2017 | 557,308 | — | 850,002 | 849,999 | 319,000 | — | 52,953 | 2,629,262 | |||||||||||
Daniel Pryor Executive Vice President, Strategy and Business Development | 2019 | 560,962 | — | 924,995 | 924,999 | 497,200 | — | 68,578 | 2,976,734 | ||||||||||
2018 | 544,615 | — | 1,874,996 | 1,875,004 | 532,000 | — | 64,249 | 4,890,864 | |||||||||||
2017 | 525,962 | 500,000 | 874,983 | 874,997 | 382,000 | — | 52,078 | 3,210,019 | |||||||||||
Shyam Kambeyanda Executive Vice President, President and CEO of ESAB | 2019 | 544,688 | 130,000 | 1,149,998 | 650,001 | 522,720 | — | 58,644 | 3,056,051 | ||||||||||
2018 | 505,000 | 330,000 | 599,992 | 599,999 | 460,000 | — | 96,121 | 2,591,112 | |||||||||||
2017 | 485,000 | 330,000 | 499,985 | 500,000 | 340,000 | — | 296,938 | 2,451,923 | |||||||||||
Brady Shirley Chief Executive Officer of DJO | 2019 | 719,231 | — | 2,499,995 | 500,003 | 702,100 | — | 22,027 | 4,443,356 | ||||||||||
Ian Brander Former Senior Vice President, Colfax and Howden President | 2019 | 378,652 | (7) | 3,152,585 | — | 400,000 | — | 195,391 | 58,300 | 4,184,928 | |||||||||
2018 | 398,000 | — | 650,012 | 349,999 | 355,000 | — | 82,198 | 1,835,209 | |||||||||||
2017 | 414,462 | — | 499,985 | 500,000 | 137,981 | 90,634 | 66,995 | 1,710,056 |
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Name | Company 401(k)/Deferred Compensation Plan Match and Contribution ($)(a) | Auto Allowance ($)(b) | Financial Services ($)(c) | Aircraft Usage ($)(d) | Supplemental Long-Term Disability Premiums ($)(e) | Accident Insurance ($)(f) | Howden Retirement Plan Company Contribution ($)(g) | Medical Care Supplement ($)(h) | Total ($) | |||||||||||
Mr. Trerotola | 164,841 | 20,000 | 12,380 | 230,867 | — | — | — | — | 428,088 | |||||||||||
Mr. Hix | 73,904 | — | 7,538 | — | — | — | — | — | 81,442 | |||||||||||
Mr. Pryor | 65,578 | — | 3,000 | — | — | — | — | — | 68,578 | |||||||||||
Mr. Kambeyanda | 54,144 | — | 4,500 | — | — | — | — | — | 58,644 | |||||||||||
Mr. Shirley | 22,027 | — | — | — | — | — | — | — | 22,027 | |||||||||||
Mr. Brander | — | 11,802 | — | — | 5,547 | 191 | 37,865 | 2,894 | 58,300 |
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Grants of Plan-Based Awards for 2019
The following table sets forth information with respect to grants of plan-based awards to our named executive officers during 2019:
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of shares of stock | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and | ||||||||||||||||||||
Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or units (#)(3) | Options (#)(4) | Awards ($/Sh) | Option Awards ($)(5) | |||||||||||||
Matthew L. Trerotola | Annual Incentive Plan | — | 673,125 | 1,346,250 | 3,365,625 | — | — | — | — | — | — | — | |||||||||||||
PRSUs | 2/25/2019 | — | — | — | 53,531 | 107,062 | 214,124 | 2,724,996 | |||||||||||||||||
Stock Options | 2/25/2019 | — | — | — | — | — | — | — | 310,364 | 26.88 | 2,724,996 | ||||||||||||||
Christopher M. Hix | Annual Incentive Plan | 238,000 | 476,000 | 1,190,000 | — | — | — | — | — | — | — | ||||||||||||||
PRSUs | 2/25/2019 | — | — | — | 19,645 | 39,289 | 78,578 | — | — | — | 1,000,003 | ||||||||||||||
RSUs(6) | 12/13/2019 | — | — | — | — | — | — | 29,394 | 999,984 | ||||||||||||||||
Stock Options | 2/25/2019 | — | — | — | — | — | — | — | 113,895 | 26.88 | 999,998 | ||||||||||||||
Daniel A. Pryor | Annual Incentive Plan | — | 226,000 | 452,000 | 1,130,000 | — | — | — | — | — | — | — | |||||||||||||
PRSUs | 2/25/2019 | — | — | — | 18,171 | 36,342 | 72,684 | — | — | — | 924,995 | ||||||||||||||
Stock Options | 2/25/2019 | — | — | — | — | — | — | — | 105,353 | 26.88 | 924,999 | ||||||||||||||
Shyam Kambeyanda | Annual Incentive Plan | — | 220,000 | 440,000 | 1,100,000 | — | — | — | — | — | — | ||||||||||||||
PRSUs | 2/25/2019 | — | — | — | 12,769 | 25,538 | 51,076 | — | — | — | 650,006 | ||||||||||||||
RSUs(6) | 12/13/2019 | — | — | — | — | — | — | 14,697 | — | — | 499,992 | ||||||||||||||
Stock Options | 2/25/2019 | — | — | — | — | — | — | — | 74,032 | 26.88 | 650,001 | ||||||||||||||
Brady Shirley | Annual Incentive Plan | — | 425,000 | 850,000 | 2,125,000 | — | — | — | — | — | — | ||||||||||||||
DJO PRSUs | 2/25/2019 | — | — | — | 39,289 | 78,578 | 157,156 | — | — | — | 2,000,007 | ||||||||||||||
RSUs | 2/25/2019 | — | — | — | — | — | — | 19,644 | — | — | 499,989 | ||||||||||||||
Stock Options | 2/25/2019 | — | — | — | — | — | — | — | 56,948 | 26.88 | 500,003 | ||||||||||||||
Ian Brander | Stock Options(7) | 3/1/2019 | — | — | — | — | — | — | — | 45,977 | 26.52 | 400,000 |
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Outstanding Equity Awards at 2019 Fiscal Year-End
The following table shows, as of December 31, 2019, the number of outstanding stock options, performance-based restricted stock unit awards and restricted stock unit awards held by the named executive officers:
Option Awards | Stock Awards | |||||||||||||||
Equity Incentive Plan Awards | ||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||
Matthew L. Trerotola | 359,066 | 179,534 | 39.54 | 7/23/2022 | — | — | — | — | ||||||||
186,521 | 373,042 | 23.74 | 1/3/2023 | — | — | — | — | |||||||||
— | 310,364 | 26.88 | 2/24/2026 | — | — | — | — | |||||||||
— | — | — | — | 123,774 | 4,502,898 | — | — | |||||||||
— | — | — | — | — | — | 107,062 | 3,894,916 | |||||||||
Christopher M. Hix | 124,611 | — | 26.56 | 6/30/2023 | — | — | — | — | ||||||||
47,739 | 23,870 | 40.47 | 2/12/2024 | — | — | — | — | |||||||||
32,237 | 64,475 | 33.41 | 3/7/2025 | — | — | — | — | |||||||||
— | 113,895 | 26.88 | 2/24/2026 | — | — | — | — | |||||||||
— | — | — | — | 42,607 | 1,550,043 | — | — | |||||||||
— | — | — | — | — | — | 68,774 | 2,501,998 | |||||||||
Daniel A. Pryor | 23,669 | — | 42.25 | 2/17/2020 | — | — | — | — | ||||||||
144,648 | — | 52.79 | 7/28/2020 | — | — | — | — | |||||||||
78,673 | 39,337 | 52.02 | 2/15/2022 | — | — | — | — | |||||||||
114,613 | — | 26.51 | 11/15/2022 | — | — | — | — | |||||||||
49,143 | 24,572 | 40.47 | 2/12/2024 | — | — | — | — | |||||||||
60,444 | 120,891 | 33.41 | 3/7/2025 | — | — | — | — | |||||||||
— | 105,353 | 26.88 | 2/24/2026 | — | — | — | — | |||||||||
— | — | — | — | — | — | 91,627 | 3,333,390 | |||||||||
Shyam Kambeyanda | 24,644 | — | 24.96 | 5/12/2023 | — | — | — | — | ||||||||
28,081 | 14,042 | 40.47 | 2/12/2024 | — | — | — | — | |||||||||
19,342 | 38,685 | 33.41 | 3/7/2025 | — | — | — | — | |||||||||
— | 74,032 | 26.88 | 2/24/2026 | — | — | — | — | |||||||||
— | — | — | — | 45,334 | 1,649,251 | — | — | |||||||||
— | — | — | — | — | — | 43,229 | 1,572,671 | |||||||||
Brady Shirley | — | 56,948 | 26.88 | 2/24/2026 | — | — | — | — | ||||||||
— | — | — | — | 19,644 | 714,649 | — | — | |||||||||
— | — | — | — | — | — | 78,578 | 2,858,668 | |||||||||
Ian Brander | 14,793 | — | 42.25 | 1/29/2020 | — | — | — | — | ||||||||
15,024 | — | 68.23 | 1/29/2020 | — | — | — | — | |||||||||
54,087 | — | 52.02 | 1/29/2020 | — | — | — | — | |||||||||
28,081 | — | 40.47 | 1/29/2020 | — | — | — | — |
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Employment Agreements and Executive Officer Severance Plan
Messrs. Trerotola and Pryor are party to our current form of employment agreement for executive officers, which was adopted by the Company on September 15, 2010.
Mr. Hix’s letter agreement, entered into upon his hire, provides for severance and change in control benefits primarily commensurate with those provided under our employment agreements. Mr. Kambeyanda is party to a letter agreement that specifies his starting annual salary and minimum target bonus. Mr. Shirley is party to a service agreement with DJO, which he entered into prior to our acquisition of the DJO business in 2019. The agreement provides for a four-year initial term, with automatic one-year term extensions commencing November 14, 2020, unless we or Mr. Shirley provides written notice in advance to terminate the automatic extension provision. The agreement provides that Mr. Shirley’s base salary is a specified amount and that he is entitled to such increases as determined by the Board. In addition, Mr. Shirley is entitled to receive an annual bonus of 100% of his base salary. The employment agreement also provides severance benefits, but does not provide change in control benefits.
Mr. Brander’s employment with Colfax was terminated in connection with the completion of the sale of the Air & Gas Handling business. Prior to this, Mr. Brander’s employment agreement was amended on May 7, 2019, in contemplation of such sale. The amended agreement provided that Mr. Brander was eligible to receive a retention bonus upon closing of such sale, subject to his continued employment through closing. The agreement also provided that, in its discretion, the Company could increase the retention bonus based on its assessment of the performance of the Air & Gas Handling business and Mr. Brander through closing.
We also maintain an Executive Officer Severance Plan, which provides for severance benefits upon a termination without cause or a resignation for good reason for executive officers who are not otherwise contractually entitled to severance compensation. The Executive Officer Severance Plan does not provide for change in control benefits. Mr. Kambeyanda is the only NEO subject to this plan.
Form of Employment Agreement
On September 15, 2010, the Company adopted a new form of employment agreement for executive officers. Messrs. Trerotola and Pryor are each parties to employment agreements based on this form, which, except for Mr. Trerotola (who has a three-
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year term), currently has a two-year term that is automatically extended unless the Board or the executive provides written notice to terminate the automatic extension provision. In addition, in the event we undergo a “change in control” (as described below under “Potential Payments Upon Termination or Change in Control”) during the term of the employment agreements, the agreements will be automatically extended to the second anniversary of the change in control. Each officer’s base salary may not be reduced below the amount previously in effect without the written agreement of the executive.
With respect to the benefits payable to each executive under these agreements upon a change in control of Colfax, the benefits are only paid upon a “double trigger,” meaning a change in control event must occur and the executive must either be terminated without cause by Colfax (or its successor) or the executive must resign for good reason. In entering into these arrangements, the Company wanted to ensure the continued dedication of these executive officers, notwithstanding the possibility of a change in control, and to retain such officers in our employ after any such transaction. We believe that, should the possibility of a change in control arise, Colfax should be able to receive and rely upon our officers’ advice as to the best interests of the Company and without the concern that such officer might be distracted by the personal uncertainties and risks created by the potential change in control. In the event, however, that such officer is actually terminated during the period beginning three months prior to a change in control event or within a certain period of time following the change in control (or prior to the end of the term of the applicable employment agreement should the change of control not be consummated), which termination may be out of their control (i.e., by the successor company or management), we believe that the officers should be compensated for their efforts in positioning Colfax for the possibility of an acquisition event. Further, any bonus payment paid in conjunction with the termination of a NEO will be based upon the performance of the Company, as stipulated in the Company’s Annual Incentive Plan. Additional information on certain benefits provided under the form of employment agreement in certain terminations or in connection with a change of control is discussed below under “Potential Payments Upon Termination or Change in Control.”
Option Exercises and Stock Vested
The following table provides information regarding (i) the vesting of earned PRSUs for Messrs. Trerotola, Hix, Pryor, and Kambeyanda, (ii) the vesting of new hire RSU awards for Messrs. Hix and Kambeyanda, (iii) the vesting of RSUs granted to Mr. Brander in contemplation of the strategic review for the Air & Gas Handling business and (iv) Mr. Brander’s option exercises during 2019. The number of shares acquired upon exercise or vesting and the value realized before payment of any taxes and broker commissions is reflected below. Value realized represents the product of the number of shares received upon exercise or vesting and the closing market pricelisting of our common stock on the exercise or vesting date, lessNew York Stock Exchange (“NYSE”). Following the exercise price for options. Mr. Shirley did not exercise any Company options nor did any of his CompanyReverse Stock Split, the Spin-off transaction and our name change to Enovis Corporation, our common stock awards vest in 2019.
Option Exercises and Stock Vested During Fiscal 2019
Option Awards | Stock Awards | |||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Matthew Trerotola | N/A | N/A | 80,854 | 2,013,171 | ||||
Chris Hix | N/A | N/A | 13,213 | 364,811 | ||||
Daniel Pryor | N/A | N/A | 14,373 | 482,070 | ||||
Shyam Kambeyanda | N/A | N/A | 30,637 | 811,881 | ||||
Ian Brander | 68,589 | 407,052 | 9,144 | 239,298 |
Nonqualified Deferred Compensation
Effective January 1, 2016, we established the Colfax Corporation Nonqualified Deferred Compensation Plan (the “Nonqualified Plan”)will continue to provide certain select members of management and other highly compensated employees, including each of the NEOs, with an opportunity to defer a stated percentage of their base compensation or their bonus compensation without regard to the compensation limits imposed by the Internal Revenue Code for our 401(k) plan. We established the Nonqualified Plan to allow these individuals to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Colfax employees who are not limited by the Internal Revenue Code limits. The plan is “unfunded,” meaning there are no assets segregated for the exclusive benefit of plan participants.
The Nonqualified Plan allows the NEOs to defer up to 50% of their base salaries and up to 75% of their bonus compensation. In addition, during 2017 we matched up to 4% of all excess
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deferrals by the NEOs and provided a 2% Company contribution. Our NEOs vest in these Company contributions to the Nonqualified Plantrade on the same terms asNYSE under the Company’s 401(k) plan.
Deferrals under the Nonqualified Plan are notionally invested among a number of different mutual funds, insurance company separate accounts, indexed rates or other measurement funds, which are selected periodically by the plan administrator to best match the funds offered in the qualified 401(k) plan. Each participating NEO can allocate his deferrals among these notional fund investment options and may change elections at any time by making a change of election with the plan administrator. Colfax notionally invests its match and contribution amounts in the same investment options in the same amounts and allocations as the reference funds selected by the officer.
Simultaneously with the executive’s election to defer amounts under the Nonqualified Plan, the executive must elect the time and form of payment for the deferred amounts, which may generally be either a lump sum distribution or in quarterly installments payable over a period of one to ten years following a specified date (that must be at least one year following the end of the year to which the officer’s deferral election relates) or at least six months following the officer’s separation from service. Limited changes to deferral elections are permitted in accordance with the terms of the Nonqualified Plan. If no election is made, the benefit will be paid in a lump sum on the last day of the month which occurs six months after the executive’s separation from service. Deferred amounts may alternatively be paid out in a lump sum in the event of an executive’s death or disability or in the event of an unforeseeable financial emergency, Furthermore, in the event the executive’s account balance at the time of his or her separation from service is less than $15,000, payment of the account balance will be made in a lump sum on or before the later of (i) December 31 of the calendar year of separation, or (ii) the date 2.5 months after the executive’s separation from service.
The Company also maintains the Colfax Corporation Excess Benefit Plan (the “Excess Benefit Plan”) which was frozen to new participants and future new deferrals on December 31, 2015. Like the Nonqualified Plan, the Excess Benefit Plan is an unfunded non-qualified deferred compensation plan in which Mr. Pryor holds an account balance. Like the Nonqualified Plan, amounts deferred under the Excess Benefit Plan are notionally invested in offered measurement funds as selected by the plan participantsymbol “ENOV” and will be distributed in accordance with participant electionsassigned a new CUSIP number.
Effect on Preferred Stock
Pursuant to our Certificate of Incorporation, our authorized capital stock consists of 20,000,000 shares of Preferred Stock, par value $0.001 per share. The proposed Certificate of Amendment to effect the Reverse Stock Split and the termsAuthorized Share Reduction would not impact the total authorized number of shares of preferred stock or the par value of the Excess Benefit Plan following a participant’s separation from service, death or disability.preferred stock. There are currently no shares of preferred stock outstanding.
Accounting Matters
The Company also maintainsReverse Stock Split will not affect the DJO Global Executive Deferred Compensation Plan (the “DJO Nonqualified Plan”),common stock capital account on our balance sheet and the par value of our common stock will remain unchanged. The stated capital component, which was acquired in connection with the acquisition of DJO. The DJO Nonqualified Plan was frozen to new participants and future deferrals on December 31, 2019. Like the Nonqualified Plan, the DJO Nonqualified Plan is an unfunded non-qualified deferred compensation plan. Mr. Shirley holds an account balance in this plan. Like the Nonqualified Plan, amounts deferred under the DJO Nonqualified Plan are notionally invested in offered measurement funds as selected by the plan participant and will be distributed in accordance with participant elections. Deferred amounts may generally be paid out in either a lump sum distribution or in annual installments payable over a period of two to ten years following a specified date or the officer’s separation from service (subject to any required 6-month delay). Deferred amounts will alternatively be paid out in a lump sum in the event of an executive’s death.
Mr. Brander does not participate in either the Nonqualified Plan or the Excess Benefit Plan.
Nonqualified Deferred Compensation
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||
Matthew L. Trerotola | 137,367 | 148,041 | 29,941 | — | 889,527 | |||||
Christopher M. Hix | 49,269 | 57,104 | 6,331 | — | 254,978 | |||||
Daniel A. Pryor | 65,578 | 48,778 | 26,311 | — | 935,670 | |||||
Shyam Kambeyanda | 27,234 | 37,344 | 11,326 | — | 353,327 | |||||
Brady Shirley | — | — | 4,091 | — | 62,637 |
Pension Benefits- Mr. Brander
Mr. Brander previously participated in a pension plan provided by Howden Group Ltd., the Howden Group Pension Plan. Membersconsists of the Howden Group Pension Plan stopped accruing benefits on September 30, 2006. The pension amount available to each participant under the Howden Group Pension Plan is based on the participant’s yearspar value per share of service and his or her “Final Pensionable Earnings.” For purposes of the Howden Group Pension Plan, “Final Pensionable Earnings” means the participant’s base annual salary as of the date accruals ceased under the Howden Group Pension Plan, plus an allowance for fluctuating earnings for overtime and shift allowances, less an amount equal to 1.5 times the Lower Earnings Limit (a figure determined by the UK tax authorities).
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The pension formula under the plan is one sixtieth of the Final Pensionable Earningsour common stock multiplied by the aggregate number years of pensionable service for each participant.
All pension amounts under the Howden Group Pension Plan are paid monthly following retirement. We retained liability with respectshares of our common stock issued and outstanding, will be reduced in proportion to the Howden Group Pension Plansize of the Reverse Stock Split, subject to a minor adjustment in connection withrespect of the saletreatment of fractional shares, and the additional paid-in capital account will be increased by the amount by which the stated capital is reduced. Our stockholders’ equity, in the aggregate, will remain unchanged. Immediately after the Reverse Stock Split, the per share net income or loss and net book value of our Air & Gas Handling business.common stock will be increased, as compared to the per share amounts absent the Reverse Stock Split, because there will be fewer shares of common stock outstanding. All historic and per share amounts in our financial statements and related footnotes (for periods after the Reverse Stock Split and, on a pro forma basis, for periods prior to the Reverse Stock Split) will be restated to reflect the Reverse Stock Split.
Effect on Colfax’s Stock Incentive Plans
2019 Pension Benefits
Name | Plan Name | Number of Years Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||
Ian Brander | Howden Group Pension Plan | 19.4 | 883,850 | (3) | — |
Potential Payments Upon Termination or Change in Control
The information below describes relevant employment agreement, severance plan and equity plan provisions for payments upon termination or change in control and sets forth the amount of compensation that could have been received by each of the NEOs in the event such executive’s employment had terminated under the various applicable triggering events described below asAs of December 31, 2019. The benefits discussed below are in addition to those generally available to all salaried employees, such as distributions under the 401(k) plan, Howden Group Pension Plan, health care benefits and disability benefits or vested amounts payable under the Nonqualified Plan and Excess Benefit Plan described above. In addition, these benefits do not take into account any arrangements that2021, we may provide in connection with an actual separation from service or a change in control. Due to the number of different factors that affect the nature and amount of any benefits provided in connection with these events, actual amounts payable to any of the NEOs should a separation from service or change-in-control occur during the year will likely differ, perhaps significantly, from the amounts reported below. Factors that could affect such amounts include the timing during the year of the event, the Company’s stock price, and the target amounts payable under annual and long-term incentive arrangements that are in place at the time of the event.
Employment Agreements
Pursuant to the terms of the employment agreements with each of Messrs. Trerotola, Pryor and Shirley, each executive is entitled to the following severance payments or benefits in the event his employment is terminated by us without “cause” or the executive resigns for “good reason,” in the case of Messrs. Trerotola and Pryor, or as a result of a “constructive termination,” in the case of Mr. Shirley (each as described below):
In the event Messrs. Trerotola or Pryor terminate employment without “cause” or for “good reason” within three months prior to a “change in control event” (as described below), or two years after a “change in control”, each executive is entitled to the following severance payments or benefits:
Mr. Shirley’s agreement does not provide for any additional payments or benefits in the event of a change in control or a termination in connection with a change in control.
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In each case described above, the executive’s right to the severance payments and benefits is conditioned on the executive’s execution of a waiver and release agreement in favor of Colfax. In addition, each employment agreement contains standard confidentiality covenants, non-disparagement covenants, non-competition covenants and non-solicitation covenants.
Under Mr. Trerotola’s and Mr. Pryor’s agreements, in the event that any payment or benefit to the executives pursuant to the employment agreements or otherwise constitute excess parachute payments under Section 280G of the Internal Revenue Code such that they would trigger the excise tax provisions of the Internal Revenue Code, such payments are to be reduced so that the excise tax provisions are not triggered, but only upon determination that the after-tax value of the termination benefits calculated with the restriction described above exceed the value of those calculated without such restriction.
Mr. Trerotola’s and Mr. Pryor’s agreements further provide that, in the event it is determined that the willful actions of the executive have resulted in a material misstatement or omission in any report or statement filed by Colfax with the SEC, or material fraud against Colfax, Colfax is entitled to recover all or any portion of any award or payment made to the executive.
For purposes of the employment agreements, the following terms generally have the following meanings:
Trerotola Pro-Rata Vesting Provisions
In addition, for Mr. Trerotola his CEO Performance Stock Unit Agreements provide that if he is terminated by the Company without “cause” (and not on account of disability) or resigns for “good reason” his outstanding performance-based equity awards shall vest pro-ratably only if the performance objectives are achieved as of the end of the performance period.
Hix Letter Agreement
Mr. Hix ishad approximately 3,660,646 shares subject to a letter agreement entered into withstock options and 1,718,449 shares subject to unvested restricted stock units (including performance-based restricted stock units) outstanding under our stock incentive plans.
If the Company upon his hire. Pursuant to that letter agreement, severance in an amount equal to the sum of his base salary and target bonusReverse Stock Split is to be provided in the event of a termination without “cause” or for “good reason”, with severance of two times such amount to be provided in connection with such a termination within three months prior to or two years after a “change in control”.
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Executive Officer Severance Plan
Mr. Kambeyanda is a participant in our Executive Officer Severance Plan, which provides for severance benefits upon termination without cause or for good reason for executive officers who are not otherwise contractually entitled to severance compensation pursuant to a separate agreement with the Company. Severance provided in the event of termination without “cause” or for “good reason” (each defined as in the form of employment agreement) is a lump sum payment equal to one times the executive’s base salary in effect and a pro rata payment of his or her target annual incentive compensation for the year of termination. The Executive Officer Severance Plan does not provide for any additional change in control benefits.
Equity Awards
The vesting of outstanding equity awards, other than performance-based awards, accelerates in full upon the death or total and permanent disability of the grantee or, unless assumed or substituted as discussed below, upon a “corporate transaction” (as defined below). The vesting of the outstanding PRSUs accelerates in full upon the death or total and permanent disability of the grantee only if and when the performance criteria for such award are achieved as of the end of the performance period upon certification of the same by the Compensation Committee, or immediately if the performance period has already ended and the Compensation Committee has certified that the performance criteria have been achieved. The outstanding PRSUs will terminate and cease to vest upon a “corporate transaction,” unless prior to the corporate transaction the achievement of the performance criteria is certified by the Compensation Committee, in which case the vesting for the award will accelerate in full unless assumed or substituted as discussed below. While these benefits are available to all of our equity plan participants equally, pursuant to SEC requirements, we have included these acceleration benefits in the table below. In addition, in the event of termination of service other than for death, disability or cause, any stock option awards will remain exercisable to the extent vested for 90 days after termination of service.
A “corporate transaction” under any outstanding equity awards is generally defined as:
Accelerated vesting upon a “corporate transaction” will not occur to the extent that provision is made in writing in connection with the corporate transaction for the assumption or continuation of the outstanding awards, or for the substitution of such outstanding awards for similar awards relating to the stock of the successor entity, or a parent or subsidiary of the successor entity, with appropriate adjustments toeffected, the number of shares available for issuance under our stock incentive plans, as well as the number of stock that would be deliveredshares subject to any outstanding award and the exercise price, grant price or purchase price relating to any such award. Ifaward under our stock incentive plans, are expected to be equitably adjusted by our Board to reflect the Reverse Stock Split. Further, any fractional shares resulting from such adjustment are expected to be eliminated by rounding downward to the nearest whole share.
For illustrative purposes only, if a one-for-four reverse stock split is effected, the 2,590,182 shares that remain available for issuance under our 2020 Omnibus Incentive Plan as of December 31, 2021, are expected to be adjusted to 647,546 shares, subject to increase as and when outstanding awards made under the plan expire or are forfeited or are otherwise again made available for issuance pursuant to the terms of the plan. Further, for illustrative purposes only, if a one-for-four reverse stock split is effected, we expect that an award is assumedoutstanding stock option for 10,000 shares of common stock, exercisable at $40.00 per share, would be adjusted as a result of the one-for-four split ratio into an option exercisable for 2,500 shares of common stock at an exercise price of $160.00 per share.
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No Dissenter’s Rights
Neither Delaware law, the Certificate of Incorporation, nor the Company’s Amended and Restated Bylaws (the “Bylaws”) provides for appraisal or substitutedother similar rights for dissenting stockholders in connection with a corporate transaction andthis proposal. Accordingly, if the holder is terminated without cause within a year following a change in control,proposed amendments are authorized by our stockholders at the awardSpecial Meeting, our stockholders will fully vest and may be exercised in full,have no right to dissent to the Reverse Stock Split or obtain payment for their shares (other than with respect to fractional shares, as described above), and we will not independently provide stockholders with any such right.
No Going Private Transaction
Notwithstanding the decrease in the number of outstanding shares following the proposed Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Shares Held in Book-Entry and Through a Broker, Bank or Other Holder of Record
If you hold registered shares of our common stock in book-entry form, you do not need to take any action to receive your post-Reverse Stock Split shares of our common stock in registered book-entry form or your cash payment in lieu of fractional shares, if applicable. If you are entitled to post-Reverse Stock Split shares of our common stock, a transaction statement will automatically be sent to your address of record as soon as practicable after the Effective Time indicating the number of shares of our common stock you hold. In addition, if you are entitled to a payment of cash in lieu of fractional shares, a check will be mailed to you at your registered address as soon as practicable after the Effective Time. By signing and cashing this check, you will warrant, to the fullest extent applicable, beginningpermitted by law, that you owned the shares of Colfax’s common stock for which you received a cash payment.
At the Effective Time, we intend to treat stockholders holding shares of our common stock in “street name” (that is, through a broker, bank or other holder of record) in the same manner as registered stockholders whose shares of our common stock are registered in their names. Brokers, banks or other holders of record will be instructed to effect the Reverse Stock Split for their beneficial holders holding shares of our common stock in “street name”; however, these brokers, banks or other holders of record may apply their own specific procedures for processing the Reverse Stock Split. If you hold your shares of our common stock with a broker, bank or other holder of record, and you have any questions in this regard, we encourage you to contact your holder of record.
If you hold any of your shares of our common stock in certificate form, you will receive a transmittal letter from our transfer agent as soon as practicable after the Effective Time. The transmittal letter will be accompanied by instructions specifying how you can exchange your certificate representing the pre-Reverse Stock Split shares of our common stock for either: (1) a certificate representing the post-Reverse Stock Split shares of our common stock or (2) post-Reverse Stock Split shares of our common stock in a book-entry form, evidenced by a transaction statement that will be sent to your address of record as soon as practicable after the Effective Time indicating the number of shares of our common stock you hold, in each case together with any payment of cash in lieu of fractional shares to which you are entitled. Beginning on the effective date of such termination andthe Reverse Stock Split, each certificate representing pre-Reverse Stock Split shares of our common stock will be deemed for the one-year period immediately following such termination or for such longer periodall corporate purposes to evidence ownership of post-Reverse Stock Split shares. If you are entitled to a payment of cash in lieu of fractional shares, payment will be made as the compensation committee shall determine.described under “—Fractional Shares.”
Estimate of Payments
Material U.S. Federal Income Tax Consequences
The following table provides information relateddiscussion is a summary of the material U.S. federal income tax consequences to compensation payableU.S. Holders (as defined below) of the Reverse Stock Split, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each NEO assuming terminationcase in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such executive’s employmentchange or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder. We have not sought and do not currently intend to seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Reverse Stock Split.
This discussion is limited to U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a U.S. Holder’s particular circumstances, including the impact of the alternative minimum tax, the Medicare contribution tax on December 31, 2019,net investment income or assumingany item of gross income with respect to our common stock being taken into account in an “applicable financial statement” (as defined in the Code). In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
persons whose functional currency is not the U.S. dollar;
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persons holding our common stock as part of a changehedge, straddle or other risk reduction strategy or as part of controla conversion transaction or corporate transaction with corresponding qualifying termination occurredother integrated investment;
banks, insurance companies and other financial institutions;
real estate investment trusts and registered investment companies;
brokers, dealers or traders in securities;
corporations that accumulate earnings to avoid U.S. federal income tax;
S corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
tax-exempt organizations or governmental organizations;
persons deemed to sell our common stock under the constructive sale provisions of the Code;
persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and
tax-qualified retirement plans.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will depend on December 31, 2019. Amounts also assume the pricestatus of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock was $36.38, the closing price on December 31, 2019, the last trading daythat for U.S. federal income tax purposes is, or is treated as:
an individual who is a citizen or resident of the fiscal year.United States;
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Potential Payments Upon Terminationa corporation created or Change of Control
Matthew L. | Christopher | Daniel A. | Shyam | |||||||
Executive | Trerotola | M. Hix | Pryor | Kambeyanda | Brady Shirley | |||||
Employment Agreement/Severance Plan Benefits: | ||||||||||
Termination without “cause” or “good reason” (for all NEOs otherthan Mr. Shirley) or “constructive termination” (for Mr. Shirley) | ||||||||||
Payment Over 24 Months/18 Months//Lump Sum Payment(1) | 4,846,500 | 1,170,000 | 1,017,000 | 625,000 | 2,550,000 | |||||
Pro Rata Incentive Compensation(2) | 1,346,250 | — | 452,000 | 440,000 | 850,000 | |||||
Termination in connection with a “change of control” | ||||||||||
Lump Sum Payment | 4,846,500 | 2,340,000 | 2,034,000 | 625,000 | 2,550,000 | |||||
Pro Rata Incentive Compensation(2) | 1,346,250 | — | 452,000 | 440,000 | 850,000 | |||||
Accelerated Stock Options(3) | 7,663,710 | 1,273,493 | 1,359,900 | 818,199 | 541,006 | |||||
Accelerated PRSUs(4) | 8,397,814 | 3,529,188 | 4,120,872 | 2,309,257 | 2,858,668 | |||||
Accelerated RSUs(4) | — | 1,287,852 | — | 1,362,649 | 714,649 | |||||
NQDC Plans/Pension(5) | 889,527 | 254,978 | 935,670 | 353,327 | 62,637 |
Payments Made to Mr. Brander
As a resultorganized under the laws of the saleUnited States, any state thereof or the District of our Air & Gas Handling business, Mr. Brander’s employment with Colfax terminated atColumbia;
an estate, the closeincome of which is subject to U.S. federal income tax regardless of its source; or
a trust that (i) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the transactionCode) or (ii) has a valid election in September 2019. In lighteffect to be treated as a United States person for U.S. federal income tax purposes.
The Reverse Stock Split is intended to qualify as a “recapitalization” for U.S. federal income tax purposes, and the remainder of this discussion assumes that the execution and effortReverse Stock Split so qualifies. A U.S. Holder generally should not recognize gain or loss upon the Reverse Stock Split, except with respect to the sale of our Air & Gas Handling business, Mr. Brandercash received a bonus for 2019 of $3,152,585, which is reflected in the “Bonus” column of the Summary Compensation Table above on page 40. The bonus consisted of a retention bonus pursuant to his amended employment agreement, with the remaining amount based upon the performance of the Air & Gas Handling business and his performance through the closing of the transaction. This bonus was paid in lieu of a bonus under our AIP for 2019. Mr. Brander’s outstanding unvested stock options and PRSUs were forfeited in connection with the salefractional share of our Air & Gas Handling business.common stock, as discussed below. A U.S. Holder’s aggregate tax basis in the shares of our common stock received pursuant to the Reverse Stock Split should equal the aggregate tax basis of the shares of our common stock surrendered (excluding any portion of such basis that is allocated to any fractional share of our common stock), and such U.S. Holder’s holding period in the shares of our common stock received should include the holding period in the shares of our common stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the shares of our common stock surrendered to the shares of our common stock received pursuant to the Reverse Stock Split. U.S. Holders who acquired shares of our common stock on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
A U.S. Holder that receives cash in lieu of a fractional share of our common stock pursuant to the Reverse Stock Split should recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the shares of our common stock surrendered that is allocated to such fractional share of our common stock. Such capital gain or loss should be long-term capital gain or loss if the U.S. Holder’s holding period for our common stock surrendered exceeds one year at the effective time of the Reverse Stock Split. The deductibility of capital losses is subject to limitations.
A U.S. Holder may be subject to information reporting and backup withholding when such holder receives cash in lieu of a fractional share of our common stock pursuant to the Reverse Stock Split. Certain U.S. Holders are exempt from backup withholding, including corporations and certain tax-exempt organizations. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and:
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As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median compensated associate and the annual total compensation of Mr. Trerotola, our President & Chief Executive Officer. The pay ratio included in this section is a reasonable estimate calculated in a matter consistent with Item 402(u) of Regulation S-K.
For 2019:
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
To identify our median-compensated employee, as well as to determine the annual total compensation of this “median employee”:
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We are asking our stockholders
the holder fails to castfurnish the holder’s taxpayer identification number, which for an advisory vote at our Annual Meeting to approve individual is ordinarily his or her social security number;
the compensation of our named executive officers, as disclosed in this Proxy Statement. Pursuant to Section 14A of furnishes an incorrect taxpayer identification number;
the Exchange Act, we are asking that you vote onapplicable withholding agent is notified by the following advisory resolution:
RESOLVED,IRS that the 2019 compensation paidholder previously failed to properly report payments of interest or dividends; or
the holder fails to certify under penalties of perjury that the holder has furnished a correct taxpayer identification number and that the IRS has not notified the holder that the holder is subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the Company’s named executive officers, as disclosed pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is herebyAPPROVED.
Though the vote is non-binding, the Compensation CommitteeIRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the Board of Directors value your opinion and will consider the outcome of the vote in establishing our compensation philosophy and making future compensation decisions. At this time, we intend to seek stockholder approval of our executive compensation program onprocedures for obtaining such an annual basis.exemption.
Why You Should Approve Our Executive Compensation Program
As discussed in our Compensation Discussion and Analysis, we believe our compensation programs and practices are appropriate and effective in implementing our compensation philosophy, and our focus remains on linking compensation to performance while aligning the interests of management with those of our stockholders.
The affirmative vote of the holders of a majority of the outstanding shares present in person or representedof our common stock is required for the approval of the amendments to our Certificate of Incorporation to effect the Reverse Stock Split and the Authorized Share Reduction. If you do not vote (either by proxy ator during the Annual Meeting and entitled tomeeting) on the Reverse Stock Split Proposal, it will have the same effect as a vote is required to approve“against” the advisory vote approving the compensation of our named executive officers.proposal.
The Board unanimously recommends that |
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On April 3, 2020, the
Proposal 2Adjournment of Special Meeting
The Board of Directors, upon recommendation of the Compensation Committee,has approved the adoptionsubmission to the stockholders of the Colfax Corporation 2020 Omnibus Incentive Plan (the “2020 Plan” or the “Plan”) subject to approval by the Company’s stockholders at the Annual Meeting. We are asking stockholders to consider and vote upon a proposal to approve the 2020 Plan. Upon approvalone or more adjournments of the 2020 Plan, awards will no longer be made under our existing Colfax Corporation 2016 Omnibus Incentive Plan (the “2016 Plan”), and the 2020 Plan will become the primary plan used for equity grants to employees, officers and directors of the Company and its affiliates going forward. If the 2020 Plan is not approved by the Company’s stockholders, the 2016 Plan will continue to operate in accordance with its terms.
The Board recommends that you vote for approval of the 2020 Plan in order to allow the Company to continue our equity-based, pay-for-performance compensation philosophy. The number of shares of common stock that remain available for issuance under the 2016 Plan is insufficient to satisfy our equity compensation needs for 2020 and beyond. Equity compensation aligns the compensation of our non-employee directors and employees with the investment interests of our stockholders and promotes a focus on long-term value creation. As of February 28, 2020, approximately 225 of our regular, full-time employees held outstanding equity awards.
The affirmative vote of a majority of our shares of common stock present, in person or represented by proxy, and entitled to vote at the AnnualSpecial Meeting is required to approve the 2020 Plan. Our executive officers and non-employee directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the 2020 Plan.
The material features and provisions of the 2020 Plan are summarized below. The full text of the 2020 Plan is attached as Appendix A to this Proxy Statement. The following description is not complete and is qualified in its entirety by reference to that exhibit.
The 2020 Plan authorizes the Compensation Committee to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based stock, performance-based stock units, dividend equivalents, and unrestricted stock awards for the purpose of providing our non-employee directors, officers and other employees (and those of our subsidiaries and affiliates) with incentives and rewards for performance.
We believe our future success depends in part on our ability to attract, motivate and retain high quality employees and non-employee directors and that the ability to provide equity-based and incentive-based awards under the 2020 Plan is critical to achieving this success. We would be at a competitive disadvantage if we could no longer use share-based awards to recruit and compensate our non-employee directors, officers and other employees.
Some of the key features of the 2020 Plan that reflect our commitment to effective management of equity and incentive compensation and our maintenance of sound governance practices in granting awards include:
Performance-Based Awards
The 2020 Plan provides that the payment of dividend equivalents with respect to performance-based awards will accumulate, be deferred and only paid contingent upon the level of achievement of the applicable management performance goals.
Clawback
All amounts paid to a grantee under the 2020 Plan are subject to recovery under any law, governmental regulation, stock exchange listing requirement or any policy adopted by the Company and may be deducted or clawed back in accordance with such law, regulation or policy.
Minimum Vesting Period
The 2020 Plan requires that nearly all awards granted under it be subject to a one-year minimum vesting period.
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Limitation on Awards to Outside Directors
The aggregate equity-based and cash compensation granted under the Plan or otherwise to Outside Directors during any calendar year will not exceed $350,000, except in the instance of a newly-elected or appointed director or a newly-designated lead director or chair, which limit is then increased to $700,000.
No Discounted Options or Stock Appreciation Rights
The 2020 Plan prohibits the grant of options or stock appreciation rights with an exercise price less than the fair market value of our shares of common stock on the grant date.
No Repricing of Options or Stock Appreciation Rights
The 2020 Plan prohibits the repricing of options or stock appreciation rights (outside of certain corporate transactions or adjustment events described in the 2020 Plan) without stockholder approval.
Independent Committee Administration
Awards to our named executive officers under the 2020 Plan will be granted by a committee composed entirely of independent directors.
Term of the 2020 Plan
No awards may be granted under the 2020 Plan more than ten years from the date of initial stockholder approval of the Plan.
Summary of Material Terms of the 2020 Plan
Shares of Common Stock Available
Subject to adjustment as provided in the 2020 Plan and the approval of this Proposal 4 by stockholders at the Annual Meeting, the number of shares of common stock that may be issued or transferred:
will not exceed, in the aggregate, 4,430,000 shares. Such shares may be shares of original issuance or treasury shares or a combination of both.
The share reserve under the 2020 Plan will be reduced on a one-for-one basis for shares covered by an award. Canceled, terminated, expired, forfeited or lapsed Awards (in whole or in part) shall be added back to the aggregate number of shares of stock reserved and available for issuance pursuant to awards granted under the Plan (“Total Available Shares”). Any stock-related award that is settled in cash or other consideration shall be added back to the Total Available Shares reserve and available again for issuance. Shares of stock withheld or deducted from an award by the Company to satisfy tax withholding requirements relating to options or stock appreciation rights shall not be added back to the Total Available Shares reserve, but shares of stock withheld or deducted by the Company to satisfy tax withholding requirements relating to full value awards shall be added back to the Total Available Shares reserve and available again for issuance pursuant to awards granted under the Plan. Performance awards (other than an option or stock appreciation right) where performance criteria were not met shall be added back to the Total Available Shares reserve and shall be available again for issuance pursuant to awards granted under the 2020 Plan. Substitute awards granted will not count against the Total Available Share reserve.
If the full number of shares of stock subject to an option or a stock-settled stock appreciation right is not issued upon exercise of such option or stock appreciation right for any reason, including by reason of a net settlement or net exercise, all such shares
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of stock that were covered by the exercised option or stock appreciation right shall not be added back to the Total Available Shares reserve. If the exercise price of an option is satisfied by the grantee delivering shares of stock to the Company (by either actual delivery or attestation), such shares of stock shall not be added to the Total Available Shares reserve. Shares of stock repurchased on the open market with the proceeds of an option exercise shall not be added to the Total Available Shares reserve. Any dividend equivalent denominated in shares of stock shall be counted against the Total Available Shares in such amount and at such time as the dividend equivalent first constitutes a commitment to issue shares of stock.
Limit on Awards
The following limits apply to awards under the 2020 Plan (subject to limited permitted adjustments under the 2020 Plan):
Minimum Vesting Requirement
The Compensation Committee will not award more than 5% of the aggregate number of shares of common stock that become available for grant under the 2020 Plan pursuant to awards that are solely subject to a vesting or performance condition that provides for full vesting or completion of the performance period in less than one year following the grant date of the applicable award, subject to the authority of the Compensation Committee to vest awards earlier, as the Committee deems appropriate,adjournment(s) thereof in the event that there is not a sufficient number of votes at the Special Meeting to approve Proposal 1. In order to permit proxies that have been timely received to be voted for such adjournments, we are submitting this proposal as a Change in Control (as defined), inseparate matter for your consideration. If it is necessary to adjourn the event of termination of employment or service or as otherwise permitted by the Plan.
Eligibility
Our officersSpecial Meeting and employees, and those of our subsidiaries and affiliates (in total, approximately 317 people) and our non-employee directors (currently 8 people) may be selected by the Board or Compensation Committee to receive benefits under the 2020 Plan. These individuals are referred to as “Service Providers” in the 2020 Plan, and as participants or grantees in this summary description.
Administration
The Board has delegated to the Compensation Committee the power and authority to administer and implement the Plan. The Compensation Committee has the authority to interpret the terms and intent of the 2020 Plan, determine eligibility and terms of awards for participants and make all other determinations necessary or advisable for the administration of the 2020 Plan. To the extent permitted by law, the Board or Compensation Committee may delegate authority under the 2020 Plan to a member of the Board or officer of the Company, who may administer the plan with respect to employees or other service providers of the Company who are not officers or directors.
Amendment or Suspension
The Board may amend, suspend or terminate the 2020 Plan at any time with respect to any shares of common stock as to which awards have not been made. No such action may amend the 2020 Plan without the approval of stockholders if the amendmentadjournment is required to be submitted for stockholder approval by applicable law, rule or regulation, including rules of the NYSE.
Effective Date and Term
The 2020 Plan will be effective as of the date of stockholder approval and will expire on May 21, 2030 unless earlier terminated by our Board. In no event will any award under the 2020 Plan be granted on or after the tenth anniversary of its effective date, and no award of incentive stock options will be granted on or after April 3, 2030.
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Options
An option granted under the Plan is the option to purchase one or more shares of common stock pursuant to the Plan. An option granted under the 2020 Plan will be exercisable only to the extent that it is vested on the date of exercise. Exercisability of options may be subject to future service requirements, to the achievement of one or more of the performance objectives of the Company or to such other terms and conditions as the Compensation Committee, in its sole discretion, may impose. No option may be exercisable more than ten years from the option grant date, and subject to limited exceptions, shall be subject to the minimum vesting requirement. The exercise price per share under each option granted under the 2020 Plan may not be less than 100%, or 110% in the case of an incentive stock option granted to a 10% stockholder, of the fair market value of the common stock on the option grant date. Payment of the option price for shares purchased pursuant to the exercise of an option may be made in cash or in cash equivalents acceptable to us or any other method permitted by law and approved by Compensation Committee. Promptly after payment , the grantee is entitled to issuance of the shares of stock subject to the option. The 2020 Plan does not permit reloading of options and, except in connection with recapitalization events, prohibits repricings without stockholder approval.
In the case of incentive stock options, the aggregate fair market value of the common stock determined on the option grant date with respect to which such options are exercisable for the first time during any calendar year may not exceed $100,000. Incentive stock options are non-transferable during the optionee’s lifetime. Awards of non-qualified stock options are generally non-transferable, except for transfers by will or the laws of descent and distribution. The Compensation Committee may, in its discretion, authorize in an Award Agreement that an award of options, other than Incentive stock options, also may be transferred to family members by gift or other transfers deemed not to be for value.
Stock Appreciation Rights (SAR)
A SAR confers on the grantee the right to receive, upon exercise, the excess of the (a) fair market value of one share of stock on the date of exercise over (b) the SAR exercise price determined by the Committee. The award agreement shall specify the exercise price, which shall be at last the fair market value on the date of grant. SARs may be granted in tandem with another award. The Board or Committee shall determine all other terms and requirements relating to the SAR, including method of exercise and settlement. SARs are subject to the minimum vesting requirement, shall have a term of not more than ten years from the date of grant, and may be transferable to a family member if specified in the award agreement.
Restricted Stock and Restricted Stock Units
Restricted stock means one or more shares of common stock awarded subject to restrictions, and restricted stock units means a bookkeeping entry representing the equivalent of one share of common stock awarded subject to restrictions. The restriction may be a period of time30 days or other and additional restrictions,less and the restricted stock or stock unit may not be transferred, pledged or encumbered duringrecord date remains unchanged, no notice of the restricted period or while subject to restrictions. Restricted stock units may be settled in stock, cash, or a combinationtime and place of both, as determined by the Compensation Committee. Unless otherwise specified in the award agreement, the holder of restricted stock shall have the right to vote and to receive dividends, and the holder of a stock unit shall not. Restricted stock and restricted stock units are subject to the minimum vesting requirements.
Dividend Equivalent Rights
A dividend equivalent rights is an award entitling the grantee to receive credits based on cash distribution that would have been paid on the shares of common stock specified in the dividend equivalent right (or such other award to which is relates). The Compensation Committee is authorized to grant dividend equivalents to a participant in connection with an award under the 2020 Plan (other than options or SARs), or without regard to any other award. Dividend equivalents will entitle the participant to receive cash or common stock equal in value to dividends paid, or other periodic payments made, with respect to a specified number of shares of common stock. Dividend equivalents may be paid or distributed when accrued or at the end of any applicable vesting period, orreconvened meeting will be deemedgiven to have been reinvested in additional common stock or in awards under the 2020 Plan, and will be subject to such risks of forfeiture as the Compensation Committee may specify. Dividend equivalent rights paid on awards subject to performance criteria will not vest unless such performance goals for such awards are achieved, and if such performance goals are not achieved, the payments made in connection with the dividend equivalent rights will be repaid to the Company. Grants of dividend equivalent rights are subject to the minimum vesting requirements.
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Performance Units and Performance Shares
A performance share means a performance award denominated in shares of common stock, the value of which is determined as a functionstockholders, other than an announcement of the extent to which corresponding performance criteria have been achieved. Performance units means a performance award denominated in a stock unit, the value of which is determined as a function of the extent to which corresponding performance criteria have been achieved. The Compensation Committee may award performance sharesplace and performance units in such amounts and upon such terms as the Compensation Committee may determine. Each performance share will have an initial value that is equal to the fair market value of a share of common stock on the date of grant. Each award of performance units or performance shares will have an actual or target number of shares of common stock set by the Compensation Committee. The Compensation Committee may set performance goals in its discretion which, depending on the extent to which they are met, will determine the value or number of performance units or performance shares that will be paid out to a participant. The Compensation Committee may, in its sole discretion, pay earned performance units or performance shares in the form of cash or in shares of common stock (or a combination of both) equal to the value of the earned performance units or performance shares. Any shares of common stock issued based upon performance units or performance shares may be granted subject to any restrictions that the Compensation Committee deems appropriate. The Committee may provide for payment of dividends or dividend equivalents to the grantee in cash or additional shares, subject in all cases to deferral and payment on a contingent basis based on earning of the performance shares or units with respect to which the dividends or dividend equivalents are paid. Performance shares and performance units are subject to minimum vesting requirements.
Unrestricted Stock
The Compensation Committee may award unrestricted stock, free of any restrictions such as vesting requirements, in such amounts and upon such terms as the Compensation Committee may determine.
We are committed to sound equity compensation practices because we recognize that equity compensation awards dilute stockholder equity. Our equity compensation practices are intended to be competitive and consistent with market practices, and we believe our historical share usage has been responsible and mindful of stockholder interests.
Set forth below is information regarding shares currently outstanding under the 2016 Plan and prior plans. The Company made its annual award grant to employees in February 2020 and those awards are included in the data below.
Selected Data as of February 28, 2020:
For purposes of evaluating our equity compensation program, stockholders may wish to consider two metrics: historical burn rate and overhang.
The 2016 Plan used a fungible share pool, under which the number of shares available reduced at varying rates based upon the type of award given. The 2020 Plan will not be a fungible plan and will not use a fungible share pool.
More detail regarding the overhang and dilution associated with the current 2016 Plan, the 2020 Plan as proposed, and our prior plans is below. The information is as of February 28, 2020. As of that date, there were 118,286,673 shares of our common stock outstanding. We replaced all prior plans with the 2016 Plan at the 2016 Annual Meeting. No additional awards will be made under those prior plans, and therefore the table below reflects that no shares are available for future issuance under those plans. Assuming approval by the stockholders at the Annual Meeting, all remaining shares available for issuance under the 2016 Plan will be cancelled, and the 2020 Plan will be the sole equity compensation plan under which future awards can be made.
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Based on the closing price on the NYSE for our shares of common stock on February 28, 2020 of $33.47 per share, the aggregate market value as of that date of the 4,430,000 shares of common stock requested for issuance under the 2020 Plan is $148,272,100.
If the 2020 Plan is approved, the Company’s total potential dilution from the shares available for issuance under the 2020 Plan and the 2016 Plan would increase from 6.19% as of February 28, 2020 to 9.93%. The Compensation Committee has considered this potential dilution level and believes that the resulting dilution levels would be within normal competitive ranges.
In determining the number of shares to request for approval by our stockholders under the 2020 Plan, our management team worked with advisors and the Compensation Committee to evaluate a number of factors including our recent share usage and criteria expected to be utilized by institutional proxy advisory firms in evaluating this proposal. We are also mindful of the ratio of our stock-based compensation to our performance over time. In addition, the Compensation Committee also reviewed, among other things, projected future share usage and projected future forfeitures. Subject to assumptions, the Committee currently anticipates that the proposed 4,430,000 shares of common stock under the 2020 Plan are expected to satisfy the Company’s equity compensation needs for approximately 3 years.
If the 2020 Plan is approved, we intend to utilize the shares authorized under the 2020 Plan to continue our practice of incentivizing key individuals through annual equity grants. Our Compensation Committee retains full discretion under the 2020 Plan to determine the number and amount of awards to be granted under the 2020 Plan, subject to the terms of the 2020 Plan, and future benefits that may be received by participants under the 2020 Plan are not determinable at this time.
Adjustment of Shares Subject to 2020 Plan
In the event of an equity restructuring, including any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend, the authorization limits regarding the number of shares under this plan, the maximum number of shares of stock that may be issued under Incentive Stock Options and the Maximum amount of stock issued under Awards shall be adjusted proportionately, and the Committee shall make such adjustments to the Plan and the outstanding awards as it deems necessary and appropriate, in its sole discretion, to prevent dilution or enlargement of benefits or potential benefits. In addition, upon the occurrence or in anticipation of a share combination, merger, consolidate or other corporate transaction, including those in which adjustments are mandatory, the Committee may, in its sole discretion, vest, equitably convert, substitute or otherwise settle outstanding awards.
Change in Control
Under the 2020 Plan, a “Change in Control” generally means the occurrence of any of the following events: (1) acquisition of beneficial ownership of more than 50% of (A) the then outstanding shares of common stock of the Company or (B) the combined voting power of the outstanding voting securities entitled to vote in director elections; (2) individuals constituting the Board as of the date of the Plan ceasing to continue to constitute at least a majority of the Board, unless election or nomination of such director was approved by a vote of at least a majority of the directors constituting the incumbent board; (3) the closing of a reorganization, merger or consolidation or sale of all or substantially all of the assets of the Company or (4) stockholder approval of a Business Combination, and (5) approval by the stockholders of the Company of a complete liquidation of dissolution of the Company. The Compensation Committee may specify in an award agreement the treatment of that award in the event of a Change in Control.
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Federal Income Tax Consequences
The following summarizes the federal income tax consequences of awards that may be granted under the 2020 Plan.
Incentive Stock Options
An option holder will not realize taxable income upon the grant of an incentive stock option under the 2020 Plan. In addition, an option holder generally will not realize taxable income upon the exercise of an incentive stock option. An option holder’s alternative minimum taxable income, however, will be increased by the amount by which the aggregate fair market value of the shares underlying the option, which is generally determined as of the date of exercise, exceeds the aggregate exercise price of the option. Further, except in the case of an option holder’s death or disability, if an option is exercised more than three months after the option holder’s termination of employment, the option will cease to be treated as an incentive stock option and will be subject to taxation under the rules applicable to non-qualified stock options, as summarized below.
If an option holder sells the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition will depend upon whether the disposition is “qualifying” or “disqualifying.” The disposition of the option shares will be a qualifying deposition if it is made at least two years after the date on which the incentive stock option was granted and at least one year after the date on which the incentive stock option was exercised. If the disposition of the option shares is qualifying, any excess of the sale price of the option shares over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. If the disposition is a disqualifying disposition, the excess of the fair market value of the option shares on the date of disposition over the exercise price will be taxable income to the option holderadjourned meeting made at the time of the disposition. Of that income, the amount up to the excess of the fair market value of the shares at the time the option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon whether or not the shares were sold more than one year after the option was exercised.Special Meeting.
Unless an option holder engages in a disqualifying disposition, the Company will not be entitled to a deduction with respect to an incentive stock option. If an option holder engages in a disqualifying disposition, the Company will be entitled to a deduction equal to the amount of compensation income taxable to the option holder.
If an option holder pays the exercise price of an incentive stock option by tendering shares with a fair market value equal to part or all of the exercise price, the exchange of shares will be treated as a nontaxable exchange, except that this treatment will not apply if the option holder acquired the shares being tendered pursuant to the exercise of an incentive stock option and has not satisfied the special holding period requirements summarized above. The tax basis of the shares tendered to pay the exercise price will be treated as the substituted tax basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares.
Non-Qualified Stock Options
An option holder will not realize taxable income upon the grant of a non-qualified stock option. When an option holder exercises the option, however, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will constitute compensation income taxable to the option holder. The Company will, subject to any applicable limitations under Code Section 162(m), generally be entitled to a deduction equal to the amount of compensation income taxable to the option holder if the Company complies with applicable reporting requirements.
If an option holder tenders shares in payment of part or all of the exercise price of a non-qualified stock option, no gain or loss will be recognized with respect to the shares tendered, even if the shares were acquired pursuant to the exercise of an incentive stock option. In such an event, the option holder will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares tendered will be treated as the substituted tax basis for an equivalent number of shares received, and the shares received will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if the option holder had paid the exercise price in cash.
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Restricted Stock
A grantee of restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award if the common stock is subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of forfeiture). The grantee, however, may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of the shares on the date on which the restrictions lapse will be treated as compensation income to the grantee and will be taxable in the year in which the restrictions lapse. The Company, subject to any applicable limitations under Code Section 162(m), generally will be entitled to a deduction for compensation paid equal to the amount treated as compensation income to the grantee in the year in which the grantee is taxed on the income.
Dividend Equivalents Rights
Grantees under the 2020 Plan who receive awards of dividend equivalent rights will be required to recognize ordinary income in the amount distributed to the grantee pursuant to the award. If the Company complies with applicable reporting requirements of the Internal Revenue Code, it will, subject to any applicable limitations under Code Section 162(m), generally be entitled to a business expense deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
Restricted Stock Units and Performance Awards
A distribution of common stock or a payment of cash in satisfaction of stock units or performance awards will be taxable as ordinary income when the distribution or payment is actually or constructively received by the recipient. The amount taxable as ordinary income is the aggregate fair market value of the common stock determined as of the date it is received or the amount of the cash payment. The Company will, subject to any applicable limitations under Code Section 162(m), generally be entitled to deduct the amount of such payments when such payments are taxable as compensation to the recipient if the Company complies with applicable reporting requirements.
Stock Appreciation Rights
The grant of SARs will not result in taxable income to the participant or a deduction to the Company. Upon exercise of a SAR, the holder will recognize ordinary income in an amount equal to the cash or the fair market value of the common stock received by the holder. The Company will, subject to any applicable limitations under Code Section 162(m), generally be entitled to a deduction equal to the amount of any compensation income taxable to the grantee, and, as to SARs that are settled in shares of common stock, if the Company complies with applicable reporting requirements.
Unrestricted Stock
A holder of shares of unrestricted stock will be required to recognize ordinary income in an amount equal to the fair market value of the shares on the date of the award, reduced by the amount, if any, paid for such shares. The Company will, subject to any applicable limitations under Code Section 162(m), generally be entitled to deduct the amount of any compensation income taxable to the grantee if it complies with applicable reporting requirements.
Upon the holder’s disposition of shares of unrestricted stock, any gain realized in excess of the amount reported as ordinary income will be reportable by the holder as a capital gain, and any loss will be reportable as a capital loss. Capital gain or loss will be long-term if the holder has held the shares for more than one year. Otherwise, the capital gain or loss will be short-term.
Tax Withholding
Payment of the taxes imposed on awards made under the 2020 Plan may be made by withholding from payments otherwise due and owing to the holder. Subject to the prior approval of the Company, the holder may elect to satisfy such obligations: (1) by causing the Company to withhold shares of common stock otherwise issuable or (2) by delivering to the Company shares of common stock already owned by the holder. The maximum number of shares of common stock that may be withheld from any award to satisfy any applicable withholding requirements cannot exceed such number of shares having a fair market value equal to the statutory amount required by the Company to be withheld and paid with respect to such award.
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Performance Objectives
Section 162(m) of the Internal Revenue Code limits public companies to an annual deduction for federal income tax purposes of $1,000,000 for compensation paid to their chief executive officer, chief financial officer, the three most highly compensated executive officers determined at the end of each year and certain other covered employees who previously fell into any of these categories. Prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”) changes to Section 162(m), performance-based compensation was excluded from such $1,000,000 deduction limitation. The pre-TCJA deductibility for performance-based compensation will not apply to the 2020 Plan.
Any performance award granted under the 2020 Plan shall be earned, vested and payable (as applicable) upon the attainment of performance goals established by the Compensation Committee based upon one or more performance criteria, together with the satisfaction of any other conditions, such as continued service, as the Compensation Committee may determine to be appropriate on an absolute or relative basis, subject to the change in control provisions of the 2020 Plan. Performance goals for performance awards may be based on one or more of, but not limited to, the following business criteria: net earnings or net income; operating earnings; pretax earnings; pre-tax earnings per share; earnings per share; share price, including growth measures and total stockholder return; earnings before interest and taxes; earnings before interest, taxes, depreciation and/or amortization; earnings before interest, taxes, depreciation and/or amortization as adjusted to exclude any one or more of the following: stock-based compensation expense; income from discontinued operations; gain on cancellation of debt; debt extinguishment and related costs; restructuring, separation and/or integration charges and costs; reorganization and/or recapitalization charges and costs; impairment charges; gain or loss related to investments; sales and use tax settlement; and gain on non-monetary transaction; sales or revenue growth, whether in general, by type of product or service, or by type of customer; gross or operating margins; return measures, including total stockholder return, return on assets, capital, investment, equity, sales or revenue; cash flow, including: operating cash flow; free cash flow, defined as earnings before interest, taxes, depreciation and/or amortization (as adjusted to exclude any one or more of the items that may be excluded pursuant to earnings before interest, taxes, depreciation and/or amortization above) less capital expenditures; cash flow return on equity; and cash flow return on investment; productivity ratios; expense targets; market share; working capital targets; completion of acquisitions of businesses or companies (including metrics resulting from the same such as revenue or margin); completion of divestitures and asset sales; debt repayment targets, and debt/equity ratios; bookings or completion of orders (including metrics resulting from the same such as revenue or margin); project bookings, milestones or completion (including metrics related to the same such as revenue or margin); and any combination of the foregoing business criteria.
The business criteria may be used to measure the performance of our company, any subsidiary or affiliate of our Company as a whole or any business unit of our Company, any subsidiary or affiliate of our Company or any combination thereof, as the Compensation Committee deems appropriate. The Compensation Committee also may compare the performance measures listed above against the performance of a group of comparative companies, or a published or special index that the Compensation Committee, in its sole discretion, deems appropriate. We may use the share price performance measure as compared to various stock market indices. The Compensation Committee also has the authority to provide for accelerated vesting of any award based on the achievement of performance goals pursuant to the performance measures listed above. The amounts payable for achievement shall be defined by the applicable award agreement and may be different between grantees, as determined by the Committee.
No awards under the 2020 Plan have been granted or will be granted unless and until the 2020 Plan is approved by the Company’s stockholders at the Annual Meeting. If approved, grants of awards under the 2020 Plan will be in the discretion of the Compensation Committee and any other committee authorized to grant awards under the 2020 Plan. Accordingly, it is not possible as of the date of this Proxy Statement to determine the nature or amount of any awards under the 2020 Plan that may be subject to future grants to employees, officers and directors of the Company and its subsidiaries or affiliates who will be eligible to participate in the 2020 Plan.
We intend to file a Registration Statement on Form S-8 relating to the issuance of additional shares of common stock under the 2020 Plan with the SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the 2020 Plan by our stockholders.
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Equity Compensation Plan Information
The following table summarizes Colfax Corporation’s equity plan information as of December 31, 2019.
Number of securities | ||||||
Number of securities | remaining available for | |||||
to be issued | Weighted-average | future issuance under | ||||
upon exercise of | exercise price | equity compensation | ||||
outstanding options, | of outstanding | plans (excluding | ||||
warrants, and rights | options, warrants, | securities reflected in | ||||
Plan Category | (a) | and rights (b)(1) | column (a))(c) | |||
Equity compensation plans approved by Company stockholders | 6,606,859 | $34.93 | 2,663,654 | |||
Stock options | 4,675,281 | $34.93 | ||||
Restricted stock units | 595,376 | – | ||||
Performance-based restricted stock units | 1,336,202 | (2) | – | |||
Equity compensation plans not approved by Company stockholders | – | – | – | |||
TOTAL | 6,606,859 | $34.93 | 2,663,654 |
The affirmative vote of the holders of a majority of the outstanding shares of our common stock present in person or represented by proxy at the AnnualSpecial Meeting and entitled to vote on the matter is required to approvefor the Colfax Corporation 2020 Omnibus Incentive Plan.
The Board recommends that our stockholders approve the 2020 Plan because appropriate equity incentives are important to attract and retain high quality officers and employees, to link compensation to Company performance, to encourage employee and director ownership in our Company, and to align the interests of participants to those of our stockholders. The approval of the 2020 Planadjournment of the Special Meeting, if necessary. Abstentions with respect to the Adjournment Proposal will enable us to continue to provide such incentives.have the same effect as a vote against the Adjournment Proposal.
The Board unanimously recommends that stockholders vote“FOR |
- Meeting Proxy Statement
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BENEFICIAL OWNERSHIP OF OUR |
The following table sets forth certain information as of March 16, 2020December 31, 2021 (unless otherwise specified), with respect to the beneficial ownership of our common stock by each person who is known to own beneficially more than 5% of the outstanding shares of common stock, each person currently serving as a director, each nominee for director, each named executive officer (as listed below), and all directors and executive officers as a group. Unless otherwise indicated, to our knowledge, each person has sole dispositive and voting power over the shares in the table.
Beneficial Owner | Shares Beneficially Owned | Percent of Class | Shares Beneficially Owned | Percent of Class | ||||||||||||
5% Holder and Director | ||||||||||||||||
Mitchell P. Rales | 10,257,859 | (1) | 8.6 | % | 9,450,461 | (1) | 6.0 | % | ||||||||
5% Holders | ||||||||||||||||
T. Rowe Price Associates, Inc. | 16,566,794 | (2) | 14.0 | % | 16,546,189 | (2) | 10.6 | % | ||||||||
BlackRock, Inc. | 9,618,958 | (3) | 8.1 | % | 9,600,661 | (3) | 6.1 | % | ||||||||
The Vanguard Group | 9,032,587 | (4) | 5.8 | % | ||||||||||||
Steven M. Rales | 8,420,373 | (4) | 7.1 | % | 8,410,679 | (5) | 5.4 | % | ||||||||
The Vanguard Group | 8,026,168 | (5) | 6.8 | % | ||||||||||||
Principal Global Investors, LLC | 6,865,138 | (6) | 5.8 | % | ||||||||||||
Dimensional Fund Advisors LP | 6,089,699 | (7) | 5.1 | % | ||||||||||||
Cooke & Bieler, LP | 5,909,634 | (8) | 5.0 | % | ||||||||||||
Directors | ||||||||||||||||
Patrick W. Allender | 307,095 | (9)(10) | * | 317,776 | (6)(7) | * | ||||||||||
Thomas S. Gayner | 82,292 | (10) | * | 91,781 | (7) | * | ||||||||||
Rhonda L. Jordan | 107,186 | (10)(11) | * | 111,866 | (7)(8) | * | ||||||||||
Liam J. Kelly | 1,842 | (10) | 17,365 | (7) | * | |||||||||||
A. Clayton Perfall | 76,044 | (10)(12) | * | 86,644 | (7)(9) | * | ||||||||||
Philip A. Okala | 1,235 | (7) | * | |||||||||||||
Didier Teirlinck | 41,373 | (7) | * | |||||||||||||
Rajiv Vinnakota | 51,027 | (10) | * | 38,654 | (7) | * | ||||||||||
Didier Teirlinck | 26,245 | (10) | * | |||||||||||||
Sharon Wienbar | 36,063 | (10) | * | 49,339 | (7) | * | ||||||||||
Named Executive Officers and Directors | ||||||||||||||||
Named Executive Officer and Director | ||||||||||||||||
Matthew L. Trerotola | 957,993 | * | 1,053,737 | (10) | * | |||||||||||
Named Executive Officers | ||||||||||||||||
Christopher M. Hix | 313,127 | * | 420,459 | (10) | * | |||||||||||
Daniel A. Pryor | 691,601 | (13)(14) | * | 731,000 | (10)(11) | * | ||||||||||
Shyam Kambeyanda | 177,291 | (13)(15) | * | 245,555 | (10) | * | ||||||||||
Brady Shirley | 18,982 | (13) | 113,020 | (10) | * | |||||||||||
Ian Brander | 7,374 | * | ||||||||||||||
All of our directors and executive officers as a group (17 persons) | 13,142,449 | (13) | 10.8 | % | 12,818,996 | (10) | 8.2 | % |
* | Represents beneficial ownership of less than 1% |
(1) | Includes |
(2) | The amount shown and the following information is derived from a Schedule 13G/A filed February |
(3) | The amount shown and the following information is derived from a Schedule |
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(4) | The amount shown and the following information is derived from a Schedule 13G/A filed February 10, 2021 by The Vanguard Group (“Vanguard”), which sets forth Vanguard’s beneficial ownership as of December 31, 2020. According to the Schedule 13G/A, Vanguard has shared voting power of 64,568 shares, sole dispositive power over 8,889,016 shares, and shared dispositive power over 143,571 shares. The business address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
Includes |
(6) | |
Includes 23,648 shares owned by the JWA Irrevocable Trust #1, |
(7) | |
Beneficial ownership by directors (other than Mitchell P. Rales) includes: (i) for each of Messrs. Allender and Gayner and Ms. Jordan, |
(8) | |
Includes 18,010 shares held by a family trust, 6,191 shares held by her spouse and 799 shares held in a trust account for her spouse. | |
Includes 7,447 shares held by a trust. |
(10) | |
Beneficial ownership by named executive officers and our executive officers as a group includes shares that such individuals have the right to acquire upon the exercise of options that have vested or will vest within 60 days of |
(11) | |
Includes 3,000 shares held by trusts for his children and | |
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GENERAL MATTERS |
Outstanding Stock and Voting Rights
The Board has fixed the close of business on April 2, 2020January 10, 2022 (the “Record Date”) as the record date for determining the stockholders entitled to notice of, and to vote at, the AnnualSpecial Meeting. Only stockholders of record on that date will be entitled to vote. Proxies will be voted as specified in the stockholder’s proxy. In the absence of specific instructions, proxies will be voted in accordance with the Company’s recommendations and in the discretion of the proxy holders onrecommendations. On any other matter which properly comes before the meetingSpecial Meeting or any adjournment or postponement thereof.thereof, the proxies will be voted in the discretion of the proxy holders. The Board has selected Mitchell P. Rales and Matthew L. Trerotola to act as proxies with full power of substitution.
Any stockholder of record giving a proxy has the power to revoke the proxy at any time before it is exercised by either (i) delivering a written notice of revocation to Colfax Corporation at 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701,2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, Attn: Corporate Secretary, (ii) delivering prior to the AnnualSpecial Meeting a properly executed and subsequently dated proxy, or (iii) virtually attending the Annual Meeting and voting in person.at the Special Meeting. Attendance at the AnnualSpecial Meeting will not cause your previously granted proxy to be revoked unless you specifically so request.request or unless you vote at the Special Meeting. A beneficial stockholder who owns common stock in street name, meaning through a bank, broker or other nominee, should contact that entity to revoke a previously given proxy.
The Company will bear the total expense of this solicitation, including reimbursement paid to brokerage firms and others for their expenses in forwarding material regarding the AnnualSpecial Meeting to beneficial owners. Solicitation of proxies may be made personally or by mail, telephone, Internet, e-mail or facsimile by officers and other management employees of the Company, who will receive no additional compensation for their services.
The holders of shares of the Company’s common stock as of the Record Date are entitled to vote at the AnnualSpecial Meeting. As of the Record Date, 118,327,405156,263,657 shares of the Company’s common stock were outstanding. Each outstanding share of the Company’s common stock entitles the holder to one vote on all matters brought before the AnnualSpecial Meeting.
A list of stockholders of record as of the Record Date will be available for inspection during ordinary business hours at our corporate headquarters located at 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701,2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, for 10 days prior to the date of our AnnualSpecial Meeting. The list will also be available for inspection at the Annual Meeting.
Special Meeting at www.virtualshareholdermeeting.com/CFX2022SM.
The quorum necessary to conduct business at the AnnualSpecial Meeting consists of the holders of a majority of the shares of the Company’s stock outstanding on the Record Date and entitled to vote at the AnnualSpecial Meeting, either present in person or represented by proxy. Abstentions and broker non-votes (described below) are not counted for purposes of determining the presence or absence of a quorum. In accordance with the Company’s Amended and Restated Bylaws (the “Bylaws”), to be elected each director nominee must receive a majority of the votes cast with respect to that director’s election. Incumbent directors nominated for election by the Board are required, as a condition to such nomination, to submit a conditional letter of resignation to the Chairman of the Board. In the event that a nominee for director does not receive a majority of the votes cast at the Annual Meeting with respect to his or her election, the Board will promptly consider whether to accept or reject the conditional resignation of that nominee, or whether other action should be taken. The Board will then take action and will publicly disclose its decision and the rationale behind it no later than 90 days following the certification of election results.
The affirmative vote of the holders of a majority of the outstanding shares of our common stock is required to approve the Reverse Stock Split Proposal.
The affirmative vote of the holders of a majority of the outstanding shares of our common stock present in person or represented by proxy at the AnnualSpecial Meeting and entitled to vote is required for ratification ofto approve the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020, for approval of the advisory vote approving the compensation of our named executive officers, and for approval of the Colfax Corporation 2020 Omnibus Incentive Plan.
Adjournment Proposal.
Abstentions will have no effect on the election of directors but will have the same effect as a vote against ratification of the appointment of Ernst & Young LLP, approval of the advisory vote approvingReverse Stock Split Proposal and the compensation of our named executive officers and approval of the Colfax Corporation 2020 Omnibus Incentive Plan.
Adjournment Proposal. Under the rules of the New York Stock Exchange (the “NYSE”), brokerage firms may vote in their discretion on behalf of clients who have not furnished voting instructions on the ratificationNYSE, each of the selection of our registered public accounting firm. In contrast, the remaining proposals are “non-routine” items.is a “routine” item. This means that brokerage firms that have not received voting instructions from their clients may notwill have discretionary voting power to vote on these proposals, (a “broker non-vote”so we do not anticipate any brokerage firms failing to vote because they have not received voting instructions from their clients (“broker non-votes”). Broker non-votes will not be considered in determining the number of votes necessary for election and, therefore, will have no effect on the outcome of the vote for the election of directors. Further, broker non-votes will have no effect on the advisory vote to approve the compensation of our named executive officers or the proposal to approve the Colfax Corporation 2020 Omnibus Incentive Plan.
Only stockholders as of the Record Date are entitled to attend the AnnualSpecial Meeting. To attend the Special Meeting, in person. The names of stockholders of record will bemust go to the meeting website at www.virtualshareholdermeeting.com/CFX2022SM and enter the 16-digit control number found on a list at the Annual Meeting and such stockholders may gain entry with a government-issued photo identification, such as a driver’s license, state-issued IDproxy card or passport. Beneficial stockholdersthe Notice previously received. If you are a beneficial stockholder who ownowns common stock in street name, meaning through a bank, broker or other nominee, must present a government-issued photo identification and proof of beneficial stock ownership as ofyour voting instruction form or Notice indicates that you may vote those shares through the Record Date (such ashttp://www.proxyvote.com website, then you may attend the Notice of Internet Availability, a copy ofSpecial Meeting using the proxy card received if one was sent to the stockholder16-digit control number indicated on that voting instruction form or an account statementNotice. Otherwise, stockholders who hold their shares in street name should contact their bank, broker or other similar evidence showing stock ownership as of the Record Date)nominee and obtain a “legal proxy” in order to gain entrybe able to attend the AnnualSpecial Meeting. RepresentativesOnce admitted, during the Special Meeting, stockholders may vote, submit questions and view the list of an entity that owns stock ofstockholders entitled to vote at the Company must present government-issued photo identification, evidence that they areSpecial Meeting by following the entity’s authorized representative or proxyholder and, ifinstructions available on the entity is a beneficial owner, proof of the entity’s beneficial stock ownershipmeeting website.
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as of the Record Date. A person who is not a stockholder will be entitled to admission only if he or she presents a valid legal proxy from a stockholder of record and government-issued photo identification. Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf.
Please note that the use of cameras (including cell phones with photographic capabilities), recording devices and other electronic devices is strictly prohibited at the meeting.
We are actively monitoring the public health and travel safety concerns relating to the coronavirus (COVID-19) and the advisories or mandates that federal, state, and local governments, and related agencies, have issued and may issue. In the event it is not possible or advisable to hold our Annual Meeting as currently planned, we will announce any additional or alternative arrangements for the meeting, which may include a change in venue or holding the meeting solely by means of remote communication. Please monitor our press releases, available at http://ir.colfaxcorp.com, and our filings with the SEC for updated information. If you are planning to attend our Annual Meeting, please check http://ir.colfaxcorp.com the week of the meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.
Stockholder Proposals and Nominations
Requirements for Stockholder Proposals to be Considered for Inclusion in our Proxy Materials. To be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, stockholder proposals must be received by our Corporate Secretary at our principal executive offices no later than the close of business on December 10, 2020.
Requirements for Stockholder Proposals to be Brought Before an Annual MeetingMeeting.. Our Bylaws provide that, for a stockholder to nominate a candidate for election to the Board or propose any other business to be considered at an annual meeting other than through a proposal presented pursuant to Rule 14a-8 of the Exchange Act, the stockholder must have given timely notice thereof in writing to the Secretary of the Company at Colfax Corporation, 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701,2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, Attn: Corporate Secretary. To be timely for an annual meeting, the stockholder’s notice must be delivered to or mailed and received by the Secretary not less than the close of business 90 days nor more than 120 days before the anniversary date of the preceding annual meeting; accordingly, for the 20202022 annual meeting, notice must be delivered to or mailed and received by the Secretary no later than the close of business on February 20, 202111, 2022 and no earlier than January 21, 2021.12, 2022. However, if the annual meeting is set for a date that is more than 30 days before or more than 70 days after such anniversary, the Company must receive the notice not earlier than the 120thday prior to the annual meeting date and not later than the close of business on the later of the 90thday prior to such annual meeting or the tenth day following the day when the Company makes a public announcement of the annual meeting date. Such notice must provide the information required by Section 2.2 of our Bylaws with respect to each matter, other than stockholder nominations of directors, that the stockholder proposes to bring before the annual meeting. Notice of stockholder nominations must provide the information required by Section 3.3 of our Bylaws. Both Section 2.2 and Section 3.3 of our Bylaws mandate certain additional information to be provided by a stockholder who wishes to introduce business or nominate a director candidate. The chairman of the annual meeting may refuse to acknowledge or introduce any nomination or proposal if notice thereof is not received within the applicable deadlines or does not otherwise comply with our Bylaws. If the stockholder seeking to make a nomination or propose business pursuant to the advance notice provision of our Bylaws does not provide notice of a nomination or proposal within the applicable deadlines or does not comply with the requirements of Rule 14a-4(c) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such nomination or proposal.
Delivery of Documents to Stockholders Sharing an Address
SEC rules permit the delivery of a single copy of a company’s annual report and proxy statement, or notice of internet availability of proxy materials, as applicable, to any household at which two or more stockholders reside if they appear to be members of the same family. This procedure, referred to as householding, reduces the volume of duplicate information stockholders receive and reduces mailing and printing expenses.
The broker, bank or other nominee for any stockholder who is a beneficial owner of the Company’s stock may deliver only one copy of the Company’s Annual Report to Stockholders and Proxy Statement or the Company’s Notice, as applicable, to multiple stockholders who share the same address, unless that broker, bank or other nominee has received contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of the Company’s Annual Report to Stockholders and Proxy Statement or the Company’s Notice, as applicable, to any stockholder at a shared address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the Company’s Annual Report to Stockholders and Proxy Statement or the Company’s Notice, as applicable, now or in the future, should submit a written request to Investor Relations, Colfax Corporation, 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 207012711 Centerville Road, Suite 400, Wilmington, Delaware 19808 or call (301) 323-9000(302) 252-9160 and ask for Investor Relations. Beneficial owners sharing an address who are receiving multiple copies of the Company’s Annual Report to Stockholders and Proxy Statement, or the Company’s Notice, as applicable, and wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.
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Additional InformationOther Matters
A copyOur principal executive office is located at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. Our telephone number is (302) 252-9160 and our website is located at www.colfaxcorp.com. Our common stock trades on the NYSE under the symbol “CFX.” Upon our name change to Enovis Corporation following completion of the Company’s Annual ReportSpin-off, we will change our ticker symbol to Stockholders for the fiscal year ended December 31, 2019 has been made available concurrently with this Proxy Statement to all stockholders entitled to notice of and to vote at the Annual Meeting. The Annual Report is not incorporated into this Proxy Statement and is not considered proxy-soliciting material.“ENOV.”
The Company filed its Annual Report on Form 10-K with the SEC on February 24, 2020. The Company will mail without charge, upon written request, a copy of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including financial statements but excluding exhibits. Exhibits, if requested, will be furnished upon the payment of a fee determined by the Company, such fee to be limited to the Company’s reasonable expenses in furnishing the requested exhibit or exhibits. Please send a written request to Investor Relations, Colfax Corporation, 420 National Business Parkway, 5thFloor, Annapolis Junction, Maryland 20701, or access these materials on the Company’s website atwww.colfaxcorp.com on the Investors page.
As of the date of this Proxy Statement, the Board does not intend to present anyNo matters, other than those described hereinthe Reverse Stock Split Proposal and the Adjournment Proposal, will be presented for action at the Annual Meeting and is unaware of any matters to be presented by other parties. If other matters are properly brought before the meeting for action by the stockholders, proxies returned to us will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.
Special Meeting.
By Order of the Board of Directors
Bradley J. Tandy
Secretary
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CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF COLFAX CORPORATION |
Colfax Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware corporation, sets forth herein the terms of its 2020 Omnibus Incentive Plan,(the “DGCL”), does hereby certify as follows:
FIRST: The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by deleting Article 1 in its entirety and inserting the following in lieu thereof:
Article 1. NAME
The Planname of this corporation is intended to enhance the Company’sEnovis Corporation.
SECOND: The Amended and its Affiliates’ (as defined herein) ability to attract and retain highly qualified officers, directors, and key employees, and to motivate such persons to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earningsRestated Certificate of Incorporation of the Company,Corporation is hereby amended by providing to such persons an opportunity to acquire or increase a direct proprietary interestdeleting Section 4.1 of Article 4 in the operationsits entirety and future success of the Company.
For purposes of interpreting the Plan and related documents (including Award Agreements),inserting the following capitalized termsin lieu thereof:
“4.1. Authorized Shares
The total number of shares of all classes of stock that the Corporation shall have the respective meanings set forth below:authority to issue is [Amendment A: 220,000,000; Amendment B: 153,333,333; Amendment C: 120,000,000] of which [Amendment A: 200,000,000; Amendment B: 133,333,333; Amendment C: 100,000,000] of such shares shall be Common Stock having a par value of $.001 per share (the “Common Stock”), and 20,000,000 of such shares shall be Preferred Stock, having a par value of $.001 per share (the “Preferred Stock”).
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A “Change in Control” will be deemed to occur (i) with respect to a Change in Control pursuant to subsection (1) above, onUpon the date that any Person becomes the beneficial owner of more than fifty percent (50%filing and effectiveness (the “Effective Time”) of eitherthis Certificate of Amendment to the CompanyAmended and Restated Certificate of Incorporation of the Corporation, each [Amendment A: two; Amendment B: three; Amendment C: four] shares of the Corporation’s common stock, par value $0.001 per share (“Common Stock”), issued and outstanding immediately prior to the Effective Time shall automatically be reclassified and combined into one validly issued, fully paid and non-assessable share of Common Stock or the Voting Stock, (ii) with respect to a Change in Control pursuant to subsection (2) above, on the date the members of the Incumbent Board first cease forwithout any reason (other than death or disability) to constitute at least a majority of the Board, (iii) with respect to a Change in Control pursuant to subsection (3) above, on the date the applicable transaction closes and (iv) with respect to a Change in Control pursuant to subsection (4) above, on the date of the stockholder approval. Notwithstanding the foregoing provisions, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because of a change in control of any Subsidiary by which the Employee may be employed.
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In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. To the extent permitted by law, the Committee may delegate its authority under the Plan to a member of the Board.
The express grant of any specific power to the Committee, and the taking of anyfurther action by the Committee, shall not be construed as limiting any powerCorporation or authority of the Committee. The Company may retainholder thereof (the “Reverse Stock Split”). Notwithstanding the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is an employee of the Company or an Affiliate thereof and is terminated for Cause.
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Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board or the Committee shall from time to time determine. Award Agreements granted from time to time orissued at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such Options shall be deemed Non-qualified Stock Options.
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The Board or the Committee may, in its sole discretion, grant (or sell at par value or such other higher Purchase Price determined by the Board or the Committee) an Award of Unrestricted Stock to any Grantee pursuant to which such Grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”) under the Plan. Awards of Unrestricted Stock may be granted or sold as described in the preceding sentence in respect of past Services and other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.
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Notwithstanding any other provision of this Plan or of any Award Agreement or other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or any Affiliate, except an agreement, contract, or understanding that expressly addresses Section 280G or Section 4999 of the Code (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified individual,” as defined in Section 280G(c) of the Code, any Option, Restricted Stock, Stock Unit, Performance Share or Performance Unit held by that Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under this Plan to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”), and (ii) if,Effective Time as a result of receivingthe Reverse Stock Split and, in lieu thereof, the Corporation’s transfer agent shall aggregate all fractional shares remaining after the Reverse Stock Split and sell them as soon as practicable after the Effective Time at the then-prevailing prices on the open market, on behalf of those stockholders who would otherwise be entitled to receive a Parachute Payment,fractional share, and after the aggregate after-tax amounts received by the Granteetransfer agent’s completion of such sale, stockholders shall receive a cash payment (without interest or deduction) from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less thantransfer agent in an amount equal to their respective pro rata share of the maximum after-tax amounttotal net proceeds of that could be received by the Grantee without causing any suchsale. Each stock certificate that,
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payment or benefitimmediately prior to be considered a Parachute Payment. In the eventEffective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that the receiptnumber of anywhole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such rightcertificate shall have been reclassified in the Reverse Stock Split, provided, however, that each person of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to exercise, vesting, payment, or benefit under this Plan,the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified in conjunctionthe Reverse Stock Split.”
THIRD: This Amendment shall become effective as of [⚫], 2022 at [⚫] [a.m./p.m.]
FOURTH: This Amendment was duly adopted in accordance with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii)Section 242 of the preceding sentence, then the Grantee shall have the right, in the Grantee’s sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment.DGCL.
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APPENDIX A
SCAN TO COLFAX CORPORATION VIEW MATERIALS & VOTE w 2711 CENTERVILLE ROAD SUITE 400 WILMINGTON, DE 19808 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on February 27, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/CFX2022SM You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on February 27, 2022. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D65075-S37863-Z81627 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY COLFAX CORPORATION Company Proposals The Board of Directors recommends you vote FOR proposals 1 and 2. For Against Abstain 1. To approve and adopt an amendment to our Amended and Restated Certificate of Incorporation to effect (a) a reverse stock split of our common stock at one of three reverse stock split ratios, one-for-two, one-for-three and one-for-four, with an exact ratio to be determined by our Board at a later date, ! ! ! and (b) a corresponding reduction in the number of authorized shares of our common stock by the selected reverse stock split ratio. 2. To approve one or more adjournments of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the ! ! ! reverse stock split proposal at the Special Meeting or any adjournment(s) thereof. NOTE: The undersigned authorizes the proxies to vote according to their discretion on such other business as may properly come before the meeting or any adjournment or postponement thereof. Yes No Please indicate if you plan to attend the virtual meeting. ! ! Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting:
The Notice and Proxy Statement are available at www.proxyvote.com.
D65076-S37863-Z81627
COLFAX CORPORATION
Special Meeting of Stockholders
February 28, 2022, 9:00 a.m. Eastern Time
This proxy is solicited by the Board of Directors
Mitchell P. Rales and Matthew L. Trerotola, or either of them, each with the full power of substitution, are hereby authorized to represent and to vote all of the shares of COLFAX CORPORATION common stock which the undersigned is entitled to vote at the Special Meeting of Stockholders of COLFAX CORPORATION to be held virtually at 9:00 a.m., Eastern Time, on Monday, February 28, 2022 at www.virtualshareholdermeeting.com/CFX2022SM, and at any adjournment or postponement of the meeting. The above named proxies will vote the shares represented hereby as directed on the other side of this card, and if no such direction is made, the above named proxies will vote “FOR” Proposals 1 and 2. The above named proxies may vote according to their discretion on any other matter which may properly come before the meeting or any adjournment or postponement thereof. The undersigned may revoke this proxy prior to its exercise. |
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