Notice of 2022 Annual Meeting of Shareholders & Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☒ | Preliminary Proxy Statement | ☐ | Confidential, For Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |||
| ☐ | Definitive Proxy Statement | |||||
| ☐ | Definitive Additional Materials | |||||
| ☐ | Soliciting Material under§240.14a-12 |
TEVA PHARMACEUTICAL INDUSTRIES LIMITED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. | |||
| ☐ | Fee computed on table below per Exchange Act Rules14a-6(i) (1) and0-11. | |||
| (1) | Title of each class of securities to which transaction applies: | |||
| ||||
| (2) | Aggregate number of securities to which transaction applies: | |||
| ||||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
| ||||
| (4) | Proposed maximum aggregate value of transaction: | |||
| ||||
| (5) | Total fee paid: | |||
| ||||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid: | |||
| ||||
| (2) | Form, Schedule or Registration Statement No.: | |||
| ||||
| (3) | Filing Party: | |||
| ||||
| (4) | Date Filed: | |||
| ||||
Notice of 2022 Annual Meeting of Shareholders & Proxy Statement
From Our Chairman of the BoardDear Shareholder,As I write to you in anticipation of our 2022 Annual Meeting of Shareholders, Teva is marking an extended period of stable and resilient performance impacted by the global coronavirus pandemic. Positioned to return to growthWe believe that our solid market performance over recent years is tied to (i) being positioned as both a specialty and generics company, (ii) strong business-to-business relationships and (iii) research and medical support capabilities. Our generics business also has a top three leadership position in many countries, including the United States and key European markets.Since the third quarter of 2017, we reduced our debt by more than $13 billion and our current net debt level stands at $20.9 billion. We believe that placing Teva in a more stable financial position will facilitate a return to growth and increase shareholder value. The underpinnings of the return to growth are already evident by recent successes, including:AJOVY(R) and AUSTEDO(R) continue to show promise for continued growth, with AJOVY now launched in most European countries and Japan, and AUSTEDO expected to reach $1 billion in 2022 sales; We had a strong launch of Truxima(R) and over the past four years have been building and steadily launching a strong pipeline of biosimilars, with 13 programs in development, of which seven are in-house; and We are eagerly anticipating the FDA decision on Risperidone LAI, an important potential treatment for patients suffering from schizophrenia.Aligning financing and our sustainability goals In addition to the debt reduction progress cited above, in November 2021, we concluded a successful $5 billion refinancing through a sustainability-linked bond offering, which better aligns our debt maturities with our expected free cash flows for the coming years. We chose to do this through a sustainability-linked bond offering to establish a direct connection with both our social and environmental targets.Environmental, social and governance (ESG)In addition to the sustainability-linked bonds, the Board is closely monitoring and seeking new initiatives to reflect Tevas values especially in these challenging times when Tevas employees and patients in Ukraine find themselves in harms way and in all our other efforts to promote ESG. As a company focused on improving health, ESG has always been central to our long-term business success. Over the last few years, we have prioritized ensuring that our ESG initiatives are tied to meaningful goals and that our progress is reported transparently.To support employee engagement and success, we will continue to make Teva an inclusive, diverse and safe Workplace, with meaningful compensation, benefits and wellness programs, and offer training and leadership development programs that foster career growth.Board refreshment and succession planning We are continually seeking high quality, diverse talent for the Board. As part of this effort, we are very pleased to present for shareholder consideration the nomination of Dr. Tal Zaks, whom the Board appointed as a director in October 2021. Dr. Zaks is a former senior pharmaceutical executive who regularly demonstrates a unique combination of medical training, broad academic knowledge and executive experience and success in the biopharmaceutical industry. He is already making an important contribution to the Boards Science and Technology Committee in its efforts to bring new R&D andWe believe that placing Teva in a more stable financial position will facilitate a return to growth and increase shareholder value..
|
| ||||||
|
|
|
|
growth engines to our business. We are confident that he will continue to contribute to the Board, along with Amir Elstein, Roberto A. Mignone and Dr. Perry D. Nisen, who have agreed to stand for election for another term.While we are confident that Kare and the management team will lead Teva to future success, the Board recognizes its responsibility to ensure that Teva thrives for years to come. We are therefore intensely involved in succession planning at the Board and executive management level, which will continue to be a focus in 2022.Opioids LitigationThe Board and its committees have all been engaged in monitoring Tevas response and efforts to bring the opioids litigation facing Teva to an acceptable conclusion. The recent agreement reached with the State of Texas, the second most populous state in the United States, marks a further step in resolving our legacy opioids litigation, and importantly also makes critical medicines part of the solution when addressing the opioids epidemic. While the agreement includes no admission of wrongdoing, it remains in our best interest to put these cases behind us and continue to focus on the patients we serve every day.Continued Dialogue and Shareholder OutreachThe Board values input from our shareholders. During 2021 and early 2022, we continued our shareholder outreach efforts and we look forward to continuing this dialogue with you in the years to come.On behalf of the Board of Directors and the management team, we appreciate your investment and support in Teva.Sincerely,Dr. Sol J. BarerChairman of theBoard of DirectorsApril , 2022
| ||||||
| ||||||
Preliminary Notice of 20202022 Annual Meeting of Shareholders
| DATE AND TIME: | ||
| ||
| ITEMS OF BUSINESS: | Proposal 1: To appoint the following persons to
Proposal 2: To approve, on anon-binding advisory basis, the compensation for Teva’s named executive officers.
Proposal 3: To approve Teva’s
Proposal
Proposal
In addition, shareholders will consider Teva’s annual consolidated financial statements for the year ended December 31,
The Board of Directors recommends that you vote FOR all proposals.
Teva urges all of its shareholders to review its annual report (“Annual | |
| ITEMS OF BUSINESS: | Proposal 1: To appoint the following persons to Teva’s Board of Directors: Amir Elstein, Roberto A. Mignone, Dr. Perry D. Nisen and Dr. Tal Zaks to serve until our 2025 annual meeting of shareholders. Proposal 2: To approve, on a Proposal 3: To approve Teva’s Compensation Policy with respect to the terms of office and employment of Teva’s Executive Officers and Directors, substantially in the form attached as Appendix A to this Proxy Statement. Proposal 4: To approve Amendments to Teva’s Articles of Association, as reflected in the form attached as Appendix B to this Proxy Statement. Proposal 5: To appoint Kesselman & Kesselman, a member of PricewaterhouseCoopers International Ltd., as Teva’s independent registered public accounting firm until Teva’s 2023 annual meeting of shareholders. In addition, shareholders will consider Teva’s annual consolidated financial statements for the year ended December 31, | |
| ||
By Order of the Board of Directors,
Dov Bergwerk
Senior Vice President,
Company Secretary
April , 2020
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on June 9, 2020
The accompanying Proxy Statement and our Annual Report are available at www.tevapharm.com/2020proxymaterials. We expect the proxy materials to be mailed and/or made available on or before April , 2020.
Table of ContentsFOR all proposals.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement i
Questions and Answers About the Annual Meeting
The Meeting
When and where will the Annual Meeting be held?
The 2020 Annual Meeting of Shareholders (the “review its annual report (“Annual Meeting”) of Teva Pharmaceutical Industries Limited (“we,” “us,” “our,”, “Teva” or the“the“Company”) will be held atconducted in a virtual format.
Proposal 1: To appoint the following persons to Teva’s Board of Directors: Amir Elstein, Roberto A. Mignone, Dr. Perry D. Nisen and Dr. Tal Zaks to serve until our 2025 annual meeting of shareholders.
Proposal 2: To approve, on a non-binding advisory basis, the compensation for Teva’s named executive offices atofficers.
Proposal 3: To approve Teva’s Compensation Policy with respect to the terms of office and employment of Teva’s Executive Officers and Directors, substantially in the form attached as Appendix A to this Proxy Statement.
Proposal 4: To approve Amendments to Teva’s Articles of Association, as reflected in the form attached as Appendix B to this Proxy Statement.
Proposal 5 Basel Street, Petach Tikva, 4951033 Israel, on Tuesday, June 9, 2020, at 4:30 p.m.: To appoint Kesselman & Kesselman, a member of PricewaterhouseCoopers International Ltd., Israel time.as Teva’s independent registered public accounting firm until Teva’s 2023 annual meeting of shareholders.
As part of our precautions regarding the coronavirus orCOVID-19, we are preparing
In addition, shareholders will consider Teva’s annual consolidated financial statements for the possibilityyear ended December 31, 2021.
The Board of Directors recommends that if necessary,you vote FOR all proposals.
Teva urges all of its shareholders to review its annual report (“Annual Report”) on Form 10-K for the Annualyear ended December 31, 2021.
This notice serves as a preliminary notice regarding our 2022 annual meeting of shareholders, pursuant to Section 5C of the Israeli Companies Regulations (Notice and Announcement of a General Meeting and a Class Meeting in Public Company and Adding Subjects to the Agenda), 5760-2000.
One or more shareholders holding 1% or more of the voting rights of Teva may be conducted by means of remote communication. If we take this step, we will announce the decisionpropose to do so in advance as well as the manner to participate in such meeting.
Who may attend the Annual Meeting?
Attendanceinclude any matter appropriate for deliberation at the Annual Meeting including any adjournments or postponements thereof, will be limitedby submitting a written proposal within fourteen days of the publication of this preliminary notice, i.e., no later than March 29, 2022, to Teva’s executive offices located at 124 Dvora HaNevi’a St., Tel Aviv 6944020, Israel, Attn: Dov Bergwerk, Company Secretary. Any such shareholder proposal must comply with the requirements of applicable law and our Articles of Association.
| RECORD DATE: | Only holders of ordinary shares (or American Depositary Shares representing such ordinary shares) of record
| |
By Order of the Board of Directors,
Dov Bergwerk
Senior Vice President,
Company Secretary
April , 2022
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on June 23, 2022
The accompanying Proxy Statement and our Annual Report are available at www.tevapharm.com/2022proxymaterials. We expect the proxy materials to be mailed and/or made available on or before April , 2022.
| Teva Pharmaceutical Industries Ltd. | i | |
| 91 | ||||
| 91 | ||||
| 92 | ||||
| A-1 | ||||
| ||||
| ||||
| ii | Teva Pharmaceutical Industries Ltd. | |
Teva is a leading global pharmaceutical company. In 2021, we continued helping patients around the world to access affordable medicines and benefit from innovations to improve their health. While the COVID-19 pandemic continued to impact patient behavior and global prescribing patterns, we continued to optimize our supply chain and manufacturing capabilities to provide essential medicines to the millions of patients who rely on us throughout the world. Our key growth drivers delivered promising results and milestones, and we met all components of our 2021 financial guidance.
Looking ahead, we expect to see continued growth of our key products AUSTEDO® and AJOVY®, as well as to continue to advance our core business through the launch of high quality generic medicines around the world.
2021 Financial Results
 |  |  | ||
| Revenue | EPS | Cash | ||
| $15.9 billion | $0.38 (GAAP) | $0.8 billion (cash flow from operating activities) | ||
$2.58 (non-GAAP*) | $2.2 billion (free cash flow**) | |||
| * | For a reconciliation of |
| ** | Free cash flow includes cash flow generated from operating activities net of capital expenditures and deferred purchase price cash component collected for securitized trade receivables. For a reconciliation of free cash flow to cash flow from operating activities, see Teva’s press release filed on Form 8-K on February 9, 2022. |
Key Product Updates—Leveraging Our Growth Engines
AUSTEDO Continued strong growth in the U.S.; launched in China in early 2021; received marketing approval for both indications in Brazil. |
AJOVY Continued growth in the U.S.; launched in most European countries, in Japan and | Biosimilars Truxima® achieved ~28% of U.S. market share; a broad portfolio of biosimilars through partnerships and organic growth. | ||||||
Generics We have a top-three leadership position in many countries, including the | Digihaler® Launched three digital inhalers in the U.S.: ProAir®, ArmonAir® and AirDuo® with built-in sensors that track inhaler events and measure inspiratory flow.
|
Risperidone LAI Announced positive phase 3 results for risperidone LAI for patients with schizophrenia in January 2021; anticipate FDA decision in first half of 2022. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 1 | |
Continuing to Reduce our Debt
 | In the |
Successful Refinancing: $5 billion Sustainability-Linked Bonds
| 2 | Teva Pharmaceutical Industries Ltd. 2022 Proxy
| |
Board and Corporate Governance Highlights
Our Board of Directors (the “Board of Directors” or the “Board”) continually evaluates Teva’s corporate governance policies and practices, focusing on ensuring effective oversight of Teva’s business and management. We have established a strong and effective framework to allow a simple majority formonitor the approval of Proposal 5 (Amendment to Teva’s Articles of Association) pursuant to Article 106risks of our Articles of Association, the affirmative vote of the holders of a majority of Teva ordinary shares participating and voting at the Annual Meeting, in person or by proxy or through their representatives, is required to adopt Proposal 5 as well as each of the other proposals. Cumulative voting is not permitted. Under the terms of the Deposit Agreement, the Depositary shall endeavor (insofar as is practicable and in accordance with our Articles of Association) to vote or cause to be voted the number of ordinary shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary by the deadline set. If instructions are not received by the Depositary by the deadline, the ordinary shares represented by such uninstructed ADSs shall not be voted at the Annual Meeting. If instructions are signed and timely returned to the Depositary, but no specific voting instruction is marked for a proposal, the holder shall be deemed to have directed the Depositary to give voting instructions “FOR” the unmarked proposal.
Can I change my vote?business.
Ordinary SharesBoard and Corporate Governance
If you hold ordinary shares
| ∎ | Board refreshment and succession planning—seven new directors appointed over the last five years |
| ∎ | 11 out of 12 directors are independent |
| ∎ | All members of our committees are independent |
| ∎ | 25% of directors serving on the Board identify as female |
| ∎ | Annual Board and committees evaluation process |
Board Oversight of record and submit your proxy card to vote by mail or appoint a proxy in advance of the Annual Meeting, you may change your vote by delivering a valid later-dated proxy within the time limitations set forth above, or voting in person at the Annual Meeting.
If you are aNon-Registered Holder of ordinary shares and vote through the electronic voting system of the Israeli Securities Authority, you may revoke your vote through such voting system at least six hours prior to the Annual Meeting (i.e., before 10:30 a.m., Israel time, on June 9, 2020), or by voting in person at the Annual Meeting. If you are aNon-Registered Holder of ordinary shares and submit your proxy card to vote by mail or appoint a proxy in advance of the Annual Meeting, you may change your vote by delivering a valid later-dated proxy within the time limitations set forth above, or voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not cause your previous vote to be revoked unless you specifically so request.
ADSsRisk
If you are the record owner of ADSs, you must follow the instructions provided by the Depositary in order to change your vote. If you hold your ADSs through a broker, bank or other nominee, you must follow the instructions provided by your broker, bank or other nominee, in order to change your vote. The last instructions you submit prior to the deadline indicated by the Depositary or the broker, bank or other nominee, as applicable, will be used to instruct the Depositary how to vote the ordinary shares underlying your ADSs. Attendance at the Annual Meeting will not cause your previous vote to be revoked.
| ∎ | Full Board and individual Committees focus on understanding and assessing Company risks, including the oversight of risks related to the COVID-19 pandemic |
Proxy Materials
| ∎ | Board reviews risk management policies of our operations and business strategy and Board committees review risk in their areas of expertise |
Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?
| ∎ | The Audit Committee assists the Board with our financial reporting, independent auditors, internal controls, internal audit function, risk assessment and risk management and cybersecurity risks |
We distribute our Notice of Annual Meeting of Shareholders, Proxy Statement and Annual Report (collectively, the
| ∎ | The Compliance Committee oversees our policies and practices for legal, regulatory and internal compliance (other than regarding financial reporting), our strategy regarding environmental, social and governance (“ESG”) matters and our culture of integrity and also reviews policies and practices that may seriously impact our reputation |
| ∎ | The Finance and Investment Committee reviews our financial risk management policies, including our investment guidelines, financings and foreign exchange and currency hedging, as well as financial risk of certain transactions |
| ∎ | The Human Resources and Compensation Committee (the “HR and Compensation Committee”) oversees compensation, retention, succession and other human resources-related issues and risks, as well as initiatives to promote inclusion and diversity |
| ∎ | The Science and Technology Committee oversees risks relating to our intellectual property and research and development activities |
| ∎ | The Corporate Governance and Nominating Committee oversees risks relating to governance policies and initiatives |
proxy materialsDirector Alignment with Shareholder Interests”) to certain shareholders via the Internet under the “Notice and Access” approach permitted by rules of the U.S. Securities and Exchange Commission (the “SEC”). This approach conserves natural resources and reduces our distribution costs, while providing a timely and convenient
| ∎ | In 2021, the Board of Directors held nine meetings with an average attendance rate of 97% |
| ∎ | We maintain director stock ownership guidelines requiring stock ownership of five times the annual cash fee (excluding committees fees) paid to directors, which must be achieved within a certain timeframe |
4 Teva Pharmaceutical Industries Ltd.2020 Proxy StatementShareholder Engagement
Questions and Answers About the Annual Meeting
| ∎ | Active shareholder engagement efforts, led by our Chairman of the Board and other Board members. Discussions are focused on responding to feedback received from shareholders on corporate governance, executive compensation and ESG matters |
method of accessing the materialsOur Environmental, Social and voting. On or by April , 2020, we expect to have mailed a “Notice of Internet Availability of Proxy Materials” to participating shareholders containing instructions on how to access the proxy materials on the Internet.
Can I access the proxy materials on the Internet?
The proxy materials are available on our website at www.tevapharm.com/2020proxymaterials. Information on our website is not part of the proxy materialsGovernance Priorities and is not incorporated into the proxy statement by reference. Record owners of our ADSs may also access the proxy materials at www.investorvote.com/teva by following the instructions provided by the Depositary. Beneficial owners of our ADSs may also access the proxy materials at www.proxyvote.com by following the instructions provided by your broker, bank or other nominee. Instead of receiving future proxy statements and accompanying materials by mail, most shareholders and ADS holders can elect to receive ane-mail that will provide electronic links to them. Opting to receive your proxy materials online will conserve natural resources and will save us the cost of producing documents and mailing them to you.The proxy materials are also available through Teva’s public filing on MAGNA (the Israeli Securities Authority’s electronic filing system) at www.magna.isa.gov.il, on the TASE’s website at www.maya.tase.co.il, or on the SEC’s website at www.sec.gov.
How do I request paper copies of the proxy materials at no charge?
You may contact Investor Relations by sending an email to TevaIR@tevapharm.com, or by making a request on our website at www.tevapharm.com/InfoRequest, by May 22, 2020.
If you are a record owner of ADSs, you may request proxy materials at www.investorvote.com/teva, by calling toll-free within the U.S. at (866)641-4276 or by sending an email to investorvote@computershare.com, by May 22, 2020 and following the instructions provided by the Depositary.
If you are a beneficial owner of ADSs, you may request proxy materials by following the instructions at www.proxyvote.com or by calling toll free within the U.S. at (800)579-1639 or by sending an email to sendmaterial@proxyvote.com by May 22, 2020 and following the instructions provided by your broker, bank or other nominee.
Other Questions
Could other matters be decided at the Annual Meeting?
The only items of business that our Board of Directors intends to present at the Annual Meeting are set forth in this Proxy Statement. As of the date of this Proxy Statement, no shareholder has advised us of the intent to present any other matter, and we are not aware of any other matter to be presented at the Annual Meeting. However, the Annual Meeting notice attached to this preliminary proxy statement serves as a preliminary notice regarding the Annual Meeting pursuant to Section 5C of the Israeli Companies Regulations (Notice and Announcement of a General Meeting and a Class Meeting in Public Company and Adding Subjects to the Agenda), 5760-2000, and accordingly, one or more shareholders holding 1% or more of the voting rights of Teva are entitled to propose items to the agenda. For more information, please see “Shareholder Proposals for the 2020 Annual Meeting and the 2021 Annual Meeting” below.
Who will pay for the cost of this proxy solicitation?
Teva will bear the entire cost of solicitation of proxies, including preparation, assembly, printing, and mailing of this Proxy Statement, the voting instruction card and any additional information furnished to shareholders. Teva may reimburse brokerage firms and other persons representing beneficial owners of ordinary shares or ADSs for reasonable expenses incurred by them in forwarding proxy soliciting materialsAccomplishments
| ∎ | Teva views ESG as core to our business and our ESG strategy reflects how we plan to address environmental and social issues. In 2022, Teva intends to update its materiality assessment on its core 21 ESG topics, while taking into consideration stakeholder priorities and emerging issues and opportunities |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 5
Questions and Answers About the Annual Meeting
| ∎ | At the end of 2021, Teva executed the largest-ever sustainability-linked bond (“SLB”) at $5 billion, which is the first in the pharmaceutical industry to link both social and environmental targets |
| ∎ | Throughout 2021, we continued our efforts to enhance transparency by publishing an annual report on how we are managing our core 21 ESG topics, by reporting in accordance with Global Reporting Initiative (“GRI”) standards, and by striving to align our reporting with Sustainability Accounting Standards Board (“SASB”) and with the Task Force on Climate-Related Financial Disclosures (“TCFD”) framework, which contributed to further improvements in ESG ranking indices in 2021 |
to such beneficial owners. We retained MacKenzie Partners, Inc. to assist with the solicitation of proxies for a fee in the amount of $20,000, plus reimbursable expenses. In addition to solicitation by mail, certain of our directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, facsimile or personal contact.
Who can I contact if I require further assistance?
If you need assistance in submitting your proxy or have questions regarding the Annual Meeting, please contact our Investor Relations department by email at TevaIR@tevapharm.com or by mail at Teva Pharmaceutical Industries Ltd., 5 Basel Street, Petach Tikva, 4951033 Israel, attention: Investor Relations, or by telephone at+972-3-914-8171. You may also contact our proxy solicitor, MacKenzie Partners, Inc., by email at proxy@mackenziepartners.com or by calling toll free within the U.S. at +1 (800)322-2885 or outside the U.S. at + 1 (212)929-5500.
6 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 3 | |
Proposal 1: Election of Directors
In recent years, we strengthened our BoardThe election of Directors with the addition of new highly qualified directors is fundamental to the Board’s successful oversight of Teva’s strategy and talentedrisks. We seek directors including several directors withwho add diverse perspectives, possess a variety of skills and provide global pharmaceutical experience and other qualifications, adding expertise as well as diversity to our Board of Directors. The average tenure of our current directors is 4.5 years of service and their average age is 63 years old. We currently have two female directors serving on our Board of Directors. qualifications.
Dr. Barer, our Chairman of the Board, is an independent director under NYSE regulations. Kåre Schultz, our President and Chief Executive Officer (the “President and CEO”) serves on the Board, which facilitates collaboration between the Board of Directors and management. Corporate governance remains a high priority and we continue to evaluate the size and composition of the Board to ensure that it maintains dynamic, exceptionally qualified leadership.
Following the recommendation of our Corporate Governance and Nominating Committee, and in consideration of Proposal 5 to this Proxy Statement, the Board of Directors recommends that shareholders approve the appointment of Amir Elstein, Roberto A. Mignone, Dr. Sol J. Barer, Jean-Michel HalfonPerry D. Nisen and Nechemia (Chemi) J. PeresDr. Tal Zaks to serve as directors until our 20232025 annual meeting of shareholders. Dr. Sol J. Barer, Jean-Michel Halfon and Nechemia (Chemi) J. PeresAll nominees are currently members of the Board of Directors and qualify as independent directors under NYSE regulations. If reappointed as a director at this Annual Meeting, Dr. Barer is expected to continue to serve as Chairman of the Board of Directors.
In accordance with the Israeli Companies law, 5759-1999 (as amended from time to time, the “Israeli Companies Law”), all nominees for election as directors at the Annual Meeting have declared in writing that they possess the requisite skills and expertise, as well as sufficient time, to perform their duties as directors.
| The Board of Directors recommends that shareholders vote FOR the appointment of Amir Elstein, Roberto A. Mignone, Dr. |
The following table sets forth information regarding the directors and director nominees of Teva as of April , 2020:March 8, 2022:
Name
| Age
|
Director Since
|
Term Ends
| Age | Director Since | Term Ends | ||||||||||||||||||||||||
Dr. Sol J. Barer—Chairman
|
|
72
|
|
|
2015
|
|
|
2020
|
| 74 | 2015 | 2023 | ||||||||||||||||||
Kåre Schultz
|
|
58
|
|
|
2017
|
|
|
(1
|
)
| 60 | 2017 | (1) | ||||||||||||||||||
Rosemary A. Crane
|
|
60
|
|
|
2015
|
|
|
2021
|
| 62 | 2015 | 2024 | ||||||||||||||||||
Amir Elstein
|
|
64
|
|
|
2009
|
|
|
2022
|
| 66 | 2009 | 2022 | ||||||||||||||||||
Murray A. Goldberg (2)
|
|
75
|
|
|
2017
|
|
|
2020
|
| |||||||||||||||||||||
Jean-Michel Halfon
|
|
68
|
|
|
2014
|
|
|
2020
|
| 70 | 2014 | 2023 | ||||||||||||||||||
Gerald M. Lieberman
|
|
73
|
|
|
2015
|
|
|
2021
|
| 75 | 2015 | 2024 | ||||||||||||||||||
Roberto A. Mignone
|
|
48
|
|
|
2017
|
|
|
2022
|
| 50 | 2017 | 2022 | ||||||||||||||||||
Dr. Perry D. Nisen
|
|
64
|
|
|
2017
|
|
|
2022
|
| 66 | 2017 | 2022 | ||||||||||||||||||
Nechemia (Chemi) J. Peres
|
|
61
|
|
|
2017
|
|
|
2020
|
| 63 | 2017 | 2023 | ||||||||||||||||||
Prof. Ronit Satchi-Fainaro
|
|
48
|
|
|
2018
|
|
|
2021
|
| 50 | 2018 | 2024 | ||||||||||||||||||
Janet S. Vergis | 57 | 2020 | 2023 | |||||||||||||||||||||||||||
Dr. Tal Zaks (2) | 56 | 2021 | 2022 | |||||||||||||||||||||||||||
| (1) | Mr. Schultz’s term ends contemporaneously with his term as President and CEO. |
| (2) |
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 7
| 4 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 1: Election of Directors
Persons Being Considered for Election at thisthe Annual Meeting
|
| |
|
|
| |
|
8 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 1: Election of Directors
|
| |
|
Continuing Directors
|
| |
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 9
Proposal 1: Election of Directors
|
| |
|
Amir Elstein Independent Director
Committees: – Corporate Governanceand Nominating (Chair) –Audit –Finance and Investment | Mr. Elstein rejoined the Board of Directors in 2009. From January 2014 to July 2014, he served as Vice Chairman of the Board of Directors of Teva. Mr. Elstein
| |
Qualifications:
With leadership positions in various international corporations, including his experience as chairman of international public companies and his service as an executive officer at Teva and other companies, Mr. Elstein provides global business management and pharmaceutical expertise.
|
Roberto A. Mignone Independent Director Committees: – Finance and Investment (Chair) – Audit – CorporateGovernance and Nominating | Mr. Mignone joined the Board of Directors in 2017. Mr. Mignone is the Founder and Managing Partner of Bridger Management LLC, a multi-billion dollar investment management firm founded in 2000 and specializing in long-term equity strategies. Since inception, Bridger Management has focused on the healthcare sector and has developed considerable research expertise in support of its investments. In addition to healthcare, Bridger Management invests in global consumer, technology and financial services companies. Prior to Bridger Management, Mr. Mignone co-founded and served as a partner of Blue Ridge Capital LLC from 1996 to 2000, an investment management firm specialized in health care, technology, media, telecommunications and financial services. Mr. Mignone serves as a co-Vice Chairman and member of the Finance Committee and Nominating Committee of the New York University Langone Medical Center. He received a Bachelor of Arts degree in Classics from Harvard College and an M.B.A. from Harvard University Graduate School of Business Administration. | |
Qualifications: With his long career as a global investment professional focused on healthcare, Mr. Mignone provides the Board with finance and management expertise with respect to large, complex pharmaceutical organizations.
|
10 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 5 | |
Proposal 1: Election of Directors
Dr. Perry D. Nisen Independent Director Committees: – Science andTechnology(Chair) – Compliance | Dr. Nisen joined the Board of Directors in 2017. In July 2021, he became Chief Executive Officer of Quanta Therapeutics Inc., a privately held biotechnology company. In 2018, he joined Soffinova Investments as Executive Partner, Private Equity and transitioned in January 2021 to a consultant role. From 2014 to 2017, Dr. Nisen served as Chief Executive Officer and the Donald Bren Chief Executive Chair of Sanford Burnham Prebys Medical Discovery Institute. From 2004 to 2014, Dr. Nisen held various roles at GlaxoSmithKline, most recently as Senior Vice President, Science and Innovation. From 1997 to 2004, Dr. Nisen served as Divisional Vice President, Global Oncology Development, and as Divisional Vice President, Cancer Research, at Abbott Laboratories. Previously, he was the Lowe Foundation Professor of Neuro-Oncology at the University of Texas Southwestern Medical Center. From 2016 to 2017, Dr. Nisen served as a director of Mirna Therapeutics, Inc. He received a B.S. from Stanford University, a Master’s degree in molecular biology, and an M.D. and PhD from Albert Einstein College of Medicine. | |
Qualifications: With extensive experience in medical research and development and management positions in leading pharmaceutical companies, Dr. Nisen provides a unique perspective on business and R&D activities. |
Dr. Tal Zaks Independent Director Committees: – Audit – Finance and Investment – Science andTechnology | Dr. Zaks joined the Board of Directors in October 2021. Dr. Zaks, M.D., Ph.D., is a venture partner at OrbiMed Advisors LLC since November 2021. From 2015 to September 2021, he served as Chief Medical Officer of Moderna, Inc. From 2010 to 2015, he held senior development positions at Sanofi, including Senior Vice President and Head of Global Oncology. From 2008 to 2010, he served as Vice President of Clinical Research, Oncology at Cephalon. From 2004 to 2008, he served as Director, Clinical Development and Translational Medicine at GlaxoSmithKline. From 1996-1999, he was a Postdoctoral Fellow at the National Cancer Institute. Dr. Zaks has also served as an adjunct Associate Professor of Medicine at the University of Pennsylvania since 2004 and as an adjunct Associate Professor of Medicine at Tufts Medical Center since 2017. He has served on the Board of Directors of Adaptimmune Therapeutics plc since 2016. Dr. Zaks received his M.D. and Ph.D. from Ben Gurion University in Israel, conducted post-doctoral research at the U.S. National Institutes of Health and completed clinical training in internal medicine at Temple University Hospital, followed by a fellowship in medical oncology at the University of Pennsylvania. He has also been awarded Ph.D. honoris causa from Bar-Ilan University. | |
Qualifications: With a unique combination of medical training, broad academic knowledge and executive experience in the biopharmaceutical industry, Dr. Zaks’s insights and experience in biopharmaceutical development, through his executive and non-executive roles, provide the Board with a broad scientific perspective and understanding of pharmaceutical product development, science and technology. |
| 6 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 1: Election of Directors
Dr. Sol J. Barer Chairman of the Board Independent Director | Dr. Barer became Chairman of the Board of Directors in 2017, after joining Teva’s Board of Directors in January 2015. Dr. Barer is Managing Partner at SJ Barer Consulting. He also serves as an advisor to the Israel Biotech Fund. From 1987 to 2011, he served in top leadership roles at Celgene Corporation, including as Executive Chairman from 2010 to 2011, Chairman and CEO from 2007 to 2010, CEO from 2006 to 2010, President and Chief Operating Officer from 1994 to 2006 and President from 1993 to 1994. Prior to that, he was a founder of the biotechnology group at the chemical company Celanese Corporation, which was later spun off as Celgene. Dr. Barer has served on the board of directors of Contrafect as lead independent director from 2011 and as Chairman of the board of directors of NexImmune, Inc. since 2019, which became a public company in February 2021. From 2020 to 2021, Dr. Barer served on the Board of Directors of Cerecor, Inc. (formerly Aevi Genomic Medicine, Inc.), from 2013 to 2019 as Chairman of the Board of Edge Therapeutics, from 2011 to 2016 on the board of Aegerion Pharmaceuticals, from 2009 to 2017 on the board of Amicus Therapeutics and from 2011 to 2017 as Chairman of the Board of InspireMD. Dr. Barer is Founding Chair of the Center for Innovation and Discovery at the Hackensack Meridian Medical School. Dr. Barer received his Ph.D. in organic and physical chemistry from Rutgers University and his B.S. in chemistry from Brooklyn College of the City University of New York. | |
Qualifications: With his long career as a senior pharmaceutical executive and leadership roles in various biopharmaceutical companies, Dr. Barer provides broad and experienced knowledge of the global pharmaceutical business and industry as well as extensive scientific expertise. |
Kåre Schultz Director and President and Chief Executive Officer | Mr. Schultz became Teva’s President and CEO and a member of the Board of Directors on November 1, 2017. From May 2015 to October 2017, Mr. Schultz served as President and Chief Executive Officer of H. Lundbeck A/S. Prior to that, Mr. Schultz worked for nearly three decades at Novo Nordisk, where he served in a number of leadership roles, including Chief Operating Officer, Vice President of Product Supply and Director of Product Planning and Customer Services in the Diabetes Care Division. Mr. Schultz has also held positions at McKinsey and Anderson Consulting. Mr. Schultz has served as a member of the board of directors of International Flavors and Fragrances Inc. since February 2021. Mr. Schultz served as a member of the board of directors of LEGO A/S from 2007 to 2020, as chairman of the board of directors of Royal Unibrew A/S from 2010 to 2017 and on the board of directors of Bitten og Mads Clausens Fond, the holding vehicle for Danfoss A/S during 2017. Mr. Schultz received a master’s degree in economics from the University of Copenhagen. | |
Qualifications: With his leadership positions in various healthcare corporations, including his experience as a chairman and a director of several international corporations and his service as the President and Chief Executive Officer of Teva, Mr. Schultz provides unique global perspective on the healthcare and pharmaceutical industries. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 7 | |
Proposal 1: Election of Directors
Rosemary A. Crane Independent Director Committees: – Human Resources and Compensation (Chair) – Science and Technology | Ms. Crane joined the Board of Directors in 2015. Ms. Crane served as President and Chief Executive Officer of MELA Sciences, Inc. from 2013 to 2014. Ms. Crane was Head of Commercialization and a partner at Appletree Partners from 2011 to 2013. From 2008 to 2011, she served as President and Chief Executive Officer of Epocrates Inc. Ms. Crane served in various senior executive positions at Johnson & Johnson from 2002 to 2008, including as Group Chairman, OTC & Nutritional Group from 2006 to 2008, as Group Chairman, Consumer, Specialty Pharmaceuticals and Nutritionals from 2004 to 2006, and as Executive Vice President of Global Marketing for the Pharmaceutical Group from 2002 to 2004. Prior to that, she held various positions at Bristol-Myers Squibb from 1982 to 2002, including as President of U.S. Primary Care from 2000 to 2002 and as President of Global Marketing and Consumer Products from 1998 to 2000. Ms. Crane has served on the board of directors of Tarsus Pharmaceuticals, Inc. since August 2021 and on the board of directors of Catalent Pharma Solutions, Inc. since 2018. From 2015 to 2019, she served as Vice Chairman of the Board of Zealand Pharma A/S. From 2017 to March 2019, she served on the board of directors of Edge Therapeutics. Ms. Crane received a B.A. in communications and English from the State University of New York and an M.B.A. from Kent State University. | |
Qualifications: With over 30 years of experience in commercialization and business operations, primarily in the pharmaceutical and healthcare industries, and more than 25 years of therapeutic and consumer drug launch expertise, Ms. Crane provides broad experience and knowledge of the global pharmaceutical business and industry. |
Jean-Michel Halfon Independent Director Committees: – Compliance (Chair) – Corporate Governance and Nominating | Mr. Halfon joined the Board of Directors in 2014. From 2008 to 2010, Mr. Halfon served as President and General Manager of Emerging Markets at Pfizer Inc., after serving in various senior management positions since 1989. From 1987 to 1989, Mr. Halfon served as Director of Marketing in France for Merck & Co., Inc. Mr. Halfon received a B.S. from Ecole Centrale des Arts et Manufactures and an M.B.A. from Institut Supérieur des Affaires. | |
Qualifications: With his years of experience in senior management at leading pharmaceutical companies, particularly his experience with emerging markets, Mr. Halfon provides expertise in international pharmaceutical operations and marketing. |
| 8 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 1: Election of Directors
Gerald M. Lieberman Independent Director
Committees: –Audit (Chair) –Human Resources and Compensation –Finance and Investment | Mr. Lieberman joined the Board of Directors in
| |
Qualifications:
With his many years of experience as an executive in leading financial services companies, including his knowledge and experience in human capital development, succession planning and compensation, Mr. Lieberman provides finance, risk management, operating and human capital expertise for large, complex organizations.
|
Independent Director
Committees: – –
| Mr.
| |
Qualifications:
With his strategic matters.
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 11
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 9 | |
Proposal 1: Election of Directors
|
| |
|
Prof. Ronit Satchi-Fainaro Independent Director
Committees: –Science and Technology –Compliance | Prof. Satchi-Fainaro joined the Board of Directors in
| |
Qualifications:
With extensive experience in clinical medicine and research, Prof. Satchi-Fainaro providesin-depth knowledge of medicine and science.
|
Janet S. Vergis Independent Director Committees: – Human Resources and Compensation – Compliance | Ms. Vergis joined the Board of Directors in 2020. She served as a retained executive advisor to various private equity firms from 2013 to 2019. From 2011 to 2012, she served as the Chief Executive Officer of OraPharma, Inc., a specialty pharmaceutical company. From 2004 to 2009, she served as President of Janssen Pharmaceuticals LP, McNeil Pediatrics, Inc. and Ortho-McNeil Neurologics, Inc., subsidiaries of Johnson & Johnson. Ms. Vergis contributed to a number of Johnson & Johnson companies during her career, holding positions of increasing responsibility in research and development, new product development, sales and marketing. Ms. Vergis has served on the board of directors of Church and Dwight Co., Inc. since 2014, Dentsply-Sirona, Inc. since 2019 and SGS SA since March 2021. She previously served on the board of directors of MedDay Pharmaceuticals from 2016 to 2021, Amneal Pharmaceutical from 2015 to 2019, as well as Lumara Health from 2013 to 2014 and OraPharma, Inc. from 2011 to 2012. Ms. Vergis received a Bachelor of Science in Biology and a Master’s of Science in Physiology from The Pennsylvania State University. | |
Qualifications: With over 30 years of experience in many aspects of the healthcare industry, including research and development, new product development, sales, and various executive roles, as well as her experience as a board member of public pharmaceutical companies, Ms. Vergis provides the Board with broad global business experience in the pharmaceutical industry.
|
Director whose Service is Concluding at the Annual Meeting
Murray Goldberg has decided not to submit his candidacy for reelection at the Annual Meeting. We sincerely thank Mr. Goldberg for his contribution, leadership and efforts on behalf of Teva throughout his term of service.
Family Relationships
There are no family relationships among any of our executive officers or directors.
12 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 10 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
Board and Corporate Governance Highlights
Our Board of Directors continually evaluates Teva’s corporate governance policies and practices, focusing on ensuring effective oversight of Teva’s business and management. We have established a strong and effective frameworkPursuant to monitor the risks of our business.
Board and Corporate Governance
|
|
|
Board Oversight of Risk
|
|
|
|
|
|
|
|
Director Alignment with Shareholder Interests
|
|
Shareholder Engagement
|
Social Impact and Responsibility
|
|
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 13
Corporate Governance and Director Compensation
Board Practices
Under our Articles of Association, the Board of Directors must consist of three to 18 directors (including(which includes our President and CEO, if serving as a member of the Board, and two statutory independent directors, if required)such are appointed in accordance with the Israeli Companies Law). Our Board of Directors currently consists of 11 persons, including our President and CEO. Subject to election of all of the directors included in Proposal 1, our Board of Directors will consist of 1012 persons, including our President and CEO. The Board of Directors has determined that all of the directors that currently serve and that will serve on the Board of Directors following the Annual Meeting are independent, except for Kåre Schultz, our President and CEO.
We currently maintain a policy to have at least two directors qualify as financial and accounting experts under Israeli law. Accordingly, the Board of Directors has determined that Gerald M. Lieberman and Roberto A. Mignone are financial and accounting experts under such criteria.
Our directors are generally entitled to review and retain copies of our documentation and examine our assets, as required to perform their duties as directors and to receive assistance, in special cases, from outside experts at our expense.
Over the course of 2021, inclusion and diversity was a point of emphasis for our Board and our management team. Teva believes that inclusion and diversity are essential to its ability to innovate and grow its business. It is our desire to create and sustain an inclusive and diverse work environment.
  |   |   |
14 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 11 | |
Corporate Governance and Director Compensation
The chart below summarizes the notable skills, qualifications and experience of each of our directors and director nominees (in addition to requisite skills and expertise to perform their duties as directors) and highlights the balanced mix of skills, qualifications and experience of the Board as a whole. These are the same attributes that the Board considers as part of its ongoing director succession planning process. This high-level summary is not intended to be an exhaustive list of each director’s and director nominee’s skills or contributions to the Board.
SKILLS/QUALIFICATIONS/
| S.
| K.
| R.
| A.
|
|
| G.
| R.
| P.
| N.
| R.
| J. | T. | |||||||||||||||||
Accounting and financial reporting experience
| ✓
| ✓
| ✓ | |||||||||||||||||||||||||||
CEO / executive management leadership skills
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓ | ✓ | ||||||||||||||||||
Human resource management and executive comp. knowledge and experience
| ✓ | ✓
| ✓
| ✓
| ✓ | ✓ | ✓ | |||||||||||||||||||||||
Pharmaceutical industry
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓ | ✓ | ✓ | ✓
| ||||||||||||||||||||
Commercial and operations management
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||
Risk oversight and risk management | ✓ | ✓ | ✓
| ✓
| ✓
| ✓
| ✓ | ✓ | ||||||||||||||||||||||
| ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||
Finance and investment markets | ✓
| ✓
| ✓
| ✓
| ||||||||||||||||||||||||||
| ✓ | ✓
| ✓
| ✓
| ||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||
Academia/Education
| ✓ | ✓
| ✓
| |||||||||||||||||||||||||||
Global perspective, international
| ✓
| ✓
| ✓
| ✓
| ✓ | ✓
| ✓
| ✓
| ✓ | ✓ | ✓ | |||||||||||||||||||
ADDITIONAL QUALIFICATIONS AND INFORMATION
| ||||||||||||||||||||||||||||||
Audit committee financial expert / financial expert under Israeli law
| ✓
| ✓
| ||||||||||||||||||||||||||||
Other public boards
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓
| ✓ | ✓ | ✓ | |||||||||||||||||||||
Director Terms and Education. Our directors are generally elected in three classes for terms of approximately three years. Due to the complexity of our businesses and our extensive global activities, we value the insight and familiarity with our operations that a director is able to develop over his or her service on the Board of Directors. Because we believe that extended service on our Board enhances a director’s ability to make significant contributions to Teva, we do not believe that arbitrary term limits on directors’ service are appropriate. At the same time, it is the policy of the Board that directors should not expect to be renominated automatically.
In recent years, we strengthened our Board of Directors with the addition of new highly qualified and talented directors, adding expertise as well as diversity to our Board of Directors. The average tenure of our current directors is 4.55.75 years of service and the average age is 6362.4 years. We currently have twothree directors who identify as female directorsout of 12 members serving on our Board of Directors. Our Chairman of the
| 12 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
Board is independent under NYSE regulations, and 1011 out of 11of12of our directors are independent under NYSE regulations. Our onlynon-independent director is our President and CEO, which facilitates collaboration between the Board of Directors and management. We continue to evaluate the size and composition of our Board of Directors to ensure it maintains dynamic, exceptionally qualified members.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 15
Corporate Governance and Director Compensation
We provide an orientation program and a continuing education process for our directors, which include business and industry briefings, provision of materials, sessions from leading experts and professionals, meetings with key management and visits to Teva facilities. We evaluate and improve our education and orientation programs on an ongoing basis to ensure that our directors have the knowledge and background needed for them to best perform their duties.
Board Meetings. The Board of Directors holds at least six meetings each year to review significant developments affecting Teva and to consider matters requiring approval of the Board, with additional meetings scheduled when important matters require Board of Directors action between scheduled meetings. A majorityIn consideration of the health and safety of our directors, executive officers and other employees, our Board and Committees meetings convened, but not fewer than four, must bewere conducted in Israel.a hybrid format in 2021, due to the ongoing COVID-19 pandemic. Members of senior management regularly attend Board meetings to report on and discuss their areas of responsibility. Information regarding the number of Board committee meetings and attendance rates for 20192021 is presented in the table below under “—Committee Composition and Board and Committee Attendance in 2019.2021.”
Executive Sessions of the Board. Our directors meet in executive session (i.e., without the presence of management, including our President and CEO) generally in connection with each regularly scheduled Board meeting and additionally as needed. Executive sessions are chaired by Dr. Barer, the Chairman of the Board.
Annual Meetings. We do not have a formal policy requiring members of the Board to attend our annual meetings, although all directors are strongly encouraged to attend. All11 out of 12 of our directors attended the 20192021 annual meeting of shareholders.
Board Leadership.The Board of Directors recognizes that one of its key responsibilities is to establish and evaluate an appropriate leadership structure for the Board of Directors so as to provide effective oversight of management. The Board of Directors has separate roles for the Chief Executive Officer and Chairman of the Board of Directors, with Dr. Sol Barer serving as independent Chairman and Mr. Kåre Schultz as President and CEO. Dr. Barer’s long career as a senior pharmaceutical executive and leadership roles in various biopharmaceutical companies, as well as his extensive scientific expertise and knowledge of the global pharmaceutical business, have made him an invaluable resource to both the Board of Directors and the Chief Executive Officer. The Board of Directors has determined that this leadership structure is appropriate for Teva at this time.time because it ensures that the appropriate level of oversight, independence and responsibility is applied to all Board decisions.
Board of Directors Role in Risk Oversight. Management is responsible for assessing and managing risk, subject to oversight by the Board of Directors. Our annual risk assessment process includes both atop-down review of strategic risks and abottom-up review of operational risks, which are presented to the Board of Directors. The Board of Directors fulfills its oversight responsibility for risk assessment and management by reviewing risk management policies and the risk appetite of our operations and business strategy and by instructing its committees to assist and advise in their areas of expertise, as described below. Each committee provides regular updates to the full Board regarding its activities.
| ∎ | The Board oversees our risk management policies and risk appetite, including operational risks and risks relating to our business strategy and transactions. Various committees of the Board assist the Board in this oversight responsibility in their respective areas of expertise. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 13 | |
Corporate Governance and Director Compensation
| ∎ | The Audit Committee assists the Board with the oversight of our financial reporting, independent auditors, internal controls, internal audit function and cybersecurity risks. It is charged with identifying any flaws in business management and recommending remedies, detecting fraud risks and implementing anti-fraud measures. The Audit Committee further discusses our policies with respect to risk assessment and management |
| ∎ | The Compliance Committee oversees our policies and practices for legal, regulatory and internal compliance (other than regarding financial reporting), our strategy regarding ESG matters and reviews policies and practices that may seriously impact our reputation. |
16 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Corporate Governance and Director Compensation
| ∎ | The Finance and Investment Committee reviews our financial risk management policies, including our investment guidelines, financings and foreign exchange and currency hedging, as well as financial risk of certain transactions. |
| ∎ | The HR and Compensation Committee oversees compensation, retention, succession and other human resources-related issues and risks. |
| ∎ | The Science and Technology Committee oversees risks relating to our intellectual property and research and development activities. |
| ∎ | The Corporate Governance and Nominating Committee oversees risks relating to our governance policies and initiatives. |
During 2021, the Board and the HR and Compensation Committee continued to closely monitor our performance in light of the COVID-19 pandemic. This included review of the effects the COVID-19 pandemic had on our business performance and operations, as well as on the safety, morale and engagement of our employees.
During 2021, the Board, Audit Committee and Compliance Committee, participated in monitoring strategic litigation, including with respect to the opioids litigation.
Cybersecurity Risk Management.The Audit Committee assists the Board with the oversight of cybersecurity risks. As part of its risk oversight function, the Audit Committee reviews our cyber risk assessment and management policies and receives briefings concerning Teva’s information security and technology risks, including cybersecurity. During 2021, the Audit Committee received regular briefings on Teva’s information security and risk management programs, including with respect to cyber security, global cyber threat trends, SAP implementation and privacy controls. Teva’s information security office leads our cybersecurity risk management program. We also maintain cyber risk insurance coverage.
Director Service Contracts. Except for equity awards that accelerate upon termination, we do not have any contracts with any of ournon-employee directors that provide for benefits upon termination of services. Information regarding director compensation can be found under“Non-Employee Director Compensation” below.
Communications with the Board. Shareholders, employees and other interested parties can contact any director or committee of the Board of Directors by writing to them care of Teva Pharmaceutical Industries Ltd., 5 Basel124 Dvora HaNevi’a Street, Petach Tikva, 4951033,Tel Aviv, 6944020, Israel, Attn: Company Secretary or Internal Auditor.Auditor or by email to TevaAGM2022@tevapharm.com. Comments or complaints relating to our accounting, internal controls or auditing matters may also be referred to members of the Audit Committee, as well as other appropriate Teva departments. The Board of Directors has adopted a global “whistleblower” policy, which provides employees and others with an anonymous means of communicating with the Audit Committee.
Nominees for Directors. In accordance withPursuant to the Israeli Companies Law, a nominee for service as a director must submit a declaration to us, prior to his or her election, specifying that he or she has the requisite qualifications to serve as a director and the ability to devote the appropriate time to performing his or her
| 14 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
duties as such and that he or she is not restricted from serving as director under the Israeli Companies Law. All of our directors, including those nominated for appointment as directors at the Annual Meeting, have provided such declaration. A director who ceases to meet the statutory requirements to serve as a director must notify us to that effect immediately and his or her service as a director will terminate upon submission of such notice.
Our Board of Directors believes that it should be composed of directors with diverse, complementary backgrounds and that directors should, at a minimum, exhibit proven leadership capabilities and possess experience at a high level of responsibility within their chosen fields. When considering a candidate for director, our Corporate Governance and Nominating Committee considers whether the directors, both individually and collectively, can and do provide the experience, judgment, commitment, skills and expertise appropriate to lead Teva in the context of its industry. In addition, our Corporate Governance and Nominating Committee considers a nominee’s expected contribution to the diversity of skills, background, experiences and perspectives, as well as whether such nominee could provide added value to any of the committees of the Board of Directors, given the then existing composition of the Board of Directors as a whole. When seeking new candidates, the Corporate Governance and Nominating Committee also strives to maintain genderconsiders candidates representing a diversity on Teva’s Board of Directors.backgrounds, perspectives, ethnicities, races and genders. Our Corporate Governance and Nominating Committee also provides input and guidance regarding the independence of directors, for formal review and approval by our Board of Directors.
When seeking candidates for directorships, our Corporate Governance and Nominating Committee may solicit suggestions from incumbent directors, management, shareholders and others. Additionally, the Board of Directors has in the past used and may continue to use the services of third party search firms to assist in the identification and analysis of appropriate candidates. After conducting an initial evaluation of a
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 17
Corporate Governance and Director Compensation
prospective candidate, members of the Board of Directors will interview that candidate if they believe the candidate may be suitable. The Chairman of the Board of Directors may also ask the candidate to meet with certain members of executive management.
If our Corporate Governance and Nominating Committee believes a director should bere-approved or a candidate would be a valuable addition to the Board of Directors, it may recommend to the Board of Directors that candidate’s appointment or election, who, in turn, can submit the candidate for consideration by the shareholders.
The Israeli Companies Law provides a process by which one or more shareholders holding 1% or more of the voting rights of Teva may propose the nomination of a candidate to the Board of Directors. See “Shareholder Proposals for the 20202022 Annual Meeting and the 20212023 Annual Meeting” below.
Non-Employee Director Compensation
As required by the Israeli Companies Law, we have adopted a Compensation Policy for Executive Officers and Directors (the “Compensation Policy”), which is presented for shareholder approval at least once every three years.Pursuantyears and presented this year for the approval of shareholders under Proposal 3.Pursuant to the Israeli Companies Law and regulations promulgated thereunder, any arrangement between Teva and a director relating to his or her compensation as a director or other position with Teva must generally be consistent with Teva’s Compensation Policy and approved by the HR and Compensation Committee, the Board and by a simple majority of Teva’s shareholders.
As approved at our 2019 annual general meeting of shareholders, ournon-employee director annual compensation program (applicable to allnon-employee directors except for the Chairman of the Board) is comprised of:
| (i) | an annual Board membership fee of $130,000 paid in cash; |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 15 | |
Corporate Governance and Director Compensation
| (ii) | additional annual cash fees for service on Board committees: |
| a. | $20,000 per annum to serve as a member of the Audit Committee; and $40,000 per annum to serve as chairperson of the Audit Committee; |
| b. | $15,000 per annum to serve as a member of the HR and Compensation Committee; and $30,000 per annum to serve as chairperson of the HR and Compensation Committee; |
| c. | $20,000 per annum to serve as a member on a special orad-hoc committee of the Board; and $30,000 to serve as chairperson of such special orad-hoc committee; and |
| d. | $10,000 per annum to serve as a member of any other standing Board committee that is not listed insub-sections (a)-(b); and $20,000 per annum to serve as chairperson on such committee; and |
| (iii) | an annual equity-based award in the form of restricted share units (“RSUs”) with an approximate aggregate grant date fair value of $160,000 and a one year cliff vesting. |
As approved at our 2019 annual general meeting of shareholders, the annual compensation for the Chairman of the Board is comprised of:
| (i) | an annual Board membership fee of $255,000 paid in cash; |
| (ii) | an annual equity-based award in the form of RSUs with an approximate aggregate grant date fair value of $285,000 and a one year cliff vesting; and |
| (iii) | office and secretarial services at Teva’s offices. |
The Chairman of the Board is not entitled to additional annual cash fees for service on Board Committees.
Fees for Board and committee service are payable over the period of time during which the individual serves as anon-employee director. In the event that anon-employee director serves as a member of the
18 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Corporate Governance and Director Compensation
Board during only part of the year, apro-rated amount of the annual board membership fee and standing committee fees will be paid. In the event of an appointment to the Board between annual meetings of shareholders, the annual equity-based award shall be prorated.pro-rated. Upon completion of anon-employee director’s service as a director, other than removal pursuant to a shareholder resolution due to a breach of fiduciary duties, any unvested awards granted to such director by virtue of such position and held by such director will immediately become vested.
We purchase directors’ and officers’ liability insurance for our directors and executive officers, as approved by our shareholders and consistent with the Compensation Policy. In addition, we release our directors from liability and indemnify them to the fullest extent permitted by law and our Articles of Association, and provide them with indemnification and release agreements for this purpose, substantially in the form approved by our shareholders at our 2012 annual meeting.
In addition, Teva reimburses or covers itsnon-employee directors’ expenses (including travel expenses) incurred in connection with attending meetings of the Board and its committees or in performing other services for Teva in their capacity asnon-employee directors, in accordance with Israeli law and the Compensation Policy.
Any director elected to serve as a member of our Board and all directors currently serving on our Board will be compensated in the manner described above and will benefit from the insurance, indemnification and release discussed above.
No additional compensation is received for attendance at a Board or committee meeting.
Director Stock Ownership Guidelines
In 2019, we established director stock ownership guidelines requiring ownership of five times the annual cash fee paid to directors for board membership (excluding committees fees), which must be achieved within the later of six years of first becoming subject to these guidelines and January 1, 2025.
2019
| 16 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Total ($) | |||||||||
Dr. Sol J. Barer (3) | 255,000 | 285,003 | 540,003 | |||||||||
Rosemary A. Crane | 170,000 | 159,999 | 329,999 | |||||||||
Amir Elstein | 180,509 | 159,999 | 340,508 | |||||||||
Murray A. Goldberg | 170,000 | 159,999 | 329,999 | |||||||||
Jean-Michel Halfon | 160,453 | 159,999 | 320,452 | |||||||||
Gerald M. Lieberman | 195,000 | 159,999 | 354,999 | |||||||||
Roberto A. Mignone | 180,000 | 159,999 | 339,999 | |||||||||
Dr. Perry D. Nisen | 160,000 | 159,999 | 319,999 | |||||||||
Nechemia (Chemi) J. Peres | 195,763 | 159,999 | 355,762 | |||||||||
Prof. Ronit Satchi-Fainaro | 150,425 | 159,999 | 310,424 | |||||||||
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Total ($) | |||
Dr. Sol J. Barer (3) | 255,000 | 284,991 | 539,991 | |||
Rosemary A. Crane | 170,000 | 159,993 | 329,993 | |||
Amir Elstein | 180,000 | 159,993 | 339,993 | |||
Jean-Michel Halfon | 160,000 | 159,993 | 319,993 | |||
Abbas Hussain (4) | 87,795 | 159,993 | 247,788 | |||
Gerald M. Lieberman | 195,000 | 159,993 | 354,993 | |||
Roberto A. Mignone | 180,000 | 159,993 | 339,993 | |||
Dr. Perry D. Nisen | 160,000 | 159,993 | 319,993 | |||
Nechemia (Chemi) J. Peres | 155,000 | 159,993 | 314,993 | |||
Prof. Ronit Satchi-Fainaro | 150,000 | 159,993 | 309,993 | |||
Janet S. Vergis | 155,000 | 159,993 | 314,993 | |||
Tal Zaks (5) | 36,890 | 112,530 | 149,420 | |||
| (1) | The amounts shown include the paid cash portion of the annual fee for the Chairman of the Board and Board membership fees and committee service fees for othernon-employee directors. |
| (2) | In June |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 19
Corporate Governance and Director Compensation
| of RSUs computed in accordance with FASB Accounting Standards Codification Topic 718 (“Topic 718”). Valuations of RSUs were determined based on the fair market value of a Teva share on the grant date, less the net present value of |
| (3) | During his service as Chairman of the Board, Dr. Barer is entitled to an annual fee of $255,000 and an annual equity-based award with an approximate grant date fair value of $285,000. |
| (4) | Mr. Hussain stepped down from the Board in July 2021. |
| (5) | Mr. Zaks was appointed to the Board effective October 1, 2021. |
Mr. Schultz was not and will not be entitled to any compensation in his capacity as a member of the Board or any committee thereof.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 17 | |
Corporate Governance and Director Compensation
Our Articles of Association provide that the Board of Directors may delegate its powers to one or more committees as it deems appropriate to the extent such delegation is permitted under the Israeli Companies Law. The Board of Directors has appointed the standing committees listed below, as well asad-hoc committees appointed from time to time for specific purposes determined by the Board.
We have adopted charters for all of our standing committees, formalizing the committees’ procedures and duties. These committee charters are available on our website at www.tevapharm.com.
Committee Composition and Board and Committee Attendance in 20192021
Name
| Audit
| Human and
| Corporate
| Finance and
| Compliance
| Science and
| Audit | Human Resources and Compensation | Corporate Governance and Nominating | Finance and Investment | Compliance | Science and Technology | ||||||||||||
Rosemary A. Crane
| Chair
| ∎
|
| Chair |
|
|
| ∎ | ||||||||||||||||
Amir Elstein
| ∎
| Chair
| ∎
| ∎ |
| Chair | ∎ |
|
| |||||||||||||||
Murray A. Goldberg
| ∎
| ∎
| ∎
| |||||||||||||||||||||
Jean-Michel Halfon
| ∎
| Chair
|
|
| ∎ |
| Chair |
| ||||||||||||||||
Roberto A. Mignone
| ∎
| Chair
| ∎
| ∎ |
| ∎ | Chair |
|
| |||||||||||||||
Dr. Perry D. Nisen
| ∎
| Chair
|
|
|
|
| ∎ | Chair | ||||||||||||||||
Nechemia (Chemi) J. Peres
| ∎
| ∎
|
| ∎ | ∎ |
|
|
| ||||||||||||||||
Gerald M. Lieberman
| Chair
| ∎
| ∎
| Chair | ∎ |
| ∎ |
|
| |||||||||||||||
Prof. Ronit Satchi-Fainaro
| ∎
| ∎
|
|
|
|
| ∎ | ∎ | ||||||||||||||||
No. of meetings in 2019
| 8
| 7
| 4
| 5
| 4
| 5
| ||||||||||||||||||
Janet S. Vergis |
| ∎ |
|
| ∎ |
| ||||||||||||||||||
Dr. Tal Zaks | ∎ |
|
| ∎ |
| ∎ | ||||||||||||||||||
No. of meetings in 2021 | 7 | 9 | 6 | 3 | 5 | 6 | ||||||||||||||||||
Average attendance rate
| 100%
| 100%
| 100%
| 100%
| 100%
| 100%
| 100% | 100% | 91.6% | 100% | 95% | 100% | ||||||||||||
In 2019,2021, our Board of Directors met 9nine times with an average attendance rate of 100%97%. In 2019,2021, each of our current directors attended 100%at least 85% of the meetings of the Board and Board committees on which he or she served. In 2019,consideration of the health and safety of our directors, executive officers and other employees, our Board of Directors and various Board committees met frequentlyCommittees meetings were conducted in a hybrid format in 2021, due to review and approve the important strategic activities throughout the year.
20ongoing Teva Pharmaceutical Industries Ltd.COVID-19 2020 Proxy Statement
Corporate Governance and Director Compensation
pandemic.
Audit Committee
The Israeli Companies Law mandatesrequires publicly held Israeli companies to appoint an audit committee. As a NYSE-listed company, Teva’s Audit Committee must be comprised solely of independent directors, as defined by the Securities and Exchange Commission (the “SEC”) and NYSE regulations.
The responsibilities of our Audit Committee include, among others: (a) identifying flaws in the management of our business and making recommendations to the Board of Directors as to how to correct them and providing for arrangements regarding employee complaints with respect thereto; (b) making determinations and considering providing approvals concerning certain related party transactions and certain actions involving conflicts of interest; (c) reviewing the internal auditor’s performance and approving the internal audit work program and examining our internal control structure and processes; (d) examining the independent auditor’s scope of work and fees; and (e) providing for arrangements regarding employee complaints regarding questionable accounting or auditing matters and monitoring compliance with and investigating alleged violations and enforcing provisions of Teva’s Code of Conduct. Furthermore, the Audit Committee discusses the financial statements and the disclosure under “Management’s Discussion
| 18 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
and Analysis of Financial Condition and Results of Operations” (the “MD&A”) and presents to the Board of Directors its recommendations with respect to the proposed financial statements and MD&A.
In accordance with the Sarbanes-Oxley Act and NYSE requirements, the Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our independent auditors. In addition, the Audit Committee is responsible for assisting the Board of Directors in monitoring our financial statements, the effectiveness of our internal controls and our compliance with legal and regulatory requirements. The Audit Committee also discusses our policies with respect to risk assessment and risk management with respect toregarding financial reporting and risks that may be material to us and major legislative and regulatory developments that could materially impact Teva’s contingent liabilities and risks.
The Audit Committee charter sets forth the scope of the committee’s responsibilities, including its structure, processes and membership requirements; the committee’s purpose; its specific responsibilities and authority with respect to, among others, registered public accounting firms; complaints relating to accounting, internal accounting controls or auditing matters; and its authority to engage advisors as determined by the Audit Committee.
The Audit Committee also reviews and receives briefings concerning Teva’s information security and technology risks, including cybersecurity, and has been briefed on Teva’s information security and risk management programs. Teva’s information security office leads our cybersecurity risk management program.
All of the Audit Committee members have been determined to be independent as defined by SEC and NYSE regulations.
The Board of Directors has determined that, of the directors on this committee, Gerald M. Lieberman (chair) and Roberto A. Mignone are “audit committee financial experts” as defined by applicable SEC regulations.
Human Resources and Compensation Committee
PubliclyThe Israeli Companies Law requires publicly held Israeli companies are required to appoint a compensation committee. OurAs a NYSE-listed company, Teva’s HR and Compensation Committee includes onlymust be comprised solely of independent directors, as defined by the SEC and NYSE regulations.
The HR and Compensation Committee is responsible for establishing annual and long-term performance goals and objectives for our executive officers, as well as reviewing our compensation philosophy and policies (including our Compensation Policy).
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 21
Corporate GovernanceThe HR and Director Compensation
The Compensation Committee is responsible for reviewing plans for the succession of our chief executive officer and other senior members of executive management.
The HR and Compensation Committee also evaluates the performance of our chief executive officer and other executive officers, makes recommendations to the Board of Directors regarding the compensation of our executive officers and directors, reviews any organizational restructuring pertaining to the roles, responsibilities and selection of executive officers and oversees our labor practices.
All of the HR and Compensation Committee members have been determined to be independent as defined by SEC and NYSE regulations.
Corporate Governance and Nominating Committee
The NYSE Listed Company Manual requires publicly listed companies to appoint a corporate governance / nominating committee composed entirely of independent directors, as defined by NYSE regulations.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 19 | |
Corporate Governance and Director Compensation
The role of our Corporate Governance and Nominating Committee is to (i) identify individuals who are qualified to become directors; (ii) recommend to the Board of Directors director nominees for each annual meeting of shareholders; and (iii) assist the Board of Directors in establishing and reviewing Teva’s statement of corporate governance principles and promoting good corporate governance in Teva.
All of the committeeCorporate Governance and Nominating Committee members must be, and have been determined to be independent as defined by NYSE regulations.
Finance and Investment Committee
The role of our Finance and Investment Committee is to assist the Board of Directors in fulfilling its responsibilities with respect to our financial and investment strategies and policies, including determining policies on these matters and monitoring implementation. It is also authorized to approve certain financial transactions (such as material loans and other financing arrangements), review our financial risk management policies and evaluate the execution, financial results and integration of Teva’s completed acquisitions, as well as various other finance-related matters, including our global tax structure and allocation policies. According to the committee’s charter, at least one of the committee’s members must be qualified as a financial and accounting expert under SEC regulations and/or the Israeli Companies Law.
The Board of Directors has determined that, of the directors on this committee, Gerald M. Lieberman and Roberto A. Mignone (chair) are financial and accounting experts under Israeli law.
A majority of committee members must be determined to be independent as defined by NYSE regulations.
Compliance Committee
The role of our Compliance Committee is to oversee our: (i) policies and practices for complying with laws, regulations and internal procedures; (ii) policies and practices regarding issues that have the potential to seriously impact our business and reputation; (iii) global public policy positions; (iv) strategy and (iv) social responsibilitygovernance of ESG matters and community outreach.to advise the Board on ESG matters; and (v) implementation of our culture of integrity.
A majority of committee members must be determined to be independent as defined by NYSE regulations. The chairperson of the Audit Committee shall be invited by the committee chairperson to participate in the Compliance Committee, as deemed relevant to the committee’s agenda.
Science and Technology Committee
The Science and Technology Committee oversees our overall strategic direction and investment in research and development and technological and scientific initiatives. As part of this responsibility, it reviews scientific and R&D strategy and priorities, scientific aspects of business development activities and technological trends. It assists the Board of Directors in risk management oversight relating to R&D and our intellectual property, advises on our intellectual property strategy, reviews new technology in which Teva is, or is considering, investing and reviews the efficacy and safety profile of new pharmaceuticals.
All of the committee members must be determined to have scientific, medical or other related expertise. A majority of committee members must be determined to be independent as defined by NYSE regulations.
22 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Corporate Governance and Director Compensation
Code of Business Conduct
Teva has adopted a code of business conduct applicable to its directors, executive officers, and all other employees. A copy of the code is available to every Teva employee on Teva’s internet site, upon request to its human resources department, and to investors and others on Teva’s website at www.tevapharm.com or by contacting Teva’s investor relations department, legal department or the internal auditor. If we make any
| 20 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director Compensation
amendment or grant any waiver to this code that applies to our chief executive officer, chief financial officer, chief accounting officer or controller, or persons performing similar functions, and that relates to an element of the SEC’s “code of ethics” definition, then we will disclose the nature of the amendment or waiver on Teva’s website. The Board of Directors has approved a whistleblower policy which functions in coordination with Teva’s code of business conduct and provides an anonymous means for employees and others to communicate with various departments of Teva, including the Audit Committee. Teva has also implemented a training program for new and existing employees concerning the code of business conduct and whistleblower policy.
Principles of Corporate Governance
We have adopted a set of corporate governance principles, which is available on our website at www.tevapharm.com. We place great emphasis on maintaining high standards of corporate governance and continuously evaluate and seek to improve our governance standards. These efforts are expressed in our corporate governance principles, our committee charters and the policies of our Board of Directors. Teva is in compliance with all corporate governance standards currently applicable to Teva under Israeli and U.S. laws, SEC regulations and NYSE listing standards.
Insider Trading Policy
Our directors, executive officers and employees, as well as their immediate family members, persons living in their home and entities controlled by any of the foregoing persons are subject to Teva’s insider trading policy (the “Policy”). The Policy prohibits insider trading and certain speculative transactions (including short sales, buying put and selling call options and other hedging or derivative transactions in Teva’s securities), and establishes a regular blackout period schedule during which directors, executive officers and certain employees may not trade in Teva’s securities. In addition, the Policy establishespre-clearance procedures that directors and executive officers must observe prior to effecting any transaction in Teva’s securities. The Policy applies not only to Teva’s ADSs and ordinary shares, but also to its debt securities and other securities for which Teva securities serve as underlying assets.
Board Evaluation Process
Our Board of Directors is committed to continuous improvement and recognizes the fundamental role a robust Board of Directors and committee evaluation process play in ensuring that our Board of Directors maintains optimal composition and functions effectively.
In the annual self-evaluation process, the members of the Board of Directors conduct a confidential oral assessment of the performance, risk oversight and composition of the Board and any committees of which he or she is a member with the Company Secretary. As part of the evaluation process, the Board of Directors, in conjunction with the Corporate Governance and Nominating Committee, reviews the effectiveness and overall composition, including director tenure, board leadership structure, diversity and skill sets, of the Board of Directors to ensure the Board of Directors serves the best interests of shareholders and positions the company for future success. The results of the oral assessments are then summarized and communicated back to each committee, committee chair and the entire Board of Directors.Directors during an executive session. After the evaluations, each committee, committee chair and the entire Board of Directors and management work to improve upon any issues presented during the evaluation process and to identify opportunities that may lead to further improvement. The Corporate Governance and Nominating Committee also uses this process to assess and determine the characteristics and skills required of prospective candidates for election to the Board of Directors.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 23
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 21 | |
Corporate Governance and Director Compensation
Similar to 2018, in 2019In late 2021 and early 2020,2022, the Board engagedconducted discussions with shareholders, as part of our shareholders in order to demonstrate ourregular, ongoing, annual commitment to strong corporate governance and continuous dialogue with our effort to gather input from our shareholders,stakeholders, which we believe enables us to better understand the perspectives of our shareholders. their perspectives.
During this time, we contacted our top 25 shareholders, representingwhich represent approximately 36%37% of our outstanding shares and a significant majority of identified institutional holders, as well as the research teams at proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. Our ChairmanThe majority of the Boardshareholders we contacted responded that they did not seek to engage at this time or did not respond to our request. Several of these holders have engaged with us and the Chairprovided feedback in prior rounds of our Compensation Committeeengagement. We participated in discussions with the shareholders representing approximately 23% of our outstanding shares. In addition, we participated in a discussionthat agreed to engage with us and with one of the proxy advisory firms. Our Chairman of the Board, the Chair of our HR and Compensation Committee and a member of the Compliance Committee who presented on ESG matters, participated in relevant discussions with shareholders.
The discussions covered a broad array of matters, including:
| ∎ | our ESG materiality assessment, our issuance of sustainability-linked bonds in November 2021, our compliance and ethics program, our continued enhancement of ESG transparency and the resulting improvements in ESG ranking indices; |
| ∎ | inclusion and diversity at Teva; |
| ∎ | board and executive succession planning; and |
| ∎ | changes to our executive compensation program over recent years. |
Feedback from our shareholders was shared and discussed with the HR and Compensation Committee, the Corporate Governance and Nominating Committee, the Compliance Committee and the Board.
The Board and management continue to engage regularly in dialogue with many of the Company’s largest shareholders, and the HR and Compensation Committee will continue to consider shareholder feedback and the results of the advisory vote on executive compensation in connection with its determinations of executive compensation. Through our shareholder outreach, we have established important feedback channels that provide a valuable way to receive ongoing input from our shareholders.
In response to feedback from our shareholders that opioid-related risks deserve greater attention from the healthcare industry, we published a report related to opioid-related governance measures taken by the Company in November 2019.
See also “Executive Compensation—Compensation Discussion & Analysis—20192021 Say-on-Pay Vote and Shareholder Engagement.”
Social ImpactHuman Capital Management
Our employees are the heart of our company. We seek to make Teva an inclusive, diverse and Responsibilitysafe workplace, with meaningful compensation, benefits and wellness programs, and offering training and leadership development programs that foster career growth.
Our HR and Compensation Committee, Compliance Committee and Board play key roles in overseeing human capital management at Teva is committedand devote time throughout the year to helping patientsits strategy and execution.
The Board and executive management view inclusion and diversity as essential to our ability to innovate and grow our business. We strive to create and sustain an inclusive and diverse work environment.
We foster an inclusive work environment that allows all people to express themselves and realize their full potential. Our Inclusion and Diversity (“I&D”) framework, governed by our I&D task force, provides a foundation for embedding I&D across our business. We focus on gender pay equity, and increase manager awareness by providing relevant training in connection with our annual performance and compensation cycle. In addition, we support recruitment, development and retention of individuals with diverse backgrounds.
| 22 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Human Capital Management
As of December 31, 2021, Teva’s work force consisted of 37,537 employees. We have employees in 58 countries around the world, representing a wide range of nationalities. Employees identifying as female represent 46% of our global employee population, 48% of managers and 29% of senior management as of December 31, 2021.
We seek to support our inclusive and diverse culture through employee resource groups, mentoring programs and training, among other things. For instance, we developed a global mentoring program for women, aimed at advancing women to senior leadership positions. In the U.S., the Teva Employee Resource Group Network represents ten distinct ERGs, which have a key role in creating a culture of inclusion and bring together employees with shared characteristics and life experiences to foster opportunities for networking, mentoring, collaboration, community outreach, career development, leadership training and cultural exchanges. In addition, we provided mandatory training for all employees globally on unconscious bias and include an inclusive leadership module in all Teva leadership development programs.
We prioritize the safety and well-being of our employees as they face both mental and physical challenges related to the COVID-19 pandemic. Our employees have demonstrated great resilience during the pandemic and we continue to provide resources to support their well-being. At the onset of the pandemic, we quickly established a comprehensive management system to control risks and support employees. During 2021, in countries where it was safe and appropriate, we took a gradual and cautious approach to returning employees to office locations, generally with a hybrid “capsule” approach. A limited number of employees would come to the office on the same set days per week to mitigate exposure and to enable social distancing. In addition, in countries where it was safe and appropriate to return fully to the office, we updated our global remote work policy, for relevant employees, allowing employees to work remotely for up to two days per week, instead of one day per week.
We invest in employee career growth and development at Teva in order to remain competitive in our industry. Our programs also benefit employees individually by providing them with the resources they need to enhance their professional and management abilities, develop leadership skills and achieve their career aspirations. Our Teva Grow program for employees provides development in essential soft skills, success in a global setting and company knowledge. For our managers, we refreshed our development programs to develop the skills, capabilities and mindset required of managers, taking into account the challenges of a disruptive environment. We focus on succession planning through global and local talent review processes that identify and accelerate successors’ readiness to fill senior positions across Teva.
We have been monitoring employee morale during this time in many ways, including by conducting our annual employee survey. Results of the 2021 survey show that employee engagement levels continue to be high. Employees are feeling connected with Teva’s mission and values, are confident in Teva’s positive
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 23 | |
Human Capital Management
impact on society and believe they are treated with respect. In addition, they feel they are able to be themselves at work, they are treated fairly regardless of personal background or characteristics, and that Teva promotes a culture of diversity and inclusiveness.
For further information, see “Item 1—Business— Human Capital Management” in our Annual Report on Form 10-K for the year ended December 31, 2021.
Environmental, Social and Governance
Teva views ESG as core to our business and our ESG strategy reflects how we plan to address environmental and social issues, while also bringing value to Teva and its stakeholders. In 2020, we conducted a materiality assessment to identify the ESG topics that matter most to our stakeholders and our business. Throughout 2021, we continued our efforts to enhance transparency by reporting annually on how we manage these 21 topics (outlined in the graphic below), as well as by reporting in accordance with GRI standards and by striving to align our reporting with SASB and with the TCFD framework. In 2022, Teva intends to update its ESG materiality assessment, while taking into consideration stakeholder priorities and emerging issues and opportunities.
Ten of the core 21 topics (in bold in the graphic below) represent areas where we believe Teva can have the greatest impact on stakeholders, and which could have the greatest impact on our business. Each of these priority topics has a designated task force, working group or committee to guide our management’s approach, goal setting, activities and reporting.
At the end of 2021, Teva executed the largest-ever SLB at $5 billion. We became the first pharmaceutical company to issue an SLB tied to both access and environmental targets, reflecting our commitment to implement our ESG strategy, and to increasing the reach of our medicines in low-and-middle-income countries (“LMICs”) and further reduce the impact of our operations on the planet. Teva plans to obtain external assurance and report on related progress and performance in our annual ESG Progress Report (with the 2021 report expected to be published on our website in May 2022).
Environmental
With 53 manufacturing sites around the world as of December 31, 2021, we believe that we have a responsibility to lessen our impact on the environment. With the launch of Teva’s sustainability-linked
| 24 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Environmental, Social and Governance
financing framework in 2021, we formally set targets to reduce absolute scope 1 and 2 greenhouse gas emissions by 25% by 2025 and by 46% by 2030 (compared to a 2019 baseline). These targets, set according to the Science Based Target (SBT) methodology in line with best practices, enhance our contribution to global efforts to meet the Paris Climate Agreement to limit mean global temperature rises to well below 2°C above pre-industrial levels, and preferably 1.5°C. In 2021, we also set additional long-term 2030 environmental targets, including reducing absolute scope 3 greenhouse gas emissions by 25%, increasing electricity purchased or generated from renewable sources to 50% and increasing energy efficiency by 10%.
Social
As the world’s leading provider of generic medicines, we are a committed global health partner addressing unmet needs, increasing the reach of affordable medicines and benefit from innovations to improve their health. We have a rich history of providing innovative, high-qualityexpanding our generic and specialty drugs,innovative medicines portfolio. Our efforts to create quality, affordable medicines for more people around the world are governed by our Access to Medicines steering committee and health solutionsguided by Teva’s Position on Access to Medicines. In 2020, our generic medicines were responsible for more than $40 billion in savings across 12 countries and, in the U.S., we saved the healthcare system nearly $32 billion, all according to an Economic Impact Report from July 2021. In 2021, we donated $487 million worth of medicines to patients around the world. At Teva, Social Impact means aligning our corporate resources and expertise with relevant areas of socialin need. We are dedicatedreceived marketing authorizations for 915 generic medicines and 163 specialty medicines. We engaged partners to promotingadvance access initiatives, help reduce healthcare costs and create cost-effective solutions, respond to drug shortages and participated in global health tenders in an effort to make treatments easily accessible and affordable for all.
Our recently-issued SLB is tied to two 2025 targets related to access to medicines—increasing the cumulative number of new regulatory submissions in LMICs on the World Health Organization’s Essential Medicines List (EML) by 150% and increasing access to treatmentmedicines programs product volume by 150% through four access to medicines programs in LMICs.
Governance
Conducting business with integrity is non-negotiable for patients.Teva. Our compliance vision is for business to be gained the right way. At Teva, compliance and ethics is everyone’s responsibility. Over the last six years, Teva has participatedstrengthened its compliance and ethics program across the globe, with an emphasis on policies, training and support that meet the business in the United Nationsareas related to compliance. Our Compliance Committee oversees our policies and practices for legal, regulatory and internal compliance and is updated on a regular basis by our Chief Compliance Officer. Our Global Compact since 2010,Compliance & Ethics (GC&E) department is structured to ensure our business partners have a consistent and dedicated partner at all levels of work.
One way we cultivate a culture of compliance and accountability is by seeking to reflect our values in our policies and procedures. Primary among these is Teva’s Code of Conduct, which encourages companies around the world to adhere to principles of responsible business.
Weoutlines our values and foundational compliance and ethics expectations for all employees. In 2021, we published four new policies and positions, including on talent recruitment and development, pricing, quality manufacturing and compassionate use. These position statements are committed to partnering with others to help achieve the UN Sustainable Development Goals (“SDG”), which were adopted by all United Nations member states in 2015. As a pharmaceutical company, we have decided to strategically focus our efforts in advancing the achievement of “SDG 3 – good health and well-being,” by prioritizing two main targets: “SDG 3.4 – reduce premature mortality fromnon-communicable diseases (“NCDs”),” and “SDG 3.8 – ensure access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines.” We are focusing on these areas through our portfolio and global health efforts, including those focused on people with multiple chronic conditions.
We remain actively engaged with our shareholders and other key stakeholdersavailable on our Environmental, Social and Governance (“ESG”) performance relative to our financial results. Based on engagement with key stakeholders and our internal analysis, we strategically prioritized the improvement of our ESG performance and transparency. Our Board of Directors remains actively engaged on these issues with oversight of our social impact and responsibility initiatives by our Compliance Committee.
Our Social Impact and Responsibility efforts are focused in the following areas, among others:
Contributing to Healthy Communities. For Teva, a healthy community is one in which individuals have access to resources and conditions that enable them to live their healthiest lives. Cultivating healthier
24 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Corporate Governance and Director Compensation
communities allows us to support people around the world on their individual paths toward wellness, thereby creating value for society and our business.
Leading a Responsible Business. At Teva, a responsible business is one that enacts and enforces strong practices and controls to ensure all activities are carried out reliably, ethically, and transparently. As a global company that influences the health and safety of millions of people, we recognize our responsibility to conduct our business with integrity. Operating in this manner helps ensure our long-term sustainability, allowing us to focus on what matters most—improving health.
Reporting and Disclosures. Teva reports its Social Impact and Responsibility efforts using the Global Reporting Initiative (GRI) Standards and publishes the results of such efforts in our annual Social Impact reports.
In 2019, we improved our performance in most of the leading ESG ratings and rankings, and we will continue to measure our performance going forward. We also achieved external recognition for our social impact programs to address NCDs and help patients with multiple chronic conditions.
For more information about Teva’s Social Impact and Responsibility practices, including our most recent annual Social Impact report, as well as positions and policy statements on issues relating to ESG issues, please see Teva’s website athttps://www.tevapharm.com/our-impact/our-company/corporate-governance/corporate-governance-documents/. Information on our website is not part of, the proxy materials and is not incorporated into, this Proxy Statement.
We established new compliance and ethics goals, including:
| ∎ | Train or retrain 100% of active employees on applicable Teva’s compliance policies by 2023 |
| ∎ | Train or retrain 100% of active sales employees on compliance policies related to marketing practices by 2023 |
| ∎ | Train new employees and retrain 100% of active employees on how to report concerns through Teva’s Office of Business Integrity hotline by 2023 |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 25 | |
Environmental, Social and Governance
| ∎ | Strengthen Teva’s culture of compliance, maintaining our Gartner global index at parity with or greater than industry benchmark |
| ∎ | Maintain 100% evaluation of submitted high-risk third-party business partners through Teva’s Third-Party Due Diligence tool |
Teva has a risk-based global compliance training and communications program. Every role at Teva is assigned a risk designation based on interactions with members of the proxy statement by reference.healthcare community or government officials, and the personnel in those roles receive relevant compliance trainings. In 2021, more than 20,000 employees were trained on ethics with a 99.6% completion rate.
ESG Governance
Our executive management and Board of Directors provide oversight of our ESG activities. Our Executive Management provide strategic guidance on a bi-annual basis, approve all global commitments and targets and review Teva’s annual ESG Progress Report. Teva’s Board of Directors oversees our ESG activities and provides strategic guidance and direction, and the Compliance Committee oversees our ESG strategy and receives updates on ESG matters. In 2021, the Compliance Committee held a session on ESG together with the Board.
We have recently strengthened our ESG governance by forming our ESG Steering Committee, led by our CEO, which guides and manages strategic ESG topics as well as our ESG forum, which brings together the ESG leaders from various business units to discuss emerging ESG issues, risks and opportunities.
Teva 2021 ESG Performance
We continue to enhance ESG transparency, which has contributed to further improvements in ESG ranking indices in 2021, as evidenced by the chart below:
For more details on Teva’s ESG performance, please see our 2021 ESG Progress Report (expected to be published in May 2022). Information on our website is not part of, and is not incorporated into, this Proxy Statement.
| 26 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
The following table sets forth information regarding our executive officers as of April , 2020:March 8, 2022:
Name
| Age
| Executive
| Position
| |||||||
Kåre Schultz
|
| 58
|
|
| 2017
|
| President and Chief Executive Officer
| |||
Richard Daniell
|
| 53
|
|
| 2017
|
| Executive Vice President, European Commercial
| |||
Sven Dethlefs
|
| 51
|
|
| 2017
|
| Executive Vice President, Global Marketing & Portfolio
| |||
Eric Drapé
|
| 58
|
|
| 2019
|
| Executive Vice President, Global Operations
| |||
Dr. Hafrun Fridriksdottir
|
| 58
|
|
| 2017
|
| Executive Vice President, Global R&D
| |||
Eli Kalif
|
| 47
|
|
| 2019
|
| Executive Vice President, Chief Financial Officer
| |||
Gianfranco Nazzi
|
| 51
|
|
| 2017
|
| Executive Vice President, International Markets Commercial
| |||
Brendan O’Grady
|
| 53
|
|
| 2017
|
| Executive Vice President, North America Commercial
| |||
Mark Sabag
|
| 50
|
|
| 2013
|
| Executive Vice President, Chief Human Resources Officer and Global Communications and Brand
| |||
David M. Stark
|
| 51
|
|
| 2016
|
| Executive Vice President, Chief Legal Officer
| |||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 25
Corporate Governance and Director Compensation
Name Kåre Schultz Richard Daniell Dr. Sven Dethlefs Eric Drapé Galia Inbar Dr. Hafrun Fridriksdottir * Eli Kalif Mark Sabag Eli Shani David M. Stark Age Executive
Officer Since Position 60 2017 President and Chief Executive Officer 55 2017 Executive Vice President, European Commercial 53 2017 Executive Vice President, North America Commercial 60 2019 Executive Vice President, Global Operations 47 2021 Executive Vice President, Chief Human Resources Officer and Global Communications and Brand 60 2017 Executive Vice President, Global R&D 49 2019 Executive Vice President, Chief Financial Officer 52 2013 Executive Vice President, International Markets Commercial 57 2021 Executive Vice President, Global Marketing and Portfolio 53 2016 Executive Vice President, Chief Legal Officer
| * | Dr. Fridriksdottir will be leaving Teva and will remain in her role until June 20, 2022. |
Kåre Schultz
President and Chief Executive Officer | The biography of Kåre Schultz, our President and Chief Executive Officer, and one of our directors, appears under “—Directors” above. | |
Richard Daniell
Executive Vice President, European Commercial | Mr. Daniell was appointed Executive Vice President, European Commercial in | |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 27 | |
Executive Officers
Dr. Sven Dethlefs
Executive Vice President,
| ||
Eric Drapé
Executive Vice President, Global Operations | Mr. Drapé was appointed Executive Vice President, Global Operations in | |
Galia Inbar Executive Vice President, Chief Human Resources Officer and Global Communications and Brand | Ms. Inbar was appointed Executive Vice President, Chief Human Resources Officer and Global Communications and Brand in August 2021. From 2019 to 2021, Ms. Inbar was Senior Vice President, Global People Operations, leading Teva’s global Human Resources operations. Prior to joining Teva, Ms. Inbar held several senior global human resources and operations roles at Amdocs and other leading technology companies. Ms. Inbar holds a BSc in Industrial Engineering from Tel-Aviv University. | |
Dr. Hafrun Fridriksdottir
Executive Vice President, Global R&D | Dr. Fridriksdottir | |
26 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 28 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Corporate Governance and Director CompensationExecutive Officers
Eli Kalif
Executive Vice President, Chief Financial Officer | Mr. Kalif was appointed Executive Vice President, Chief Financial Officer in | |
Mark Sabag
Executive Vice President, International Markets Commercial | Mr. | |
| ||
| ||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 27
Corporate Governance and Director Compensation
Eli Shani Executive Vice President, Global Marketing and Portfolio | Mr. Shani was appointed Executive Vice President, Global Marketing and Portfolio in August 2021. From 2018 to 2021, he served as SVP, Business Development and Alliance Management. Prior to that, he held several senior leadership roles at Teva including, Senior Vice President, Strategic Initiatives, International Markets, Chief Operating Officer of a joint venture formed by Teva and Procter & Gamble and Vice President in Teva’s Corporate Business Development group. Before joining Teva, Mr. Shani held several senior leadership roles in healthcare and investment banks. He holds a joint degree in law and accounting from the University of Tel Aviv and an MBA from the University of Chicago. | ||
David M. Stark
Executive Vice President, Chief Legal Officer | Mr. Stark | ||
28 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 29 | |
COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis (“CD&A”) describes the philosophy, objectives, process, components and additional aspects of our 20192021 executive compensation program. This CD&A is intended to be read in conjunction with the tables that immediately follow this section, which provide further historical compensation information for the following named executive officers (“NEOs”):
Name |
Position | |
Kåre Schultz | President and Chief Executive Officer (“CEO”) | |
Eli Kalif | Executive Vice President, Chief Financial Officer (“CFO”) | |
Dr. Sven Dethlefs (1) |
| |
| Executive Vice President, North America Commercial | |
Eric Drapé | Executive Vice President, Global Operations | |
Mark Sabag (2) | Executive Vice President, International Markets Commercial | |
|
| |
|
| |
| (1) |
|
| (2) | Mr. |
|
|
Quick CD&A Reference Guide
|
Page 30
| |
II. Compensation
|
Page 38
| |
III. Compensation
|
Page 41
| |
IV. Components of Our Compensation
|
Page 44
| |
|
| |
|
|
I. Executive SummaryBUSINESS AND COMPENSATION OVERVIEW
Compensation Objectives
In order to accomplish our key corporate objectives, we must attract, motivate and retain highly skilled and experienced people to execute our corporate strategy and lead our team. To that end, our executive officer compensation program is designed to:
| (i) | link pay to performance; |
| (ii) | align executive officers’ interests with those of Teva and its shareholders over the long term; |
| (iii) | provide competitive compensation to attract and retain talent; and |
| (iv) | encourage |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 29
| 30 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
20192021 Select Business Highlights
In 2019,2021, despite challenges due to COVID-19, we made significantmeaningful progress in executing on our strategic plan to reduce costs and return to growth,delivered solid results, generating strong cash flow and improving our profitability, as detailed below.
Strategic Developments
|
| ∎ |
|
| ∎ | While COVID-19 continued to impact patient behavior and global prescribing patterns, we continued to optimize our |
| ∎ | Sales of |
| ∎ | Sales of AJOVY for the preventive treatment of migraines in adults continued to grow, with $313 million in global revenues in 2021 (including a milestone payment). In North America, revenues were $176 million, an increase of 31% compared to 2020 and in Europe, revenues were $87 million, an increase of 184% compared to 2020. AJOVY reached 28% market share in Europe and 21% in the U.S. AJOVY was launched in Japan in August 2021. |
| ∎ | In |
| ∎ | We continued to grow the market share of Truxima® to approximately 28% in the U.S., our |
| ∎ | Our biosimilar pipeline increased to 13 products, including 7 of our own and 6 with partners and including Lucentis, which is expected to launch in Europe in 2022. |
| ∎ | We generated improvement in several ratings that we receive from a wide range of organizations that evaluate the performance of companies with respect to ESG matters. As described above, we issued $5 billion of sustainability-linked bonds, the largest such issuance to date. |
| ∎ | In July 2021, Teva’s Economic Impact Report was released, based on an independent study by |
| ∎ | We reduced our net debt by |
|
|
|
Financial Results
|
| ∎ | Our revenues in |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 31 | |
Executive Compensation
| ∎ | Operating |
| ∎ | As of December 31, |
| ∎ | GAAP |
| ∎ | During |
30 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
|
|
|
Multi-Year Restructuring Largely Completed in 2019Taking ESG to Position Teva for Future Growththe Next Level and Achieving Solid Results
Teva is dedicated to advancing the health of its patients, the planet and its business. As a company focused on improving patients’ lives, ESG has been a central concern to Teva. Over the last few years, we’ve laid strong foundations for ESG. In September 2017,pursuing our Board appointed Mr. Schultz as CEO based on his strong track recordgoal of ESG leadership, we formalized our ESG strategy, priorities and targets, and we enhanced our reporting and disclosure. We have greatly expanded our reporting, in corporate turnaroundspart, to meet the growing expectations of shareholders, other stakeholders and driving growth. AtESG rating entities for disclosing more qualitative and quantitative information in accordance with the time of Mr. Schultz’s appointmentrelevant global ESG standards.
In November 2021, in 2017,line with our ESG strategy, we had approximately $34issued $5 billion of debtsustainability-linked bonds, the largest offering of its kind to date, to refinance debt. These are the first such bonds in the pharmaceutical industry to include both environmental and COPAXONE, a product that generated a significant amount of our revenue, was losing patent protection aroundsocial targets, namely reducing greenhouse gas emissions and improving access to medicines, by 2025. In addition, in 2021, the worldHR and we anticipated lower product revenue amid competition from generic versions.
Shortly after his appointment, Mr. Schultz initiated atwo-year Company restructuring plan designed to reduce our spend base significantly, which would provide cash flow to service debt and stabilize earnings, while still maintaining full operational capacity. In 2019, we essentially concluded the plan. Under Mr. Schultz’s leadership, the Company’s executive officers succeeded in reducing our spend base by $3 billion since 2017, reducing our net debt by 21% since 2017, and optimizing our manufacturing operations, enabling us to lay the foundation for future growth.
In order to focus our executive officers on these most critical strategic priorities during the restructuring period, the Compensation Committee and the Board selectedset for the CEO and other executive officers objective and measurable goals directly related to our renewed ESG strategy, including on environmental, access to medicines, employee engagement, antimicrobial resistance and other objectives. These serve as examples of how our purpose and our financial and sustainability objectives are linked.
In 2020, we began transitioning our business for further growth, and in 2021, we sought to continue our growth, driven in part by increases in sales and market share of recently launched products. Consistent with this strategic shift, in 2021, the HR and Compensation Committee and the Board set ambitious goals in our annual incentive plan, increasing the target for non-GAAPNon-GAAP EPS by 5% over the 2020 actual result and by 6% over the 2020 goal, and increasing the target for Free Cash Flow as performance metrics inby 10% over the 2019 annual cash incentive plan2020 actual result andnon-GAAP Operating Profit by 15% over the 2020 goal. No adjustments were made to these goals due to the global pandemic. Even amidst the headwinds and Net Debt Reduction in the 2019-2021 long-term incentive equity plan. Even in the midstoperational impacts of the restructuring and despite facing significant market headwinds,global pandemic, our CEO and ourother executive officers led the Company to achieve solid results in achieving the 2019non-GAAP EPS2021, generating strong cash flows and Free Cash Flowimproving our profitability. The Company improved its gross and operating margins and reduced net debt, keeping us on our path to achieve our 2023 long-term goals.
See “—Key HighlightsAspects of 20192021 Executive Compensation—3. 20192021 Targets Performance AchievementIncreased and Annual and Long-Term Incentive Compensation Payouts”Rigorous; No Adjustments Due to COVID-19” below for additional information on the target and achievement levels of performance for these metrics.
We believe that our success in 2019 in steadying our earnings performance and in bringing new specialty products to market around the world have positioned the Company for future growth. As such, for 2020, the Compensation Committee and the Board began to shift the focus of incentives by incorporating Net Revenue and top line growth into the 2020-2022 long-term incentive equity metrics.
Key Highlights of 2019 Executive Compensation
| ||
| 32 | ||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 31
Executive Compensation
2019Key Aspects of 2021 Executive Compensation
| 1. | 2021 CEO Compensation: Majority Performance-Based (Total and Long-Term Incentive Equity) |
Identical to 2020, approximately 86% of our CEO’s 2021 compensation was variable and at-risk, with the substantial majority being performance-based. In addition, 70% of our CEO’s long-term incentive equity grant was in the form of performance share units (“PSUs”). The PSUs are subject to three-year performance metrics tied to our key goals and there is a relative Total Shareholder Return (“TSR”) modifier (+/- 20%). The PSUs will vest, if at all, at the end of the performance period. The other 30% of our CEO’s long-term incentive equity grant was in the form of time-based restricted share units (“RSUs”), which vest over four years. There was no increase to the CEO’s compensation, which was the level approved by our shareholders, as compared to 2020.
2021 CEO Target Total Direct Compensation
Executive
| Principal
| Base Salary
| Target
| 2019 PSUs
| 2019 RSUs
| Total
| Principal
| Base Salary
| Target
|
Target
|
Target
| Total (*)
| ||||||||||||
Kåre Schultz
|
CEO
|
$2,000,000
|
$2,800,000
|
$2,999,985
|
$2,999,992
|
$10,799,977
| CEO | $2,000,000 | $2,800,000 | $7,000,000 | $3,000,000 | $14,800,000 | ||||||||||||
% of Total
|
18%
|
26%
|
28%
|
28%
| 100% |
| 14% | 19% | 47% | 20% | 100% | |||||||||||||
% of Long-Term
|
50%
|
50%
| ||||||||||||||||||||||
% of Long-Term Incentive |
|
|
| 70% | 30% |
| ||||||||||||||||||
| (*) | Equity values have been rounded to the nearest $10,000. |
| 2. |
|
In orderaddition to earn any70% of the CEO’s target equity grant in the form of PSUs, asimilar to 2020, 50% of the value of the target equity grant for our other executive officers is subject to performance-based vesting conditions in the form of PSUs, and the other 50% is in the form of time-based RSUs. This enhances the strong link between pay and performance for our NEOs and the alignment of the interests of the NEOs with those of Teva and its shareholders.
A minimum of 85% of target performance must be achieved in order to earn any PSUs for a particular metric, which is a rigorous and challenging level of achievement that must be met before any PSUs are earned.level. In addition, the HR and Compensation Committee and the Board established three-year goalsup-front for the chosen metrics and communicated them to grant recipients, clearly articulating the targets from the outset of the performance period. For the grants in the form of PSUs, the Compensation Committee and the Board reduced the maximum potential number of PSUs to be earned from 300% to 240% of the target number of PSUs for maximum performance.
| 3. |
|
No Adjustments Due to COVID-19. The HR and Compensation Committee and the Board did not make any adjustments to the targets and did not exercise any discretion to make adjustments to our annual or long-term incentive plan goals due to COVID-19, demonstrating our strong performance relative to those goals despite challenging circumstances.
Annual Cash Incentives. At the beginning of 2021, we established annual cash incentive plan targets for Non-GAAP EPS and Free Cash Flow that were aligned to the high end of the range of our outlook as communicated to investors in February 2021. These goals were considered rigorous, aggressive and challenging, attainable only with strong performance, and took into account the relevant opportunities and risks, including the significant continuing headwinds we were facing.
The 2021 Non-GAAP EPS goal was set at $2.70, 5% higher than our actual 2020 performance and 6% higher than the 2020 goal, and the Free Cash Flow goal was set at $2.3 billion, 10% higher than our
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 33 | |
Executive Compensation
actual 2020 performance and 15% higher than the 2020 goal, based on the assumptions communicated to investors in February 2021, including:
| ∎ | Anticipated continued decline in COPAXONE revenue |
| ∎ | Anticipated |
|
| ∎ | Anticipated |
In spite of the challenges we faced in 2021, we made exceptional progress.achieved very solid results. For the 20192021 annual incentive plan, the HR and Compensation Committee and the Board determined that the Company’s achievement was 96% of our 20192021 non-GAAPNon-GAAP EPS target, and 103%95% of our 20192021 Free Cash Flow target, both of which were aligned to the high end of our 2019 outlook as communicated to investors in February 2019.target. Based on achievement of these corporate objectives, along with determination of the NEOs’ individual performance achievement (which represented 25% of the target total opportunity), the HR and Compensation Committee and the Board approved an annual incentive plan payout of 102%72% of target for the CEO and between 93%96% and 118%102% of target for the other NEOs.
32 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
In addition, for 2017-2019Long-Term Incentives. For the 2019-2021 PSUs, the HR and Compensation Committee and the Board determined that the achievement for the combined three-year performance period was 100%98% of thenon-GAAP EPS target for Net Debt, resulting in an earning percentage of 100%91%, and achievement of 111%103% of the Free Cash Flow target for Non-GAAP Operating Profit, resulting in an earning percentage of 154%113%. The average of these earning percentages, 127%102%, was then subject to a relative TSR modifier, which adjusted the earning percentage downward by 20%, resulting in a modified earning percentage of 102%. The Compensation Committee and the Board then exercised negative discretion to reduce the final earning percentage to 100%82% of the target number of PSUs.
|
|
|
|
|
|
|
Realizable Pay Demonstrates Pay for Performance Alignment
As described in more detail below, a core component of our compensation philosophy is to incentivize our executive officers by creating a strong link between their performance and compensation. To show the alignment of pay outcomes with performance, it is useful to illustrate the amounts realizable as of December 31, 2021 relative to the target amounts of CEO compensation set by the HR and Compensation Committee, the Board, and shareholders for the relevant year.
Realizable pay shows this relationship because it reflects the actual value of annual incentives and equity awards received or to be received by our NEOs,CEO, and fluctuates with financial metric performance and with increases or decreases in share price. For this reason, contrasting target pay with realizable pay provides a meaningful demonstration of the pay for performance alignment.alignment of Teva’s executive compensation program.
When the Company does not meet performance targets and/or the share price decreases, an executive’s realizable pay is affected.
| 34 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
The following charts demonstrate the relationship between the target and realizable pay values, in each of the past three years, of our NEOs’:CEO’s: (1) annual incentive, and (2) annual equity grants, including PSUs RSUs, and stock options, as applicable, followingRSUs.
When the conclusion ofCompany does not meet performance targets and/or the applicable three-year PSU performance period (December 31) and RSU and option values fromshare price decreases, the same annual grant as of that date. The equity grants to the NEOs in 2015 and 2016 included PSUs and stock options and in 2017 included PSUs, RSUs and stock options. CEO’s realizable pay is affected.
The realizable value shown for the annual cash incentive reflects actual Non-GAAP EPS, Free Cash Flow and individual performance for the applicable year, and when contrasted with target value, underscores the link of thisthe pay outcome to actual performance. We calculated the realizable value of annual equity has been calculatedgrants by multiplying the number of 1) actual earned shares (for the completed 2019-2021 performance period) based on actual three-year non-GAAP operating profit, net debt reduction and relative TSR performance, 2) target shares for each other PSU grant, and 3) the number of vested and unvested RSUs
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 33
Executive Compensation
(for the 2017 grant)each RSU grant, by the stock price per share on the last trading day of the relevant performance period, and by determining the intrinsic (or “in the money”) value of vested and unvested stock options on these dates.
With respect to PSUs, for 2015 grants, the Company’s three-year performance did not achieve the threshold level, and no PSUs were earned. For 2016 grants, the Company’s three-year performance produced an earning percentage of 75.09%, but because2021. Because of the decrease in the share price that is a key component of the equity value, the realizable equity value of such PSUs represented just 22% of the target value. For NEOs that received a grant in February 2017, the Company’s three-year performance produced an earning percentage of 100%, but because of the decrease in the share price, the realizable value of such PSUs represented just 35% ofsubstantially less than the target value, demonstrating the direct link between performance and the realizable value of RSUs represented just 31% of the grant value. Per the terms of Mr. Schultz’s employment agreement, he received a 2017 grant upon commencing employment in November 2017, and as the share price had already declined by that time resulting in a lower fair value per unit, the CEO’s realizable value of such PSUs represented 104% of the target value and the realizable value of RSUs represented 94% of the grant value. With respect to stock options granted in 2015, 2016 and 2017, because of the decrease in the share price, no stock options granted had any intrinsic value at the conclusion of the respective PSU performance periods.pay outcomes.
|
| |
|
| |
|
20192021 Say-on-Pay Vote and Shareholder Engagement
At the 20192021 annual meeting of shareholders, our shareholders approved, on an advisory basis, in our Say-on-Pay proposal, the compensation of our NEOs, with approximately 89% of the votes cast on the matter “For” such approval, an improvement from 2018’s advisory vote. The Compensation Committee viewed the approval by shareholders of the executive compensation program at such a level as evidence that a substantial majority of shareholders have a favorable view of the Company’s executive compensation program.
In addition, our shareholders approved our amended compensation policy, as required by Israeli law, with approximately 90%76% of the votes cast on the matter “For” such approval.
Similar to 2018, in 2019In late 2021 and early 2020,2022, the Board engagedconducted discussions with shareholders, as part of our shareholders in order to demonstrate ourregular, ongoing, annual commitment to strong corporate governance and continuous dialogue with our effort to gather input from our shareholders,stakeholders, which we believe enables us to better understand the perspectives of our shareholders. their perspectives.
During this time,
34 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
we contacted our top 25 shareholders, representingwhich represent approximately 36%37% of our outstanding shares and a significant majority of identified institutional holders, as well as the research teams at proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis & Co. Our Chairman of the Board and the ChairShareholders representing approximately 34% of our Compensation Committeeoutstanding shares responded that they did not seek to engage at this time or did not respond to our request. Several of these holders have engaged with us and provided feedback in prior rounds of engagement. We participated in discussions with the shareholders representing approximately 23% of our outstanding shares. In addition, we participated in a discussionthat agreed to engage and with one of the proxy advisory firms. Our Chairman of the Board, the Chair of our HR and
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 35 | |
Executive Compensation
Compensation Committee and a member of the Compliance Committee who presented on ESG matters participated in relevant discussions with shareholders.
The discussions covered a broad array of matters as presented in the table below.
| Topics Raised | Teva Response | |
Changes to executive compensation program over recent years | The Chair of our HR and Compensation Committee raised the topic of our executive compensation program. Shareholder commentary on the subject was limited, and ultimately, there were no common themes. (Given the opportunity to determine the topics of discussion, most shareholders focused on the other topics set forth below.) Following engagement with shareholders over the past few years, the HR and Compensation Committee has taken the following actions: ∎ Increased the proportion of long-term incentive equity grants that are performance-based from 50% to 70% for the CEO (2020) and from 33% to 50% for all other NEOs (2019); ∎ Introduced a relative TSR modifier in our long-term performance-based awards (2017); ∎ Enhanced disclosure to show the threshold, target and maximum performance levels and payout opportunities for the annual cash incentive plan and for PSUs, the performance period of which has ended (2018); ∎ Eliminated overlapping metrics in short- and long-term performance-based awards (2019); ∎ Updated peer group criteria by reducing the revenue range to $10-$40 billion from $10-$70 billion, which resulted in the removal of five of the largest companies by revenue, to reflect current organizational status (2019); ∎ Enhanced stock ownership guidelines by increasing the ownership guideline for the CEO to 6x base salary (from 4x) and for the other executive officers to 3x base salary (from 2x), adopted ownership guidelines for members of the Board of Directors equal to 5x the annual cash retainer fee for Board membership (excluding committee fee) and discontinued including unvested PSUs toward satisfaction of the ownership guidelines (2019); and ∎ Requested and obtained shareholder approval to decrease compensation for the Chairman of the Board and revise the compensation for other directors to provide greater alignment with shareholders (2019). | |
Environmental, Social, and Governance | The Board and the executive management team firmly believe that ESG is critical to our long-term sustainability and success. Teva’s ESG approach is underpinned by several fundamentals: ∎ Materiality assessment. A 2020 assessment led to the identification of ten priority areas. ∎ Tangible and ambitious long-term goals, reinforced by ESG policies and positions. In 2021, we established targets on environment, access to medicines, responsible supply chain and ethics and compliance. ∎ Oversight of ESG governance by the Board. Our Compliance Committee of the Board oversees ESG policies, programs, and initiatives. ∎ Executive compensation linked to ESG. In 2021, the CEO and several executives had individual performance goals directly tied to Teva’s ESG strategy. | |
| 36 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
| Topics Raised | Teva Response | |
∎ ESG targets linked to our financing strategy. Teva’s issuance of sustainability-linked bonds in November 2021 is an example of how our purpose and our financial and sustainability objectives are linked. The bond targets two of the most critical challenges for the world: access to medicines and climate change. ∎ Compliance and ethics. We continue to prioritize our compliance and ethics program across the globe, with an emphasis on policies and training. Teva strives to create a culture of compliance by reflecting its values in policies and procedures, including Teva’s Code of Conduct and Teva’s Policy on the Prevention of Corruption. Employees are assigned relevant compliance trainings and receive frequent communications from Board members and senior management about the importance of integrity. ∎ Reporting. Teva continues to enhance transparency, by reporting in accordance with Global Reporting Initiative (GRI) standards and striving to align reporting with other robust international standards, such as the Sustainability Accounting Standards Board (SASB) and with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. | ||
Inclusion and diversity | The Board and executive management view inclusion and diversity as essential to our ability to innovate and grow our business. It is our desire to create and sustain an inclusive and diverse work environment. Employees identifying as female represent 46% of our global employee population, 48% of managers, 29% of senior management, and 25% of directors as of December 31, 2021. Our Inclusion and Diversity (“I&D”) framework, governed by our I&D task force, provides a foundation for embedding I&D across our business. We focus on gender pay equity and increase manager awareness by providing relevant training in connection with our annual performance and compensation cycle. In addition, we support recruitment, development and retention of individuals with diverse backgrounds. We seek to support our inclusive and diverse culture through employee resource groups (“ERGs”), mentoring programs, sponsorship, and training, among other things. In addition, we provided mandatory training for all employees globally on unconscious bias and include an inclusive leadership module in all Teva leadership development programs. | |
Executive succession planning | The HR and Compensation Committee and the Board view succession planning as a top priority. Our succession planning covers the CEO as well as our executive management team. The goal of succession planning is to ensure we have the highest caliber talent pool to lead our strategic growth in a collaborative environment. Both internal and external candidates will be considered but we are highly encouraged by our commitment to develop internal talent. The CEO is fully engaged in this process. | |
Feedback from our shareholders was shared and discussed with the HR and Compensation Committee, the Corporate Governance and Nominating Committee, the Compliance Committee and the Board.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 37 | |
Executive Compensation
The Board and management continue to engage regularly in dialogue with many of the Company’s largest shareholders, and the HR and Compensation Committee will continue to consider shareholder feedback and the results of the advisory vote on executive compensation in connection with its determinations of executive compensation.compensation as depicted in our annual shareholder engagement cycle below. Through our shareholder outreach, we have established important feedback channels that provide a valuable way to receive ongoing input from our shareholders.
Teva Pharmaceutical Industries Ltd. II. COMPENSATION PHILOSOPHY AND OBJECTIVES
2020 Proxy StatementCompensation Philosophy 35
| ∎ | Pay-for-performance:We aim to incentivize our executive officers by creating a strong link between their performance and compensation. Therefore, a significant portion of the total compensation package provided to our executive officers is based on measures that reflect both our short- and long-term goals and performance, as well as the executive officer’s individual performance and impact on shareholder value. |
| ∎ | Alignment of executive officers’ interests with those of Teva and its shareholders: In order to promote retention and motivate executive officers to focus on long-term objectives and the performance of Teva’s shares, a significant portion of the compensation packages of our executive officers is granted in the form of equity-based compensation, which creates a direct link between the interests of executive officers and the interests of Teva and its shareholders. By making executive officers shareholders with a personal stake in the value of Teva, we are motivating them to create, and enabling them to share in, Teva’s growth and success, while also fostering an ownership culture among executive officers. |
| ∎ | Competitive compensation to attract and retain talent: We compete with global companies to attract and retain highly talented professionals with the necessary capabilities to promote creativity, encourage high achievement, manage our complex business and worldwide operations and execute our strategy. The HR and Compensation Committee and the Board reference, among other things, the amounts and structures of the compensation of executive officers in the companies in our peer group in determining competitive pay levels, and generally target total direct compensation at the median range of comparable positions at these companies. |
| 38 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
| ∎ | High standards of corporate governance, compliance and risk management: We are committed to transparent and ethical business practices. Maintaining high standards of corporate governance and legal compliance are key factors in our success. This allows us to create long-term value for our shareholders as well as all of our other stakeholders, including employees, customers, suppliers and, above all, patients worldwide. Compensation is structured in a manner that creates an incentive to deliver high performance (both short- and long-term) while taking into account our compliance and risk management philosophy and avoiding undue pressure on executive officers to take excessive risks, thereby encouraging a balanced and effective risk-taking approach. |
II. Compensation GovernancePolicy under the Israeli Companies Law
Due to our unique position as an Israeli company with an extensive global footprint, we aim to adopt compensation policies and practices that match those of similar global companies, but we must also comply with applicable Israeli law, including the requirement that Israeli publicly-traded companies adopt a compensation policy which is submitted periodically for shareholder approval and contains certain limits on elements of compensation. Executive compensation decisions must generally be consistent with that policy.
As approved at our 2019 annual meeting of shareholders, and as required by the Israeli Companies Law, we have adopted a Compensation Policy regarding the terms of office and employment of our “Office Holders” (as defined under the Israeli Companies Law, which includes directors, the CEO, other executive officers and any other managers directly subordinate to the CEO), including cash compensation, equity-based awards, releases from liability, indemnification and insurance, severance, and other benefits (the “Terms of Office and Employment”). Each of our NEOs is an Office Holder within the meaning of the Israeli Companies Law. The Compensation Policy is reviewed from time to time by the HR and Compensation Committee and the Board to ensure its alignment with our compensation philosophy and objectives and to consider its appropriateness for Teva. Under the Israeli Companies law, we are required to submit the compensation policy to shareholders at least once every three years for approval. Because three years have elapsed since our shareholders last approved the Compensation Policy in 2019, and as further described in “Proposal 3: Approval of Teva’s Compensation Policy” set forth below, Teva is submitting to shareholders a proposal to re-approve the current Compensation Policy.
Compensation Governance
As part of the efforts of the Compensation Committee to ensure that our compensation program, which includes our policiesThe HR and practices, aligns our executive officers’ interests with those of Teva and its shareholders, the Compensation Committee assesses the effectiveness of our compensation program periodically and reviews risk mitigation and governance matters. We do this by maintaining the following best practices:
What We Do | ||||||||
|
| |||||||
Shareholder-Approved Compensation Policy
|
| |||||||
Majority Variable Pay
|
| |||||||
|
| |||||||
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 39 | |
Executive Compensation
What We Do | ||||||
Combination of Balanced Performance Metrics
|
| |||||
Equity for Long-Term Incentives
|
| |||||
|
| |||||
Peer Data
|
|
| ||||
|
| |||||
Stock Ownership Guidelines
|
| |||||
Clawback
|
| |||||
|
| |||||
Cap Bonus, Equity Grant Fair Values and PSU Payouts
|
|
| ||||
|
|
|
| |||
|
| |||||
Double Trigger Change-in-Control Provisions
|
| |||||
What We Don’t Do | ||||||
No Dividends on Unearned Awards
|
| |||||
|
| |||||
No Repricing of
|
| |||||
No Excise Tax Gross-Ups
|
| |||||
|
| |||||
|
| |||||
|
| ||||||
| 40 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | ||||||
36 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Compensation Policy under the Israeli Companies LawIII. COMPENSATION DETERMINATION PROCESS
Due to our unique position as an Israeli company with an extensive global footprint, we aim to adopt compensation policies and practices that match those of similar global companies, but we must also comply with applicable Israeli law, including the requirement that Israeli publicly traded companies adopt a compensation policy which is brought for shareholders’ approval and contains certain limits on elements of compensation. All executive compensation decisions must generally be consistent with that policy.
As approved at our 2019 annual meeting of shareholders, and as required by the Israeli Companies Law, we have adopted a Compensation Policy regarding the terms of office and employment of our “Office Holders” (as defined under the Israeli Companies Law, which includes directors, the CEO, other executive officers and any other managers directly subordinate to the CEO), including cash compensation, equity-based awards, releases from liability, indemnification and insurance, severance, and other benefits (the “Terms of Office and Employment”). Each of our NEOs is or was an Office Holder within the meaning of the Israeli Companies Law. The Compensation Policy is reviewed from time to time by the Compensation Committee and the Board to ensure its alignment with our compensation philosophy and objectives and to consider its appropriateness for Teva. Under the Israeli Companies law, we are required to bring the compensation policy to shareholders at least once every three years for approval.
Pursuant to the Israeli Companies Law, arrangements between Teva and its Office Holders must generally be consistent with the Compensation Policy. However, under certain circumstances, we may approve an arrangement that is not consistent with the Compensation Policy, if the arrangement is approved by a majority of our shareholders who participate and vote, provided that (i) the majority includes a majority of the votes cast by shareholders who participate and vote (abstentions are disregarded) who (A) are not controlling shareholders and (B) do not have a personal interest in the matter, or (ii) the votes cast against the arrangement by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who participate and vote constitute two percent or less of the voting power of the Company (a “special majority”).
In addition, pursuant to the Israeli Companies Law, the Terms of Office and Employment of Office Holders generally require the approval of the Compensation Committee and the Board. The Terms of Office and Employment as applicable to directors, including with respect to other positions in the Company, further require the approval of the shareholders by a simple majority. The Terms of Office and Employment with respect to a CEO (who is not a director) generally require the approval of the shareholders by the special majority referenced in the immediately preceding paragraph.
Under certain circumstances, if the Terms of Office and Employment of Office Holders who are not directors are not approved by the shareholders, where such approval is required, the Compensation Committee and the Board may nonetheless approve such terms. In addition,non-material amendments of the Terms of Office and Employment of Office Holders who are not directors may be approved by the Compensation Committee only andnon-material amendments of the Terms of Office and Employment of Office Holders who are not directors and excluding the CEO may be approved by the CEO only, provided such approvals are permitted under the Compensation Policy and consistent therewith.
Accordingly, pursuant to our Compensation Policy, the Compensation Committee can authorize our CEO to approve changes in terms for any other executive officer with respect to any calendar year, provided that it does not exceed the value of such executive officer’sone-month base salary.
III. Compensation Philosophy and Objectives
We are committed to transparent and ethical business practices. Maintaining high standards of corporate governance and legal compliance are key factors in our success. This allows us to create long-term value for our shareholders as well as all of our other stakeholders, including employees, customers, suppliers and, above all, patients worldwide.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 37
Executive Compensation
Our executive officer compensation philosophy also values the following principles:
|
|
|
|
Our objectives with respect to executive officer compensation, as summarized below, are designed to: (i) link pay to performance; (ii) align executive officers’ interests with those of Teva and its shareholders over the long term; (iii) provide competitive compensation packages that motivate our executive officers; and (iv) encourage balanced risk management.
|
|
|
|
38 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
IV. Compensation Determination Process
The Compensation Committee and the Board design the executive compensation program with the intention of accomplishing the goals described above. In determining executive compensation, the Compensation Committee obtains input and advice from its independent compensation consultant and reviews recommendations from our CEO with respect to the performance and compensation of our other executive officers. The Compensation Committee and, if applicable, the Board, review and approve the compensation and the performance-based metrics and goals of the CEO and executive officers and consider financial, operational and share price performance to determine appropriate executive compensation parameters, amounts and forms.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 39
Executive Compensation
Key Participants
The roles and responsibilities of all parties involved with the compensation determination process are set forth below:
Participant | Responsibilities | |
Shareholders |
∎ Approve the Compensation Policy as required under the Israeli Companies Law, including caps for cash incentives and equity, at least once every three years, and any changes thereto ∎ Cast advisory vote on proposal(s) regarding executive compensation under U.S. law ∎ Approve any compensation that deviates from the Compensation Policy ∎ Approve compensation of the CEO ∎ Approve compensation of directors ∎ Approve equity plans, material changes to equity plans and share reserve increases ∎ Provide direct feedback and input to Teva and our Board | |
Board of Directors |
∎ Evaluate performance of the CEO and executive officers, including the NEOs ∎ Review and approve (subject to shareholder approval in certain cases): ∎ Equity plans, material changes to equity plans and share reserve increases ∎ CEO and executive officer compensation, with input and recommendation from, and prior approval of, the HR and Compensation Committee ∎ Changes to the Compensation Policy | |
Human Resources and Compensation Committee |
∎ Consider shareholder feedback and all other factors to help align our executive compensation program with the interests of Teva and our shareholders and long-term value creation ∎ Review and approve (subject to Board and shareholder approval in certain cases): ∎ CEO and executive officer compensation, including adjustments to executive officers’ base salaries, cash incentives and equity compensation, as well as other components of compensation ∎ Performance-based metrics and goals under the annual cash incentive plan and PSU plan ∎ Achievement of performance-based goals under the annual cash incentive plan and associated with PSUs ∎ Equity plans and awards ∎ The Compensation Policy and its continued appropriateness (periodically) ∎ The CD&A and the compensation tables and accompanying narrative descriptions | |
Independent Compensation Consultant |
∎ Advise the HR and Compensation Committee on various director and executive officer compensation and governance topics, including: ∎ Compensation Policy, pay philosophy, best practices and market trends ∎ Selection of peer group companies ∎ Director and executive officer compensation practices and levels at peer group companies ∎ Design of annual cash incentive plan and performance and other equity plans, and awards and grants under each plan ∎ Stock ownership guidelines ∎ Review and provide an independent assessment of the data and materials presented by management to the HR and Compensation Committee ∎ Participate in HR and Compensation Committee meetings as requested | |
CEO |
∎ Evaluate the performance of other executive officers, including the other NEOs, and recommend adjustments to base salaries, annual cash incentives and long-term equity compensation ∎ Develop business goals, which are evaluated and incorporated by the HR and Compensation Committee and the Board in the design of our executive officer compensation program | |
40 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 41 | |
Executive Compensation
Role of Independent Compensation Consultant
The HR and Compensation Committee has the authority to retain independent compensation consultants to assist it in the performance of its duties and responsibilities without consulting or obtaining the approval of management of the Company. The HR and Compensation Committee has retained Semler Brossy Consulting Group LLC (“Semler Brossy”) as its independent compensation consultant. Semler Brossy reported directly to, and was directly accountable to, the HR and Compensation Committee. While the HR and Compensation Committee took into consideration the review and recommendations of this independent advisor when making decisions about the Company’s executive officer and director compensation practices and governance related topics, the HR and Compensation Committee ultimately made its own independent decisions about these matters.
The HR and Compensation Committee assessed the independence of Semler Brossy pursuant to the rules of the SEC and the NYSE. In doing so, the HR and Compensation Committee considered each of the factors set forth by the SEC and NYSE with respect to a compensation consultant’s independence. The HR and Compensation Committee also considered the nature and amount of work performed for the HR and Compensation Committee and the fees paid for those services in relation to the firm’s total revenues. After these reviews, the HR and Compensation Committee concluded that there were no conflicts of interest, and that Semler Brossy was independent pursuant to SEC and NYSE rules.
Compensation Peer Group and Peer Selection Process
In setting compensation for our CEOThe HR and executive officers, the Compensation Committee believes that obtaining relevant market and benchmark data is very important to making determinations about executive compensation. This information provides a solid reference point for making decisions and very helpful context even though, relative to other companies, there are differences and unique aspects of the Company.
The HR and Compensation Committee takes into consideration the structure and components of, and the Board consider comparativeamounts paid under, the executive compensation informationprograms of other, comparable peer companies, as derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program. The HR and Compensation Committee also considers broader industry practices and our competitors for talent.
The HR and Compensation Committee has developed and maintained a relevant group of peer companies (the “Peer Group”) as one point of reference.
Update to 2019 Peer Group:Periodically,generally using the Compensation Committee reassesses the Peer Group used as a reference point for evaluating executive officer compensation. In connection with determining the 2019 compensation of the CEO and other NEOs, the Compensation Committee conducted a review of our Peer Group to ensure its continued appropriateness. In light of changes in our revenues, the Compensation Committee revised the Peer Group selection criteria for company size by reducing the revenue range to$10-$40 billion from$10-$70 billion and by placing an upper limit on market capitalization of $160 billion. This resulted in the addition of Biogen Inc. and the removal of five of the largest companies from our 2018 peer group: GlaxoSmithKline Plc, Merck & Co., Inc., Novartis AG, Pfizer Inc. and Roche Holding AG.
The Peer Group was selected based on certain primary selection criteria, including:following criteria:
| ∎ | Industry: Pharmaceutical sector/subsector; |
| ∎ | Company size: $10 billion to $40 billion of revenues, market capitalization of $10 billion to $160 billion, and a similar number of employees as Teva; and |
| ∎ | Global presence and geography:Global footprint and breadth, with focus on U.S. and European markets; |
Company revenues are considered a primary factor in determining the Peer Group, which has been constructed so that our revenues are generally in the middle of the revenue range of the Peer Group companies. The HR and Compensation Committee believes that the Peer Group companies are the companies with which we compete for talent. In general, the HR and Compensation Committee accords less weight to market capitalization due in part to the number of factors that can influence and cause volatility in the spot price of the common stock of a company.
| 42 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
The Peer Group established for setting 2021 compensation consisted of the following companies:
Company | Headquarters | Revenues (1) ($ in millions) | Market Cap (1) ($ in millions) | Employees (1) | ||||||||||||||||
AbbVie, Inc. | United States | $ | 33,266 | $ | 150,187 | 30,000 | ||||||||||||||
Amgen, Inc. | United States | $ | 23,362 | $ | 126,296 | 22,000 | ||||||||||||||
Astellas Pharma, Inc. | Japan | $ | 12,089 | $ | 25,488 | 16,243 | ||||||||||||||
AstraZeneca Plc | United Kingdom | $ | 24,384 | $ | 132,036 | 61,100 | ||||||||||||||
Biogen, Inc. | United States | $ | 14,378 | $ | 38,789 | 7,400 | ||||||||||||||
Bristol-Myers Squibb Co. | United States | $ | 26,145 | $ | 131,742 | 23,300 | ||||||||||||||
Eli Lilly & Co. | United States | $ | 22,320 | $ | 118,273 | 38,815 | ||||||||||||||
Gilead Sciences, Inc. | United States | $ | 22,449 | $ | 72,904 | 11,800 | ||||||||||||||
GlaxoSmithKline Plc | United Kingdom | $ | 44,704 | $ | 83,307 | 99,437 | ||||||||||||||
Merck KGaA | Germany | $ | 18,126 | $ | 64,424 | 57,451 | ||||||||||||||
Mylan NV (2) | United Kingdom | $ | 11,501 | $ | 7,516 | 35,000 | ||||||||||||||
Novo Nordisk A/S | Denmark | $ | 18,325 | $ | 149,318 | 43,158 | ||||||||||||||
Sanofi | France | $ | 42,230 | $ | 113,280 | 100,409 | ||||||||||||||
Takeda Pharmaceutical Co., Ltd. | Japan | $ | 30,587 | $ | 48,420 | 49,578 | ||||||||||||||
|
| Revenues ($ in millions) | Market Cap ($ in millions) | Employees | ||||||||||||
Teva Pharmaceutical Industries Ltd. Percentile Rank | 21st | 2nd | 60th | ||||||||||||
Median | $22,906 | $98,294 | 36,908 | ||||||||||||
| (1) | Source (revenue, market capitalization and employee number information): Dow Jones (October 2020). |
| (2) | Subsequent to the HR and Compensation Committee’s selection of Mylan NV as a Peer Group company, the company became Viatris Inc. |
The HR and Compensation Committee periodically reviews the Peer Group to ensure that the companies included continue to meet the primary selection criteria outlined above. The HR and Compensation Committee decided to keep the same Peer Group as the prior year except for Allergan Plc which was removed due to being acquired.
The HR and Compensation Committee and the Board consider data from the Peer Group companies as a reference point in reviewing market pay levels, allocations and practices. Other factors considered when setting the compensation of
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 41
Executive Compensation
our CEO and executive officers include sustained performance, criticality of contributions to Teva, and the executive officer’s role, skills, experience and development. The HR and Compensation Committee retains discretion in determining the nature and extent of the use of Peer Group data.
The Peer Group established for setting 2019 compensation consisted of the following companies:
Company | Headquarters | Revenues (1) ($ in millions) | Market Cap (1) ($ in millions) | Employees (1) | ||||||||||||||||
AbbVie, Inc.
|
United States
|
$
|
28,216
|
|
$
|
142,009
|
|
|
29,000
|
| ||||||||||
Allergan Plc
|
Ireland
|
$
|
15,941
|
|
$
|
63,680
|
|
|
17,800
|
| ||||||||||
Amgen, Inc.
|
United States
|
$
|
22,784
|
|
$
|
133,636
|
|
|
20,800
|
| ||||||||||
Astellas Pharma, Inc.
|
Japan
|
$
|
10,557
|
|
$
|
34,371
|
|
|
16,617
|
| ||||||||||
AstraZeneca Plc
|
United Kingdom
|
$
|
26,367
|
|
$
|
96,596
|
|
|
61,100
|
| ||||||||||
Bayer AG
|
Germany
|
$
|
37,648
|
|
$
|
83,085
|
|
|
99,762
|
| ||||||||||
Biogen, Inc. (2)
|
United States
|
$
|
10,990
|
|
$
|
68,823
|
|
|
7,300
|
| ||||||||||
Bristol-Myers Squibb Co.
|
United States
|
$
|
20,776
|
|
$
|
100,883
|
|
|
23,700
|
| ||||||||||
Celgene Corp.
|
United States
|
$
|
12,822
|
|
$
|
61,593
|
|
|
7,467
|
| ||||||||||
Eli Lilly & Co.
|
United States
|
$
|
22,871
|
|
$
|
113,521
|
|
|
40,655
|
| ||||||||||
Gilead Sciences, Inc.
|
United States
|
$
|
26,135
|
|
$
|
97,213
|
|
|
10,000
|
| ||||||||||
Merck KGaA
|
Germany
|
$
|
16,480
|
|
$
|
45,039
|
|
|
52,880
|
| ||||||||||
Mylan NV
|
United Kingdom
|
$
|
11,907
|
|
$
|
19,396
|
|
|
35,000
|
| ||||||||||
Novo Nordisk A/S
|
Denmark
|
$
|
16,097
|
|
$
|
118,752
|
|
|
42,076
|
| ||||||||||
Sanofi
|
France
|
$
|
37,691
|
|
$
|
110,053
|
|
|
106,566
|
| ||||||||||
Shire plc
|
Ireland
|
$
|
17,794
|
|
$
|
54,367
|
|
|
23,044
|
| ||||||||||
Takeda Pharmaceutical Co., Ltd.
|
Japan
|
$
|
14,374
|
|
$
|
33,493
|
|
|
27,230
|
| ||||||||||
Revenues ($ in millions) | Market Cap ($ in millions) | Employees | ||||
Teva Pharmaceutical Industries Ltd. Percentile Rank
| 53rd
53rd
|
6th
|
76th
| |||
Median |
$17,794
|
$83,085
|
27,230
|
|
|
Internal Considerations
Internal fairness:. The CompanyHR and Compensation Committee also reviews relevant internal ratios between executive officer compensation and the compensation of other employees, specifically the average and median values of other employee compensation, and its potential effect on the Company’s labor relations in connection with the review and approval of compensation to executive officers.
In addition, see “Additional Compensation Information—2019 Pay Ratio” set forth below.
42 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 43 | |
Executive Compensation
Risk ConsiderationsIV. COMPONENTS OF OUR COMPENSATION PROGRAM
While the Board has overall responsibility for risk oversight, each of the standing committees of the Board regularly assesses risk in its area of oversight in connection with executing its responsibilities. Thus, the Compensation Committee assesses the potential risks arising from our compensation program, policies and practices. The Compensation Committee coordinates with our legal, human resources and other departments, considers shareholder feedback and interests and consults with its compensation consultant. The Compensation Committee reviewed and discussed the assessment for 2019. The Compensation Committee determined that our compensation program, policies and practices do not create risks that are reasonably likely to have a material adverse effect on Teva.
V. Components of Our Compensation Program
20192021 Components in General
The HR and Compensation Committee, Board and shareholders each participated in the selection of the components of compensation set forth in the chart below to achieve our stated executive officer compensation program objectives. The majority of the compensation of each executive officer is variable and at-risk and a significant portion is subject to the achievement of performance goals in order to be earned. The HR and Compensation Committee and the Board review all components of the compensation of executive officers in order to verify that each executive officer’s total compensation is consistent with our compensation philosophy and objectives and within the parameters set by our shareholder-approved Compensation Policy.
Element | Description | Additional Detail | ||
Base Salary |
Fixed cash compensation
Determined based on each executive officer’s role, individual skills, experience, performance, external market value and internal equity |
Base salaries are intended to provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable leadership team | ||
Short-Term Incentives: Annual Cash Incentive Opportunities |
Variable cash compensation based on the level of achievement relative to Company and individual performance objectives that arepre-determined annually
Weighted performance against goals must be at least 85% of target (90% for the CEO) and other predetermined thresholds must be met in order for any payout to occur
Cash incentives are capped at a maximum of 200% of base salary if achievement level is at least 120% of performance goal
Per the Compensation Policy, a target cash award as a percentage of base salary is capped at 100% (150% for the CEO) |
Annual cash incentive opportunities are designed to ensure that our executive officers are incentivized to reach Teva’s annual goals; payout levels are determined based on actual financial and operational results, as well as individual performance | ||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 43
| 44 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Element | Description | Additional Detail | ||
Long-Term Incentives: Annual Equity-Based Compensation |
Variable equity-based compensation
Performance Share Units
Corporate performance against goals must be at least 85% of target in order for award to be earned for that metric
Awards are capped at 240% of target number of shares if achievement level is at least 120% of performance goal and 75thpercentile relative TSR
Restricted Share Units
Per the Compensation Policy, the maximum monetary grant value of the annual equity award is $11.0 million at target for the CEO and $4.5 million at target for executive officers |
Equity-based compensation is used to foster a long-term link between executive officers’ interests and the interests of Teva and its shareholders, as well as to attract, motivate and retain executive officers for the long term
In | ||
20192021 Target Pay Mix
The target pay mix supports the core principles of our executive officer compensation philosophy of compensating for performance and aligning executive officers’ interests with those of Teva and its shareholders, by emphasizing short- and long-term incentives.
The following charts outline the HR and Compensation Committee and the Board’s allocation of annual target total direct compensation payable to the CEO and to other NEOs. The HR and Compensation Committee and the Board allocated compensation among (i) base salary, (ii) the target amount payable under the short-term annual cash incentive planopportunity and (iii) the target value of long-term annual equity, as determined using the fair value of PSUs at target level and RSUs granted under our long-term equity incentive plan. The Compensation Committee and the Board determined these allocations and amounts with reference to, and consistent with, the allocations among such elements at the Peer Group companies and within the maximum limits set forth in the Compensation Policy. equity.
A sizeable majority of annual target total direct compensation is variable,at-risk pay, consistent with ourpay-for-performance philosophy. Specifically, in 2019, 82%2021, 86% of Mr. Schultz’s annualour CEO’s target total direct compensation wasat-risk compensation, and 78%, on average, of the annual target total direct compensation of our other NEOs wasat-risk compensation. We consider compensation to be “at risk” if it is subject to performance-based payment or vesting conditions or if its value depends on stock price appreciation.
44 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 45 | |
Executive Compensation
Target Pay Mix
PercentageThe percentages of annual target total direct compensation as calculated above isare based on the annualized 20192021 base salary, the 20192021 annual cash incentive compensation opportunity (assuming achievement at the target level), and the grant date fair value of the annual equity grant made in March 2019, which included PSUs (assuming vesting at the target achievement level) and RSUs.grants. Each compensation element is outlined in more detail in the 20192021 Summary Compensation Table and 20192021 Grants of Plan-Based Awards table.
Base Salary
Purpose:Base salaries provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable management team. Base salaries vary among executive officers, and are individually determined according to each executive officer’s areas of responsibility, role and experience based on a variety of considerations, which may include, inter alia, professional background (education, skills, expertise, professional experience and achievements and previous compensation arrangements, as relevant), external competitiveness, job criticality and internal fairness.
2019 base salaries for continuing NEOs in 2019remained unchanged:For 2019,2021, there were no changes made to the annual base salariessalary for eachour CEO compared to 2020. The HR and Compensation Committee adjusted the annual base salary of our continuing NEOsCFO and EVP, Global Operations, to bring them more in 2019 (disregarding any effects of foreign exchange rates) compared toline with the end of 2018.market levels.
Executive | Annualized ($) | Annualized ($) | 2018-2019 % Change | ||||||||||||
Kåre Schultz
|
$
|
2,000,000
|
|
$
|
2,000,000
|
|
|
0.0%
|
| ||||||
Eli Kalif
|
|
N/A
|
|
$
|
657,494
|
|
|
N/A
|
| ||||||
Dr. Hafrun Fridriksdottir
|
$
|
720,000
|
|
$
|
720,000
|
|
|
0.0%
|
| ||||||
Brendan O’Grady
|
|
N/A
|
|
$
|
700,000
|
|
|
N/A
|
| ||||||
Gianfranco Nazzi
|
|
N/A
|
|
$
|
548,602
|
|
|
N/A
|
| ||||||
Michael McClellan
|
$
|
700,000
|
|
$
|
700,000
|
|
|
0.0%
|
| ||||||
Dr. Carlo de Notaristefani
|
$
|
836,400
|
|
$
|
836,400
|
|
|
0.0%
|
| ||||||
Executive | Annualized ($) | Annualized ($)(1) | 2020-2021 % Change | ||||||||||||
Kåre Schultz | $ | 2,000,000 | $ | 2,000,000 | 0% | ||||||||||
Eli Kalif | $ | 681,281 | $ | 754,343 | 11% (2) | ||||||||||
Dr. Sven Dethlefs | N/A (3) | $ | 816,000 | N/A | |||||||||||
Eric Drapé | $ | 708,010 | $ | 763,583 | 8% (4) | ||||||||||
Mark Sabag | N/A (3) | $ | 772,637 | N/A | |||||||||||
| (1) | Annualized base salary as of December 31, 2021 converted from local currency, where relevant, using a 2021 annual average exchange rate. |
| (2) | Mr. Kalif and Mr. Sabag are paid in Israeli shekels. The change in salary shown for Mr. Kalif is due to a 4% salary increase and fluctuations in exchange rates. |
| (3) | Dr. Dethlefs and Mr. Sabag were not NEOs in 2020. |
| (4) | Mr. Drapé is paid in Euros. The change in salary shown is due to a 4% salary increase and fluctuations in exchange rates. |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 45
| 46 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Annual Cash Incentives
Purpose:The annual cash incentive component aims to ensure that our executive officers are incentivized to reach our annual goals. Annual cash incentives are designed to provide a significantpay-for-performance element of our executive compensation package, as payout eligibility and levels are determined based on actual financial and operational performance, as well as individual performance.
Pursuant to our Compensation Policy, which serves as a shareholder approved framework, executive officer target annual cash incentive opportunity is capped at 100% of annual base salary, and for the CEO, target annual cash incentive opportunity is capped at 150% of annual base salary. In addition, the maximum annual cash incentive payout cannot exceed 200% of target annual cash incentive.
2019 Annual Cash Incentives
OurThe 2021 annual cash incentive plan for executive officers takes the form of cash awards that are earned based onone-year performance. This structure aligns our executive officers’ interests with those of our shareholders by providingoffers incentives to the executive officers to achieveaccomplish certain short-term financial and operational goalsresults that the HR and Compensation Committee and Board determined to be vital to executingview as key steps in the execution of our overall business strategy.strategy, with the intent ultimately of increasing shareholder value.
TargetThe amount of the payout, if any, under the annual cash incentive percentage opportunities for our continuing NEOs in 2019 were not changed compared to 2018plan is determined as set forth in the following table:
Executive | 2018 Target Annual Cash Incentive (% of Base Salary) | 2019 Target Annual Cash Incentive (% of Base Salary) | ||||||||
Kåre Schultz | 140% | 140% | ||||||||
Eli Kalif | N/A | 100% | ||||||||
Dr. Hafrun Fridriksdottir | 100% | 100% | ||||||||
Brendan O’Grady | N/A | 100% | ||||||||
Gianfranco Nazzi | N/A | 100% | ||||||||
Michael McClellan | 100% | 100% | ||||||||
Dr. Carlo de Notaristefani | 100% | 100% | ||||||||
Annual Cash Incentive Calculation Methodologyfollows:
Eligible Salary | X | Target Incentive %
| X | Overall Performance Factor % |
|
=
Annual Cash Incentive Plan Payout |
Target Opportunities
The amount ofHR and Compensation Committee and the Board determine the target annual cash incentive opportunity and payment for the executive officers, including the CEO and our other NEOs, is determined as follows:
First, the Compensation Committee determines a target cash incentive opportunityavailable to each NEO by taking the individual’s base salary and multiplying it by the individual’s target incentive percentage. The HR and Compensation Committee and the Board did not change the target incentive percentages for our NEOs from 2020 levels.
Executive | 2021 Target Annual Cash Incentive (% of Base Salary) | ||||
Kåre Schultz | 140% | ||||
Eli Kalif | 100% | ||||
Dr. Sven Dethlefs | 100% | ||||
Eric Drapé | 100% | ||||
Mark Sabag | 100% | ||||
46 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 47 | |
Executive Compensation
Second, the Compensation Committee determines an overall performance factor percentage for each executive officer.
|
|
|
Finally, the Compensation Committee takes the target cash incentive opportunity of each executive officer and multiplies it by the applicable overall performance factor of the respective executive officer to determine the actual cash incentive to be paid. The Compensation Committee then approves and presents the Company and the individual-level performance achievements, the calculation of performance factors and the determination of incentive payout amounts to the Board for its review and approval.
Performance Measures and Goals
For the 2019 annual cash incentive, theThe HR and Compensation Committee and the Board used the same performance measure categories, Company Financial and Individual, and weightings as in 2018:2020:
Category | Weighting |
| |||||
Company Financial | 50% Non-GAAP EPS
| ||||||
25% Free Cash Flow
| |||||||
Individual | 25% | See Below | |||||
Company Financial Measures:Measures. The HR and Compensation Committee and the Board believe that certain financial measures are key performance indicators of the present and future prospects of our business and key drivers of shareholder value, and selected the following financial measures for use in the annual cash incentive plan:
| ∎ | Non-GAAP |
| ∎ | Free Cash Flow: |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 47
Executive Compensation
These performance measures were selected because they focus management on metrics that align with our most critical strategic priorities of servicing debt, controlling expenses and improving profitability, and give a clear line of sight into how achieving operating goals drives Teva performance and generates rewards.
The HR and Compensation Committee and the Board used the non-GAAPNon-GAAP measures that are used for investor guidance as performance metrics in structuring our annual cash and our performance-based long-term equity incentive programs. The use of these measures is not intended to replace comparable GAAP measures as set forth in our consolidated financial statements. We believe that thesenon-GAAPNon-GAAP measures are helpful to management and investors as measures of operating performance because they exclude various items that do not relate to or are not indicative of operating performance.
Target, Threshold and Maximum Company Performance Goals:Levels. The HR and Compensation Committee and the Board set the 20192021 threshold, target and maximum performance levels for the Company performance goals. These goals were set at levels that were considered rigorous, aggressive and challenging, attainable only with strong performance, and that took into account the relevant risks and opportunities.
The HR and Compensation Committee and the Board increased the target for Non-GAAP EPS by 5% over the 2020 actual result and by 6% over the 2020 goal, and increased the target for Free Cash Flow by 10% over the 2020 actual result and by 15% over the 2020 goal.
The HR and Compensation Committee and the Board did not make any adjustments to the targets during the year and did not exercise any discretion as a result of the COVID-19 pandemic.
| 48 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
In developing our 20192021 business plan and corresponding incentive plan performance metric targets, which were based on the business plan and were aligned to the high endranges of our 2019 outlook as communicated to investors in February 2019,2021, the HR and Compensation Committee and the Board made key assumptions, including a decline in total revenue compared to 2018, based on the assumptions communicated to investors in February 2019, including:
| ∎ | Anticipated continued decline in COPAXONE |
| ∎ | Anticipated |
|
| ∎ | Anticipated |
After setting the targets, the HR and Compensation Committee and the Board also set the threshold and maximum performance levels. To achieve threshold performance, 85% of target performance for each Company performance metric must be achieved, which is a rigorous and challenging level of achievement that must be met. An achievement percentage of less than 85% of target for eithernon-GAAPNon-GAAP EPS or Free Cash Flow would result in no annual cash incentive payment for executive officers. The HR and Compensation Committee and the Board set the maximum level of performance at 120% of target for each Company performance metric, a level that presented a significant challenge requiring exceptionally strong performance.
In spite of the challenges we faced in 2021, we achieved 96% of our 20192021 non-GAAPNon-GAAP EPS target and 103%95% of our 20192021 Free Cash Flow target, both of which were aligned to the high end of our 2019 outlook.target.
Weighting | Performance Metric | Threshold (85%) | Target (100%) | Maximum (120%) | Actual Results |
% | Performance Metric | Threshold (85%) | Target (100%) | Maximum (120%) | Actual Results | % Achievement | ||||||||||||||||||||||||||||||||||||||||||||||
50% |
Non-GAAP EPS |
$ |
2.13 |
|
$ |
2.50 |
|
$ |
3.00 |
|
$ |
2.40 |
|
96% |
| Non-GAAP EPS | $2.30 | $2.70 | $3.24 | $2.58 | 96% | |||||||||||||||||||||||||||||||||||||
25% | Free Cash Flow | $ | 1.7B | $ | 2.0B | $ | 2.4B | $ | 2.05B |
103%
|
| Free Cash Flow | $2.0B | $2.3B | $2.8B | $2.2B | 95% | |||||||||||||||||||||||||||||||||||||||||
48 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Individual Measures:Measures. The remaining 25% of the measures under the 20192021 annual cash incentive plan were individual performance measures established by the HR and Compensation Committee and the Board early in the year. These measures included components specific to the nature of each executive officer’s position and area of responsibility. The HR and Compensation Committee and the Board evaluated performance with respect to the individual measures by determining an individual performance rating and individual performance achievement percentage, which was then used as a component for determining the overall performance factor.
Executive | Individual Goals | % Achievement | ||
Kåre Schultz |
∎ Achieving global sales targets and sales targets for new ∎ Achieving ESG targets related to environment, access to medicine, antimicrobial resistance and other objectives ∎ Achieving key generic and specialty ∎ Achieving employee engagement, voluntary attrition and senior management succession targets ∎ Achieving other strategic initiatives | 100% | ||
Eli Kalif | ∎ Achieving financial targets ∎ Achieving employee engagement, voluntary attrition and senior management succession targets ∎ Achieving other strategic initiatives | 110% | ||
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 49 | |
Executive Compensation
Executive | Individual Goals | % Achievement | ||
Dr. Sven Dethlefs | EVP, Global Marketing & Portfolio and International Markets Commercial ∎ Achieving regional sales and operating profit targets and sales targets for new generic ∎ Achieving employee engagement, voluntary attrition and senior management succession targets ∎ Achieving other strategic initiatives EVP, North America Commercial (1) ∎ Achieving regional sales and operating profit targets and sales targets for new generic and specialty products ∎ Achieving employee engagement, voluntary attrition and senior management succession targets ∎ Achieving other strategic initiatives | 115% | ||
Eric Drapé | ∎ Achieving global gross margin and business unit targets ∎ Achieving ESG targets related to environment, access to medicine, antimicrobial resistance and other objectives ∎ Achieving targets related to ∎ ∎ Achieving other strategic initiatives | 110% | ||
|
| |||
|
∎ ∎ Achieving ∎ Achieving
| |||
|
∎ Achieving regional sales and operating profit targets and sales targets for new ∎ | |||
|
∎ Achieving ∎ Achieving
| |||
|
| |||
|
| |||
| (1) |
|
| (2) | Mr. |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 49
| 50 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Compliance Modifier. Strong individual goals performance by the CEO and NEOs, as measured by the various components, is fully rewarded only if there are no substantial compliance events. Individual goals performance achievement may be decreased by up to 10% if there is a substantial compliance event.
Embedding ESG in Individual Measures. The Compensation Committee and the Board set the individual goals for executive officers to ensure greater alignment with key strategic priorities. In addition to continuing to include items that align with other strategic objectives, one area of augmented focus was ESG. In recent years, investors have brought ESG issues to the fore, and, as described above, they were a predominant topic during our shareholder engagement. The CEO and several other executive officers were given objective and measurable goals directly related to our renewed ESG strategy including our environment, access to medicine, employee engagement, antimicrobial resistance and other objectives.
Overall Performance Factor and Payout Calculation
Overall Performance Factor:Factor.The HR and Compensation Committee and the Board then calculated an overall performance factor for each executive officer by taking the weighted average of the achievement percentages of the Company financial measures and the individual measures and converting that weighted average to an overall performance factor based on the following table:table below.
Weighted Average Level of Achievement of Objectives | Overall Performance Achievement % (1) (2) | Overall Performance Factor: Potential Annual Cash Incentive | Overall Performance Achievement % (1) (2) | Overall Payout Performance Factor: Potential Annual Cash Incentive | ||||
Below Threshold |
Below 85% (below 90% for CEO) |
0% (no annual cash incentive payment) | Below 85% (below 90% for CEO) | 0% (no annual cash incentive payment) | ||||
Threshold |
85% (90% for CEO) | 25% | 85% (90% for CEO) | 25% | ||||
Target |
100% |
100% (140% for CEO) | 100% | 100% (140% for CEO) | ||||
Maximum Cash Incentive
|
120% |
200% | 120% | 200% |
| (1) | Payouts for performance for the CEO are determined linearly based on a straight-line interpolation of the applicable payout range (i.e., 11.5% for each percentile change in weighted average performance between threshold and target and 3.0% for each percentile change in performance between target and maximum). No additional payout is made for weighted average performance achievement in excess of 120%. |
| (2) | Payouts for performance for other executive officers are determined linearly based on a straight-line interpolation of the applicable payout range (i.e., 5.0% for each percentile change in performance between threshold and maximum). No additional payout is made for performance achievement in excess of 120%. |
| (3) | Payout as a percentage of target for the CEO at threshold is 18% and at maximum is 143%. Payout as a percentage of target for other executive officers is the same as the percentage of base salary as detailed in the table above because their target annual cash incentive is 100% of base salary. |
Payout Calculation:For 2019, the
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 51 | |
Executive Compensation
The HR and Compensation Committee and the Board reviewed Company financial and individual performance against 2019 objectives in order to make determinations regarding whether any payouts were due under our 2019 executive officers’ annual incentive plan.
The table below sets forth the calculation of the overall performance achievement percentage and performance factor for our CEO and other NEOs:
Executive
| Non-GAAP EPS % Achievement (50% weighting) | Free Cash Flow (25% weighting) |
Individual % Achievement (25% weighting) | Overall Performance Achievement | Overall Factor | ||||||||||||||||||||
Kåre Schultz
| 96% | 103% | 110% | 101% | 102% | ||||||||||||||||||||
Eli Kalif
| N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Dr. Hafrun Fridriksdottir
| 96% | 103% | 107% | 100% | 102% | ||||||||||||||||||||
Brendan O’Grady
| 96% | 103% | 120% | 104% | 118% | ||||||||||||||||||||
Gianfranco Nazzi
| 96% | 103% | 107% | 100% | 102% | ||||||||||||||||||||
Michael McClellan
| N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Dr. Carlo de Notaristefani
|
| 96%
|
|
| 103%
|
|
| 100%
|
|
| 99%
|
|
| 93%
|
| ||||||||||
Executive | Non-GAAP EPS % Achievement (50% weighting) | Free Cash Flow (25% weighting) | Individual % Achievement (25% weighting) | Overall Performance Achievement % | Overall Factor % | ||||||||||||||||||||
Kåre Schultz | 96% | 95% | 100% | 97% | 72% | ||||||||||||||||||||
Eli Kalif | 96% | 95% | 110% | 99% | 96% | ||||||||||||||||||||
Dr. Sven Dethlefs | 96% | 95% | 115% | 100% | 102% | ||||||||||||||||||||
Eric Drapé | 96% | 95% | 110% | 99% | 96% | ||||||||||||||||||||
Mark Sabag | 96% | 95% | 110% | 99% | 96% | ||||||||||||||||||||
50 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Payout Calculation.The HR and Compensation Committee and the Board then took the target award opportunity and applied the overall payout performance factor to determine the total 20192021 annual incentive plan payout for the CEO and each NEO. This amount is reflected in the“Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table presented below under the “Additional Compensation Information” section.
Executive | Eligible Base ($) |
Target | Target Award ($) | Overall Performance Factor(*) | Payout ($) | ||||||||||||||||||||
Kåre Schultz
|
$
|
2,000,000
|
|
|
140%
|
|
$
|
2,800,000
|
|
|
102%
|
|
$
|
2,869,720
|
| ||||||||||
Eli Kalif
|
|
N/A
|
|
|
N/A
|
|
|
N/A |
|
|
N/A |
|
|
N/A |
| ||||||||||
Dr. Hafrun Fridriksdottir
|
$
|
720,000
|
|
|
100%
|
|
$
|
720,000
|
|
|
102%
|
|
$
|
734,832
|
| ||||||||||
Brendan O’Grady
|
$
|
676,923
|
|
|
100%
|
|
$
|
676,923
|
|
|
118%
|
|
$
|
800,868
|
| ||||||||||
Gianfranco Nazzi
|
$
|
541,580
|
|
|
100%
|
|
$
|
541,580
|
|
|
102%
|
|
$
|
552,505
|
| ||||||||||
Michael McClellan
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
| ||||||||||
Dr. Carlo de Notaristefani
|
$
|
836,400
|
|
|
100%
|
|
$
|
836,400
|
|
|
93%
|
|
$
|
780,445
|
| ||||||||||
Executive | Eligible Base ($) (1) | Target Annual Cash Incentive (% of Base Salary) | Target Award ($) | Overall Payout Performance Factor (2) | Payout ($) | ||||||||||||||||||||
Kåre Schultz | $ | 2,000,000 | 140% | $ | 2,800,000 | 72% | $ | 2,029,440 | |||||||||||||||||
Eli Kalif | $ | 747,175 | 100% | $ | 747,175 | 96% | $ | 715,340 | |||||||||||||||||
Dr. Sven Dethlefs | $ | 816,000 | 100% | $ | 816,000 | 102% | $ | 832,320 | |||||||||||||||||
Eric Drapé | $ | 756,108 | 100% | $ | 756,108 | 96% | $ | 724,106 | |||||||||||||||||
Mark Sabag | $ | 765,294 | 100% | $ | 765,294 | 96% | $ | 732,686 | |||||||||||||||||
Eligible base salary is generally defined as actual base salary earned during the year. Dr. Dethlefs’ eligible base salary was $816,000, his annualized salary when he moved to his current position. |
| (2) | Percentages have been rounded to the nearest whole percentage. |
Long-Term Incentive Equity-Based Compensation
Purpose:The third and largest main component of the executive compensation program is long-term equity incentives.
Equity-based compensation is intended to incentivize and reward for future long-term performance, as reflected by the market price of our shares and/or other performance criteria, and is used to foster a long-term link between executive officers’ interests and the interests of Teva and its shareholders. Equity-based compensation is also intended to attract, motivate and retain executive officers for the long term by (i) providing them with a meaningful interest in Teva’s share performance; (ii) linking equity-based compensation to potential and sustained performance; and (iii) spreading benefits over a longer performance cycle through the vesting period mechanism.
| 52 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Pursuant to our Compensation Policy, which serves as a shareholder approved framework, the minimum full vesting period of all equity-based awards is three years from the date of grant (partial vesting can occur before), the maximum monetary grant date fair value of annual equity-based awards granted to the CEO cannot exceed $11 million at target and to any other executive officer $4.5 million at target, and the maximum number of shares settled for a performance-based equity award shall not exceed 250% of the target number of shares granted.
2019 Long-Term Equity Incentives—Annual Grant
In making determinations about 2019 long-term equity incentive grants to executive officers, the Compensation Committee and the Board considered, among other things:
|
|
|
|
|
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 51
Executive Compensation
The sizes of the grants to executive officers vary based on the factors above. The portion of executive officer compensation that is composed of these equity vehicles is “at risk” and directly aligned with shareholder value creation.
Change to Long-Term Incentive Equity in 2019
For the 2019 long-term incentive equity grants to executive officers, the Compensation Committee and the Board reviewed andre-evaluated the Company’s executive compensation program in light of the restructuring that is now largely behind us, and made the following changes to the long-term equity incentives:
|
|
|
|
52 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Equity Vehicles and Mix
The HR and Compensation Committee and the Board used the equity vehicles and mix set forth in the following table:
| Type of Long- Term Incentive Vehicle | Proportion | Vesting Schedule | Performance | Rationale for Use of Performance Metric | ||||
1) |
1) Primary measure of top line growth | |||||||
Performance Share Units | 70% for CEO; 50% for other executive officers | Three-year cliff vesting | 2) 2021-2023 Non-GAAP Operating Profit (50%) | 2) Leading indicator of profitability, expense control and sustained long-term performance
| ||||
|
| |||||||
| 3) | 3) Strong performance, as measured by the other two operating metrics, is fully rewarded only if it also results in above median shareholder returns. The relative TSR modifier for the
| |||||||
Restricted Share Units | 30% for CEO; 50% for other executive officers |
| N/A | N/A | ||||
The 2019HR and Compensation Committee and the Board have structured the mix of equity vehicles and the relative weight assigned to each type to motivate performance against long-term targets, stock price appreciation over the long term and to encourage ownership and retention while aligning executive officers’ interests with those of our shareholders. The RSUs are complementary to the PSUs because they have upside potential but deliver some value even during periods of market or stock price underperformance, providing a retention incentive and reinforcing an ownership culture and commitment to Teva.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 53 | |
Executive Compensation
Performance Metrics
Financial Measures
The 2021-2023 PSU performance measures were selected because:
| ∎ |
|
| ∎ |
|
| ∎ | Relative TSR is an important measure because TSR ties executive officer compensation |
|
Before the conclusion of the three-year performance period, we do not publicly disclose our specific performance measure targets and the corresponding minimums and maximums because of the potential for competitive harm from such disclosure. These measures are competitively sensitive and would reveal information about our view of our anticipated trajectory, which is not otherwise public. The HR and Compensation Committee and the Board believe that they have set performance goals at rigorous and challenging levels so as to require significant effort and achievement by our executive officers to be attained, and that such goals have been established in light of our internal forecast as well as the macroeconomic and industry environments. After the end of the performance period, the targets and achievement relative to such targets will be disclosed.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 53
Executive Compensation
TheTarget, Threshold and Maximum Performance Levels. Similar to the annual cash incentive plan, for the PSUs, the HR and Compensation Committee and the Board utilize RSUs to encourage ownership and retention while immediately aligning executive officers’ interests with those of our shareholders.
2019 PSU Calculation Methodology
In connection with the 2019 PSU grants,defined payout levels representing the number of sharesPSUs to be earned by the executive officers will be determined inbased on the level of actual performance relative to the three-year targets.
For each of the two steps as follows.
Company Financial Measures: There are two Company financial performance measures, 2019-2021Net Revenue and non-GAAPNon-GAAP Operating Profit, the HR and 2019-2021 Net Debt Reduction, each of which is weighted 50%. In step one, for each of these two measures, the Compensation Committee determines the Company’s performance achievement percentage for the three-year period. The performance achievement percentage is then converted to an earning percentage as set forth below.
Level of Achievement of Objectives(*) | Performance Achievement % | Earning Percentage | ||
Below Threshold | Below 85% | 0% | ||
Threshold | 85% | 25% | ||
Target | 100% | 100% | ||
Maximum | 120% | 200% |
Level of Achievement of Objectives (*) | Performance Achievement % | Earning Percentage | ||||||||
Below Threshold | Below 85% | 0% | ||||||||
Threshold | 85% | 25% | ||||||||
Target | 100% | 100% | ||||||||
Maximum | 120% | 200% | ||||||||
| (*) | Linear interpolation will be used to determine the applicable earning percentage between levels. |
The HR and Compensation Committee then calculates the average of the earning percentages for the two performance measures.
Relative TSR Modifier:Modifier.The HR and Compensation Committee and the Board introduced a TSR modifier in the PSU design beginning in 2017. They continue to view the inclusion of Total Shareholder Return as critical because it ties executive officer compensation withto the shareholder experience and the creation of shareholder value, and it aligns the interests of executive officers with those of Teva and
| 54 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
its shareholders. By measuring our stock performance relative to peers, it mitigates the impact of macroeconomic factors, both positive and negative, that affect the industry and/or stock price performance and are beyond the control of management, and it provides rewards that are more directly aligned with performance through different economic cycles.
In step two, theThe average of the earning percentages determined in the first step is multiplied by a modifier that has been determined based on our relative TSR performance for the three-year period as set forth below. The Company’s TSR is ranked relative to our Peer Group,Group; the HR and the Compensation Committee and the Board believe that the Peer Group is an appropriate comparator group that is broadly representative in terms of its size, industry, geographic footprint and employee base. See “—IV.III. Compensation Determination Process—Compensation Peer Group and Peer Selection Process” for a list of the peer group companies used for this purpose.
Level of Achievement of Relative | Relative TSR Ranking | Modifier | ||
Threshold | Up to 25th percentile | 80% (i.e., 20% less than unmodified average of the earning percentages) | ||
Target | 50th percentile | 100% | ||
Maximum |
| 120% | ||
| (*) | Linear interpolation will be used to determine the applicable modifier. |
The product of (1) the average of the earning percentages and (2) the relative TSR modifier is multiplied by the target number of PSUs granted to each of the executive officers to determine the final number of PSUs
54 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
earned by each individual. For example, if the Company’s TSR rank is less than or equal to the 25th percentile, then the average of the earning percentages is multiplied by 80% (equivalent to a reduction of 20%) to determine the final performance factor and then multiplied by the target number of PSUs to determine the final number of earned PSUs. If the Company’s TSR rank is at the 75th percentile or above, then the average of the earning percentages is multiplied by 120% (equivalent to an increase of 20%) and then incorporated into the calculation.
TheUltimately, the HR and Compensation Committee approves and presents the performance achievement percentages, the calculation of the average earning percentage and the TSR modifier, and the determination of the number of PSUs earned by each executive officer to the Board for its review and approval.
2019 Long-Term Incentive Award Values—Annual Grant2021 Grants of PSUs and RSUs
In connection withmaking determinations ofabout 2021 long-term equity incentive grants to executive officers, the appropriate level of annual equity grants for 2019, theHR and Compensation Committee and the Board took into accountconsidered, among other things: sustained performance; criticality of contributions to Teva; comparison against our Peer Group; the executive officer’s role, skills, experience and development; internal fairness among executive officers; current value of prior granted equity and pay mix. The sizes of the grants to executive officers vary based on these factors outlined above as well as information regarding the absolute levels and allocations at the companies in the Peer Group. The portion of executive officer compensation that is composed of these equity vehicles is “at risk” and directly aligned with shareholder value creation.
In light of the restructuring and other factors, the
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 55 | |
Executive Compensation Committee and the Board did not recommend an increase to the aggregate equity grant value to the CEO (which was in accordance with the maximum limits provided in the compensation policy in effect at the time of grant).
The Compensation Committee and the Board determined that it was consistent with our performance-based compensation philosophy and appropriate to structure the equity grants to executive officers such that (1) 50% would be granted in PSUs that will be earned and will vest only if we achieve specified levels of performance as measured by the performance metrics at the end of the three-year performance period and (2) 50% would be granted in RSUs that will vest over four years.
The Compensation Committee and the Board increased the allocation of PSUs for the NEOs as compared to 2018 in order to further enhance the link between pay and performance and the alignment of the interests of the NEOs with those of Teva and its shareholders, similar to the change made for the CEO in 2018.
The following table sets forth the 20192021 annual grant date fair values at target approved by the HR and Compensation Committee, the Board and shareholders for the CEO and by the HR and Compensation Committee and the Board for the other NEOs.
Executive | PSUs ($) | RSUs ($) | Total ($) | |||||||||
Kåre Schultz | $ | 2,999,985 | $ | 2,999,992 | $ | 5,999,977 | ||||||
Eli Kalif | N/A | N/A | N/A | |||||||||
Dr. Hafrun Fridriksdottir | $ | 949,995 | $ | 949,993 | $ | 1,899,988 | ||||||
Brendan O’Grady | $ | 949,995 | $ | 949,993 | $ | 1,899,988 | ||||||
Gianfranco Nazzi | $ | 649,993 | $ | 649,984 | $ | 1,299,977 | ||||||
Michael McClellan | $ | 849,999 | $ | 849,996 | $ | 1,699,995 | ||||||
Dr. Carlo de Notaristefani
| $
| 1,249,996
|
| $
| 1,249,986
|
| $
| 2,499,982
|
| |||
Executive | PSUs ($) (*) | RSUs ($) (*) | Total ($) (*) | ||||||||||||
Kåre Schultz | $ | 7,000,000 | $ | 3,000,000 | $ | 10,000,000 | |||||||||
Eli Kalif | $ | 900,000 | $ | 900,000 | $ | 1,800,000 | |||||||||
Dr. Sven Dethlefs | $ | 1,050,000 | $ | 1,050,000 | $ | 2,100,000 | |||||||||
Eric Drapé | $ | 950,000 | $ | 950,000 | $ | 1,900,000 | |||||||||
Mark Sabag | $ | 1,000,000 | $ | 1,000,000 | $ | 2,000,000 | |||||||||
| (*) | Equity values have been rounded to the nearest $10,000. |
Consistent with historical practice, the dollar value allocated to PSUs was converted to a number of units, based on the fair market value on the grant date fair value as determined in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718. The dollar amount allocated to RSUs was converted to a number of shares using the fair market value on the grant date.
As discussed below under “—2019 Potential Payments Upon Termination or Change in Control,” under the terms of their separations from service, the 2019 grants of PSUs and RSUs to Mr. McClellan were forfeited upon his resignation, and the 2019 grants of PSUs and RSUs to Dr. de Notaristefani will continue to vest in full.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 55
Executive Compensation
2017-20192019-2021 Performance Share Unit Payout
As disclosed previously, in 2019 we eliminated overlapping metrics in short- and long-term performance-based awards by using Net Debt Reduction and Non-GAAP Operating Profit in the PSU. In 2017,2019, the HR and Compensation Committee and the Board granted PSUs with performance-based vesting requirements for the three-year performance period of 2017-2019.2019-2021. In connection with the 20172019 PSU grants, the number of PSUs earned by the NEOs who were executive officers at the time of the grants has been determined in two steps as follows.
In step one, there were two Company financial performance measures, 2017-20192019-2021 non-GAAPNon-GAAP EPSOperating Profit and 2017-2019 Free Cash Flow,2019-2021 Net Debt Reduction, each of which was weighted 50%. For each of these two measures, the HR and Compensation Committee and the Board determined the Company’s performance achievement percentage for each year in the three-year period relative to the target set according to the annual business plan for each year. The Compensation Committee and the Board then calculated the average annual performance achievement percentage for the three-year period. The average three-year performance achievement percentage was then converted to an earning percentage as set forth below:based on the following:
Level of Achievement of Objectives(*) | % Achievement of Target | Earning Percentage | ||
Threshold | Up to 85% | 0% | ||
Target | 100% | 100% | ||
Maximum
| 120%
| 200%
|
Level of Achievement of Objectives (*) | % Achievement of Target | Earning Percentage |
| |||
Below Threshold | Below 85% | 0% |
| |||
Threshold | 85% | 25% |
| |||
Target | 100% | 100% |
| |||
Maximum | 120% | 200% |
| |||
| (*) | Linear interpolation was used to determine the applicable earning percentage between levels. |
The HR and Compensation Committee and the Board then calculated the average of the earning percentages for the two performance measures.
| 56 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
In step two, this average of the earning percentages was multiplied by a modifier that was determined based on our TSR performance relative to the companies included in the peer group used as a reference point for 20172019 compensation decisions for the three-year period, as set forth below.
Level of Achievement of Relative | Relative TSR Ranking | Modifier | ||
Threshold | Up to 25thpercentile | 80% (i.e., 20% less than unmodified average of the earning percentages) | ||
Target | 50th percentile | 100% | ||
Maximum |
| 120% | ||
| (*) | Linear interpolation was used to determine the applicable modifier. |
The product of (1) the average of the earning percentages and (2) the relative TSR modifier was multiplied by the target number of PSUs granted to the NEOs, to determine the final number of PSUs earned by each individual, except that the number of PSUs to be issued maycould not exceed 200%240% of the target number of PSUs.
56 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
The HR and Compensation Committee and the Board approved an average earning percentage of 127%102% which was then subject to a relative TSR modifier, which adjusted the earning percentage downward by 20%, resulting in a modified earning percentage of 102%. The Compensation Committee and the Board then exercised negative discretion to reduce the final earning percentage to 100%82%.
Weighting | Performance Metric | Year | Target | Actual Results | % Achievement | Earning % | ||||||||||||||||
| 2017 | $ | 4.86 | $ | 4.01 | 83% | |||||||||||||||||
50% | Non-GAAP EPS | 2018 | $ | 2.50 | $ | 2.92 | 117% | |||||||||||||||
| 2019 | $ | 2.40 | $ | 2.40 | 100% | |||||||||||||||||
|
| |||||||||||||||||||||
| Average | 99.9% | 99.6% | ||||||||||||||||||||
| 2017 | $ | 6.9B | $ | 6.0B | 87% | |||||||||||||||||
50% | Free Cash Flow (1) | 2018 | $ | 2.8B | $ | 3.7B | 132% | |||||||||||||||
| 2019 | $ | 1.8B | $ | 2.1B | 113% | |||||||||||||||||
|
| |||||||||||||||||||||
| Average | 110.9% | 154.3% | ||||||||||||||||||||
Weighted Average: | 127.0% | |||||||||||||||||||||
Relative TSR Modifier(-20%, reflecting <25th percentile) |
| 80.0% | ||||||||||||||||||||
Modified Earning % | 101.6% | |||||||||||||||||||||
Final Earning % (after exercising negative discretion) |
| 100.0% | ||||||||||||||||||||
Weighting | Performance Metric | Threshold (85%) ($B) Excluding FX Effect (*) | Target (100%) ($B) Excluding FX Effect (*) | Maximum (120%) ($B) Excluding FX Effect (*) | Actual Results ($B) | % Achievement | Earning % | |||||||
| 50% | Non-GAAP Operating Profit | 10.7 | 12.6 | 15.1 | 12.9 | 103% | 113% | |||||||
| 50% | Net Debt Reduction | 24.1 | 20.5 | 17.1 | 20.9 | 98% | 91% | |||||||
| Weighted Average: |
|
|
|
|
|
| 102% | |||||||
Relative TSR Modifier (-20%, reflecting <25th percentile) |
|
|
| 80% | ||||||||||
Final Earning % |
|
|
|
| 82% | |||||||||
|
Based on this outcome, the NEOs earned Teva PSUs in respect of their 2017-20192019-2021 PSU awards as follows:
Executive | Target Award (# of PSUs) | Final Earning Percentage | Final (# of PSUs) | |||||||||
Kåre Schultz (1) | 212,314 | 100% | 212,314 | |||||||||
Eli Kalif (2) | N/A | N/A | N/A | |||||||||
Dr. Hafrun Fridriksdottir | 17,850 | 100% | 17,850 | |||||||||
Brendan O’Grady (2) | N/A | N/A | N/A | |||||||||
Gianfranco Nazzi (2) | N/A | N/A | N/A | |||||||||
Michael McClellan (2) | N/A | N/A | N/A | |||||||||
Dr. Carlo de Notaristefani
|
| 30,941
|
|
| 100%
|
|
| 30,941
|
| |||
Executive | Target Award (# of PSUs) | Final Earning Percentage (1) | Final (# of PSUs) | ||||||||||||
Kåre Schultz | 198,938 | 82% | 162,593 | ||||||||||||
Eli Kalif (2) | N/A | N/A | N/A | ||||||||||||
Dr. Sven Dethlefs | 46,419 | 82% | 37,939 | ||||||||||||
Eric Drapé | 39,787 | 82% | 32,518 | ||||||||||||
Mark Sabag | 53,050 | 82% | 43,358 | ||||||||||||
| (1) |
|
| (2) | Mr. Kalif |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 57
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 57 | |
Executive Compensation
New Hire and LegacyOne-Time Grants
The Compensation Committee and the Board do not generally intend to provideone-time grants except in a very judicious and limited manner in rare circumstances as warranted by the situation. The Compensation Committee and the Board view any such grants to the NEOs as a special and exceptional nonrecurring event to meet the Company’s needs during a specific period or for a specific purpose. The Compensation Committee and the Board continue to prudently and carefully evaluate our compensation program to ensure that it accounts for the current transitional stage, aligns the interests of executive officers and shareholders and links their pay to the Company’s performance.
In 2019, the Compensation Committee and the Board did not approve anyone-time grants to any NEOs, other than a modestsign-on make-whole equity grant to Mr. Kalif in connection with his appointment as CFO, which was granted in February 2020. See “Leadership Transitions” below for a description of this grant.
As previously disclosed, pursuant to a legacy Actavis Generics retention plan that we assumed in connection with our acquisition of Actavis Generics in 2016, Dr. Fridriksdottir had been granted a cash award of $1,000,000. Half of the cash award was earned in December 2018 and the remaining half was earned in December 2019. In November 2016, after the closing of our acquisition of Actavis Generics, we made a special cash retention award to Dr. Fridriksdottir of $300,000 due to her significance and key role during the transition period and the importance of securing her services after the acquisition. We paid half of the cash award in March 2018 and the remaining half was paid in March 2019. In December 2016, we made a cash retention award to Dr. Fridriksdottir of $750,000. We paid one quarter of the cash award in January 2019 and paid the remaining three quarters in January 2020. These awards were granted to Dr. Fridriksdottir prior to her appointment as an executive officer.
As previously disclosed, pursuant to anon-executive retention program adopted in September 2017 to secure the services of key employees during a period of uncertainty for our Company, we granted certainnon-executives awards consisting of cash and equity. In connection with this program, Mr. McClellan, Mr. O’Grady and Mr. Nazzi were paid the second half of the cash award in September 2019 totaling $33,750 for Mr. McClellan, $20,500 for Mr. O’Grady and 36,850 euros for Mr. Nazzi (approximately $40,579 based on the September 2019 average exchange rate of 0.91 euros per U.S. dollar). These payments were subject to continued employment through the applicable payment dates.
Leadership Transitions
Appointment of Mr. Eli Kalif as Executive Vice President and CFO
Effective as of December 22, 2019, we entered into an employment agreement with Mr. Eli Kalif to serve as our Executive Vice President and CFO.
Mr. Kalif has over twenty years of experience in corporate and operational finance, mainly with Flex Ltd., a Nasdaq-listed global technology design and manufacturing service provider. For the past 9 years, Mr. Kalif served as Flex’s Senior Vice President, Finance, leading the finance organization that supports Flex’s Global Operations, Components & services business. Prior to this role, Mr. Kalif served in other leadership positions in Flex’s finance organization. Mr. Kalif is a Certified Public Accountant and holds a bachelor’s degree in Accounting and Economics from the College of Management Academic Studies in Israel.
Mr. Kalif’s employment agreement provides that Mr. Kalif will be employed as Executive Vice President and CFO, until his death, disability, termination with or without cause or resignation with or without good reason. The agreement provides for an initial annual base salary of 2,343,200 NIS (approximately $650,000 based on an exchange rate of 3.60 Israeli shekels per U.S. dollar). Mr. Kalif is eligible to be considered for an annual cash incentive with a target of 100% of his then-current annual base salary, and for equity-based awards under our equity compensation plan. In addition, Mr. Kalif received asign-on equity award in February 2020 in the form of RSUs with a grant date fair value of $250,000 in consideration of certain equity
58 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
grants with Mr. Kalif’s prior employer that were forfeited upon his resignation, which will vest in three equal installments on the second, third, and fourth anniversaries of the grant date, subject to his continued employment through the applicable vesting dates.
Separation of Former CFO Mr. Michael McClellan
On November 8, 2019, Michael McClellan resigned from his role as Executive Vice President and CFO for personal reasons. Pursuant to the terms of our employment agreement with Mr. McClellan, in connection with his resignation, Mr. McClellan was entitled to a three month notice period.
Separation of Dr. Carlo de Notaristefani
On October 2, 2019, Dr. Carlo de Notaristefani stepped down as Executive Vice President, Global Operations. He will remain with Teva until the end of the second quarter of 2020 to ensure an orderly transition.
Pursuant to the terms of employment with Dr. de Notaristefani, in connection with his termination of employment, Dr. de Notaristefani is entitled to a nine month notice period, eligibility for 2019 annual cash incentive, cash severance equal to the product of twelve times his monthly base salary and payment of certain costs associated with continued medical insurance for eighteen months. Dr. de Notaristefani is also entitled to receive an amount equal to twelve times his monthly base salary, in consideration for, and conditioned upon, his undertaking not to compete with Teva for one year following termination and other restrictive covenants.
Dr. de Notaristefani is also entitled to continued vesting in full of his equity-based awards.
SupplementalNon-GAAP Income Data
We utilize certainnon-GAAPNon-GAAP financial measures to evaluate performance, in conjunction with other performance metrics. The following are examples of how we utilize thenon-GAAPNon-GAAP measures:
| ∎ | our executives and Board use |
| ∎ | our annual budgets are prepared on a |
| ∎ | senior executive officers’ annual compensation is derived, in part, using these |
Non-GAAP financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. We provide thisnon-GAAP data because our executives believe that the data provide useful information to investors. However, investors are cautioned that, unlike financial measures prepared in accordance with U.S. GAAP,non-GAAP measures may not be comparable with the calculation of similar measures for other companies.
For the definitions ofnon-GAAPNon-GAAP financial measures and a reconciliation of these items to the most directly comparable financial measures calculated and presented in accordance with GAAP, reference is made to the section captioned “SupplementalNon-GAAP Income Data” in the Company’s Form10-K for the year ended December 31, 2019.
Teva Pharmaceutical Industries Ltd.�� 2020 Proxy Statement 59
Executive Compensation
2021.
Other Elements of Compensation
We generally provide to our executive officers the same benefits that are provided to all employees, including certain health and welfare benefits and other benefits. In addition, our executive officers are provided with certain additional benefits, intended to be competitive with the practices of companies in our Peer Group.
Health and Welfare Benefits
We offer health and welfare benefits to all eligible employees, including all executive officers, which are tailored to each location’s competitive market. Health and welfare benefits may include medical, dental, prescription drug, vision, life insurance, accidental death and dismemberment, short- and long-term disability coverage and an employee assistance program.
Retirement and Other Local Benefits
Israel
Israeli law generally requires severance pay equal to one month’s salary for each year of employment upon the termination of an employee’s employment due to retirement, death, termination without cause and other circumstances as defined under Israeli law. We make monthly contributions on behalf of our executive officers on Israel payroll to pension plans. These funds provide a combination of pension allowance and/or insurance and severance pay benefits to the executive officers. We contribute 7.5% of aan NEO’s monthly salary to the pension component (including disability insurance) and 8.33% of the NEO’s monthly salary to the severance component, and the employee contributes an amount between 6% and 7% of the monthly salary to the pension component. The contributions to the severance component are on account of Teva’s obligation to pay severance upon termination as referenced above. Our CEO isand EVP, Global Operations
| 58 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
are entitled to similar contributions on behalf of the Company as a pension contribution and on account of severance. Accordingly, a substantial part of our statutory severance obligation is covered by these monthly contributions.
Generally, in addition, our executive officersNEOs on Israel payroll (excluding the CEO)those on relocation), like all of our employees in the country, are entitled to participate in a study fund plan, pursuant to which each employee who participates in the plan contributes an amount equal to 2.5% of his or her monthly salary to the study fund and Teva contributes to this fund or pays 7.5% of his or her monthly salary.
North America
Our North American subsidiaries mainly provide various defined contribution plans for the benefit of their employees. Under these plans, contributions are based on specified percentages of pay. In addition, Teva USA offers a supplemental deferred compensation plan to eligible employees. The plan is a nonqualified plan which is intended to work as a complement to the qualified 401(k) Retirement Savings Plan. The plan has been designed to address the “retirement gap” that many highly compensated individualssenior level employees face, primarily due toIRS-imposed limits on qualified plans and IRAs. Finally, certain executive officers located in the United States participate in a defined contribution supplemental executive retirement plan (“DC SERP”). As of the beginning of 2017, no new executive officers are enrolled in this plan.
Expatriate Benefits / International Assignment and Relocation Benefits
Teva provides benefits to our employees who either accept an expatriate assignment or relocate internationally. The benefits are designed to provide ongoing assignment management and physical relocation support services. These benefits can vary depending on the nature of the assignment or relocation, but generally include a housing allowance, transportation support, a cost of living allowance (where applicable), home leave, global health insurance, and Company-paid education for approved
60 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
dependents in locations where public education is not suitable. Additionally, we provide tax preparation and tax support services, dependent on the nature of the assignment (e.g., tax equalization for home-based assignments or tax gross up of relocation benefits and ongoing assignment allowances for host-based assignments), as well as immigration services to manage compliance within all global jurisdictions. The purpose of these benefits is to keep our expatriate employees “economically neutral” for the costs associated with living and working outside their home country, with the goal that they are not financially advantaged or disadvantaged as a result of relocating to another country and incurring associated taxes.
Details regarding benefits and perquisites specific to each NEO can be found in the footnotes to the 20192021 Summary Compensation Table set forth below under “Additional Compensation Information.”
VI. Additional Compensation Policies and PracticesV. ADDITIONAL COMPENSATION POLICIES AND PRACTICES
EquityStock Ownership PolicyGuidelines
Teva and its shareholders are best served by executives and directors that manage the business with a long-term perspective. Therefore, we adopted sharestock ownership guidelines, as we believe sharestock ownership is an important tool to strengthen the alignment of interests among our executive officers and directors and our shareholders, to reinforce executive officers’ commitment to Teva and to demonstrate Teva’s commitment to sound corporate governance.
The policy provides that Teva expects the applicable required level of equitystock ownership to be satisfied by our executive officers within five years, and by our directors within six years, of the later of the date the guidelines were adopted or the date of appointment as an executive officer or director. If an executive officer’s holding requirement increases because of a change in annual base salary, or if a director’s holding requirement increases because of a change in annual cash retainer, the executive officer is expected to achieve the higher holding requirement within one year, and the director within two years, of the date of the increase.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 59 | |
Executive Compensation
The HR and Compensation Committee receives periodic reports of the ownership achieved by each executive officer and director. For purposes of determining compliance with the guidelines, the value of an executive officer or director’s share holdings is based on the closing price of Teva’s American Depositary Shares reported on the principal U.S. national securities exchange on which the shares are listed (currently the NYSE) on the last trading day of the year.
To further strengthen the alignment of interests among our executive officers and directors and our shareholders, starting in 2019, the Compensation Committee and the Board modified the equity ownership guidelines by increasing the required salary multiple from 4x to 6x for the CEO and from 2x to 3x for other executive officers. In addition, they introduced an equity ownership guideline for directors. The Compensation Committee and the Board also modified the definition of what can be included to satisfy the guidelines by removing unvested PSUs. The updated ownership guidelines are as follows:
Current Position | Multiple of Base Salary/Retainer | |
CEO | 6x | |
All other executive officers | 3x | |
Directors | 5x annual cash fee(*) | |
| (*) | Excluding committee fees. |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 61
Executive Compensation
The value of all of the following types of Teva shares or stock options owned by, or granted to, an executive officer or director qualifies toward the attainment of the target multiple of pay:
| ∎ | shares owned outright by the executive officer or director or jointly with, or separately by, his or her immediate family members residing in the same household; |
| ∎ | shares held in a grantor trust or under a similar arrangement for the economic benefit of the executive officer or director or his or her immediate family members residing in the same household; |
| ∎ | shares held in any Teva retirement plan; |
| ∎ | unvested time-based restricted shares and RSUs; and |
| ∎ | the intrinsic value of vested but unexercisedin-the-money stock options. |
At the last measurement date, all NEOs are in compliance with our stock ownership guidelines, or fall within the period to attain the guideline level of stock ownership.
Clawback Policy
Our executive officers are required to return any compensation paid to them on the basis of results included in financial statements that turned out to be erroneous and that were subsequently restated, during the three-year period following filing thereof. In such cases, compensation amounts will be returned net of taxes that were withheld thereon, unless the executive officer has reclaimed or is able to reclaim such tax payments from the relevant tax authorities (in which case the executive officer will also be obligated to return such tax amounts). We will publicly disclose the general circumstances of any repayment or forfeiture of compensation from our executive officers under our clawback policy, and the aggregate amounts repaid or forfeited, if required by applicable law or regulation, or if we have previously disclosed the underlying event giving rise to the repayment or forfeiture, unless such disclosure would, as determined by our HR and Compensation Committee or Board, raise legal or privacy concerns with respect to those individuals involved or would not be in the best interests of our shareholders.
In addition, in the event that it is discovered that an executive officer engaged in conduct that resulted in a material inaccuracy in Teva’s financial statements or caused severe financial or reputational damage to Teva, or in the event that it is discovered that an executive officer breached confidentiality and/ornon-compete obligations to Teva (as determined by the Company), the Company has broad remedial and disciplinary authority. Such disciplinary action or remedy would vary depending on the facts and circumstances, and may include, without limitation, (i) terminating employment, (ii) initiating an action for breach of fiduciary duty, and (iii) seeking reimbursement of performance-based or incentive compensation
| 60 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
paid or awarded to the executive officer, including by means of an offset to, or cancellation of, outstanding grants or opportunities. The Company will determine applicable terms to enforce repayment of clawback amounts and may modify this clawback policy in accordance with applicable law and regulations.
Anti-Hedging and Anti-Pledging Policies
Our directors and executive officers are prohibited from hedging their equity-based awards and any other Teva securities held by them (whether they are subject to transfer restrictions or not), such as purchasing or selling options on Teva securities, purchasing or selling puts, calls, straddles, equity swaps or other derivative securities linked to Teva’s securities, or engaging in “short” sales on Teva securities. This policy applies to each director and each executive officer until one year after the director’s or executive officer’s termination or retirement. Our employees are also strongly discouraged from participating in any transaction in which profit is earned through a decline in value of Teva securities, such as short sales or hedges. Directors and executive officers are prohibited from pledging or using their equity-based awards and any other Teva securities held by them (whether they are subject to transfer restrictions or not) as collateral for loans.
Risk Considerations and Assessment
Our compensation elements are designed to include mechanisms that reduce incentives to expose Teva to imprudent risks that may harm the Company or our shareholders in the short- and long-term. This is achieved by using tools such as (i) placing maximum limits on short- and long-term incentives; (ii) measuring performance using key performance indicators that are designed to reduce incentives to take excessive risks; (iii) using compensation vehicles with diverse performance measures; (iv) granting a mix of equity-based compensation types that have long-term vesting schedules, which tie the awards to a longer performance cycle; (v) requiring clawback of compensation payments in certain circumstances; and (vi) requiring compliance with meaningful stock ownership guidelines.
While the Board and the Audit Committee have overall responsibility for risk oversight, each of the standing committees of the Board regularly assesses risk in its area of oversight in connection with executing its responsibilities. Thus, the HR and Compensation Committee assesses the potential risks arising from our compensation program, policies and practices. The HR and Compensation Committee coordinates with our legal, human resources and other departments, considers shareholder feedback and interests and consults with its compensation consultant. The HR and Compensation Committee reviewed and discussed the assessment for 2021. The HR and Compensation Committee determined that our compensation program, policies and practices do not create risks that are reasonably likely to have a material adverse effect on Teva.
Compensation Policy Requirements
Pursuant to the Israeli Companies Law, arrangements between Teva and its Office Holders must generally be consistent with the Compensation Policy. However, under certain circumstances, we may approve an arrangement that is not consistent with the Compensation Policy, if the arrangement is approved by a majority of our shareholders who participate and vote, provided that (i) the majority includes a majority of the votes cast by shareholders who participate and vote (abstentions are disregarded) who (A) are not controlling shareholders and (B) do not have a personal interest in the matter, or (ii) the votes cast against the arrangement by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who participate and vote constitute two percent or less of the voting power of the Company (a “disinterested majority”).
In addition, pursuant to the Israeli Companies Law, the Terms of Office and Employment of Office Holders generally require the approval of the HR and Compensation Committee and the Board. The Terms of Office and Employment as applicable to directors, including with respect to other positions in the
62 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 61 | |
Executive Compensation
Company, further require the approval of the shareholders by a simple majority. The Terms of Office and Employment with respect to a CEO (who is not a director) generally require the approval of the shareholders by the disinterested majority referenced in the immediately preceding paragraph.
Under certain circumstances, if the Terms of Office and Employment of Office Holders who are not directors are not approved by the shareholders, where such approval is required, the HR and Compensation Committee and the Board may nonetheless approve such terms. In addition, non-material amendments of the Terms of Office and Employment of Office Holders who are not directors may be approved by the HR and Compensation Committee only and non-material amendments of the Terms of Office and Employment of Office Holders who are not directors and excluding the CEO may be approved by the CEO only, provided such approvals are permitted under the Compensation Policy and consistent therewith.
Accordingly, pursuant to our Compensation Policy, our CEO is authorized to approve changes in terms for any other executive officer with respect to any calendar year, provided that it does not exceed the value of such executive officer’s one-month base salary, unless determined otherwise by the HR and Compensation Committee and the Board.
Tax Deductibility
PriorGenerally, a public company cannot deduct compensation in excess of $1 million paid in any year to the Tax Cuts and Jobs Act (the “TCJA”) signed into law in December 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally limited the corporate tax deduction for compensation paid to the CEOa Company’s chief executive officer, chief financial officer and the three other most highly compensated executives (other than the CFO) to $1.0 million annually, unlessofficers. Traditionally, certain requirements were satisfied. To maximize the corporate tax deduction, incentive plans were designed so that certain awards under those plans would constitute “qualified performance-based compensation” was not subject to this $1 million limitation. The 2017 U.S. tax reform, however, eliminated the “qualified performance-based compensation” exemption. Nevertheless, our HR and Compensation Committee continues to view pay for purposesperformance as an important part of our executive compensation program. The HR and Compensation Committee, after considering the potential impact of the application of this Section 162(m) of the Code, and preserve our corporatemay provide compensation to executive officers that may not be tax deductibility for those amounts.
The TCJA contained significant changes to Section 162(m) of the Code, including the elimination of the performance-based compensation exception to Section 162(m) for corporate tax years beginning after December 31, 2017, and an expansion of employees covered by the provision. Section 162(m) now covers the CFO or any individual who served as the CFO in the relevant taxable year. In addition, once an individual becomes a covered employee under Section 162(m) for any taxable year beginning after December 31, 2016, this status carries forward to all future years, even in the event of the employee’s termination or death. The TCJA provides limited transition relief for certain grandfathered “performance-based” compensation, specifyingdeductible if it believes that providing that compensation payable pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after that date will remain eligible for the “performance-based” compensation exception to Section 162(m) (i.e., may remain deductible even if in excess of $1 million). The U.S. Internal Revenue Service has provided some guidance on the application of the transition relief to specific situations. However, given the changes to Section 162(m), we expect that the U.S.-based tax deductibility of performance-based compensation in excess of $1.0 million will be less of a consideration for us when designing and implementing our executive officers’ compensation program in future years.
While the TCJA may limit the deductibility of compensation paid to our covered employees, the Compensation Committee and the Board will—consistent with past practice—retain flexibility to design compensation programs that areis in the best long-term interests of Tevathe Company and our shareholders, with deductibility of compensation being one of many factors considered.its shareholders.
HR and Compensation Committee Report
The HR and Compensation Committee has reviewed and discussed this “Compensation Discussion and Analysis” section of this Proxy Statement with our executives. Based upon this review and discussions, the HR and Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement.
This HR and Compensation Committee Report shall not be deemed to be incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended (the “Securities Act”) or the U.S. Securities Exchange Act of 1934, as amended, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent the Company incorporates such Report by specific reference.
Members of the HR and Compensation Committee:
Rosemary A. Crane, Chair
Gerald M. Lieberman
Nechemia (Chemi) J. Peres
Janet S. Vergis
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 63
| 62 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
ADDITIONAL COMPENSATION INFORMATION
20192021 Summary Compensation Table
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) (2) | Stock Awards ($) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) (5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (6) | Total ($) | |||||||||||||||||||||||||
Kåre Schultz President and Chief Executive Officer
|
|
2019 |
|
|
2,000,000 |
|
|
0 |
|
|
5,999,977 |
|
|
0 |
|
|
2,869,720 |
|
0 |
|
726,867 |
|
|
11,596,564 |
| |||||||||
| 2018 | 2,000,000 | 20,000,000 | 4,499,977 | 1,500,019 | 3,790,360 | 0 | 679,519 | 32,469,875 | ||||||||||||||||||||||||||
| 2017 | 333,333 | 0 | 14,229,808 | 2,000,009 | 0 | 0 | 464,591 | 17,027,741 | ||||||||||||||||||||||||||
Eli Kalif Executive Vice President, Chief Financial Officer
|
|
2019 |
|
|
18,130 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
0 |
|
2,425 |
|
|
20,555 |
| |||||||||
Dr. Hafrun Fridriksdottir Executive Vice President, Global Research and Development |
|
2019 |
|
|
720,000 |
|
|
837,500 |
|
|
1,899,988 |
|
|
0 |
|
|
734,832 |
|
0 |
|
185,405 |
|
|
4,377,725 |
| |||||||||
| 2018 | 720,000 | 650,000 | 2,321,392 | 900,003 | 1,296,144 | 0 | 87,492 | 5,975,031 | ||||||||||||||||||||||||||
| 2017 | 696,346 | 900,000 | 999,957 | 500,047 | 535,000 | 0 | 77,492 | 3,708,842 | ||||||||||||||||||||||||||
Brendan O’Grady Executive Vice President, North America Commercial
|
|
2019 |
|
|
676,923 |
|
|
20,500 |
|
|
1,899,988 |
|
|
0 |
|
|
800,868 |
|
0 |
|
64,011 |
|
|
3,462,290 |
| |||||||||
Gianfranco Nazzi Executive Vice President, International Markets Commercial
|
|
2019 |
|
|
541,580 |
|
|
40,579 |
|
|
1,299,977 |
|
|
0 |
|
|
552,505 |
|
0 |
|
1,014,531 |
|
|
3,449,172 |
| |||||||||
Michael McClellan Former Executive Vice President, Chief Financial Officer
|
|
2019 |
|
|
603,077 |
|
|
33,750 |
|
|
1,699,995 |
|
|
0 |
|
|
0 |
|
0 |
|
1,894,421 |
|
|
4,231,243 |
| |||||||||
| 2018 | 700,000 | 135,000 | 1,799,992 | 900,003 | 1,172,640 | 0 | 238,375 | 4,946,010 | ||||||||||||||||||||||||||
| 2017 | 397,058 | 101,250 | 199,260 | 195,515 | 0 | 0 | 211,090 | 1,104,173 | ||||||||||||||||||||||||||
Dr. Carlo de Notaristefani Former Executive Vice President, Global Operations
|
|
2019 |
|
|
836,400 |
|
|
0 |
|
|
2,499,982 |
|
|
0 |
|
|
780,445 |
|
0 |
|
202,011 |
|
|
4,318,838 |
| |||||||||
| 2018 | 836,400 | 0 | 3,549,915 | 1,166,679 | 1,495,232 | 0 | 194,294 | 7,242,520 | ||||||||||||||||||||||||||
| 2017 | 836,400 | 0 | 2,569,720 | 866,688 | 0 | 0 | 189,551 | 4,462,359 | ||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) | Stock Awards ($) (2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) (4) | Total ($) | ||||||||||||||||||||||||||||||||||||
Kåre Schultz President and Chief Executive Officer | 2021 | 2,000,000 | 0 | 9,999,994 | 0 | 2,029,440 | 0 | 652,338 | 14,681,772 | ||||||||||||||||||||||||||||||||||||
| 2020 | 2,000,000 | 0 | 9,999,970 | 0 | 3,055,920 | 0 | 668,628 | 15,724,518 | |||||||||||||||||||||||||||||||||||||
| 2019 | 2,000,000 | 0 | 5,999,977 | 0 | 2,869,720 | 0 | 726,867 | 11,596,564 | |||||||||||||||||||||||||||||||||||||
Eli Kalif Executive Vice President, Chief Financial Officer | 2021 | 747,175 | 0 | 1,799,996 | 0 | 715,340 | 0 | 282,472 | 3,544,983 | ||||||||||||||||||||||||||||||||||||
| 2020 | 681,281 | 0 | 1,949,974 | 0 | 826,599 | 0 | 265,961 | 3,723,815 | |||||||||||||||||||||||||||||||||||||
| 2019 | 18,130 | 0 | 0 | 0 | 0 | 0 | 2,425 | 20,555 | |||||||||||||||||||||||||||||||||||||
Dr. Sven Dethlefs Executive Vice President, North America Commercial | 2021 | 742,731 | 0 | 2,099,982 | 0 | 832,320 | 0 | 142,344 | 3,817,377 | ||||||||||||||||||||||||||||||||||||
Eric Drapé Executive Vice President, Global Operations | 2021 | 756,108 | 0 | 1,899,989 | 0 | 724,106 | 0 | 432,056 | 3,812,259 | ||||||||||||||||||||||||||||||||||||
| 2020 | 708,010 | 0 | 1,799,994 | 0 | 859,028 | 0 | 481,569 | 3,848,601 | |||||||||||||||||||||||||||||||||||||
Mark Sabag Executive Vice President, International Markets Commercial | 2021 | 765,294 | 0 | 1,999,991 | 0 | 732,686 | 0 | 290,770 | 3,788,741 | ||||||||||||||||||||||||||||||||||||
Salary
| (1) |
|
Bonus
|
64 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Stock Awards
The amounts shown in the Stock Awards column represent the aggregate grant date fair value of the PSUs and RSUs awarded to our NEOs, computed in accordance with Topic 718. |
The grant date fair value of PSUs displayedincluded above is determined based upon achievement of performance at the “target” level, which is the probable outcome of the performance metrics associated with each award of PSUs. If performance were to be achieved at “maximum” level, the grant date fair value of the 20192021 PSU awards as of the respective grant dates would have been as follows: Mr. Schultz: $7,199,976;$16,799,991; Mr. Kalif: $2,160,001; Dr. Fridriksdottir: $2,279,990;Dethlefs: $2,519,984; Mr. O’Grady: $2,279,990;Drapé: $2,279,980; and Mr. Nazzi: $1,559,996; Mr. McClellan: $2,040,007; and Dr. de Notaristefani: $3,000,000.Sabag: $2,399,987.
Options
|
Non-Equity Incentive Awards
The amounts shown in theNon-Equity Incentive Plan Compensation column are comprised of amounts paid in respect of the executive officer annual cash incentive plan, as determined by the HR and Compensation Committee and the Board in accordance with the plan and the awards thereunder. Payments pursuant to the executive officer annual cash incentive plan are generally made early in the year following the year in which they are earned. The Company paid the amounts reported in 2021 for Mr. Kalif and Mr. Sabag in Israeli shekels. The 2021 U.S. dollar amounts in the table above were converted from Israeli shekels using a 2021 annual average exchange rate of 3.23 shekels per U.S. dollar. The Company paid the amount reported in |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 63 | |
Executive Compensation
All Other Compensation
Name
|
Defined (a)
|
Automobile (b)
|
Housing (c)
|
Tax (d)
|
Other (e)
| Total ($)
| ||||||||||||||||||
Kåre Schultz
|
|
316,806
|
|
|
91,958
|
|
|
200,786
|
|
|
112,563
|
|
|
4,754
|
|
|
726,867
|
| ||||||
Eli Kalif
|
|
—
|
|
|
1,261
|
|
|
—
|
|
|
1,161
|
|
|
3
|
|
|
2,425
|
| ||||||
Dr. Hafrun Fridriksdottir
|
|
150,159
|
|
|
24,000
|
|
|
—
|
|
|
3,548
|
|
|
7,698
|
|
|
185,405
|
| ||||||
Brendan O’Grady
|
|
29,745
|
|
|
24,000
|
|
|
7,031
|
|
|
1,811
|
|
|
1,424
|
|
|
64,011
|
| ||||||
Gianfranco Nazzi
|
|
43,788
|
|
|
43,287
|
|
|
240,720
|
|
|
677,450
|
|
|
9,286
|
|
|
1,014,531
|
| ||||||
Michael McClellan
|
|
61,360
|
|
|
40,398
|
|
|
146,327
|
|
|
1,640,009
|
|
|
6,327
|
|
|
1,894,421
|
| ||||||
Dr. Carlo de Notaristefani
|
|
156,470
|
|
|
33,998
|
|
|
—
|
|
|
3,424
|
|
|
8,119
|
|
|
202,011
|
| ||||||
Name | Defined (a) | Automobile (b) | Housing (c) | Tax (d) | Other (e) | Total ($) | ||||||||||||||||||||||||
Kåre Schultz (*) | 316,175 | 62,680 | 204,376 | 64,195 | 4,912 | 652,338 | ||||||||||||||||||||||||
Eli Kalif (*) | 118,401 | 57,021 | — | 47,044 | 60,006 | 282,472 | ||||||||||||||||||||||||
Dr. Sven Dethlefs | 115,848 | 24,000 | — | 66 | 2,430 | 142,344 | ||||||||||||||||||||||||
Eric Drapé (*) | 197,717 | 50,551 | 124,924 | 51,667 | 7,197 | 432,056 | ||||||||||||||||||||||||
Mark Sabag (*) | 121,149 | 56,444 | — | 46,677 | 66,500 | 290,770 | ||||||||||||||||||||||||
The U.S. dollar amounts in the table above were converted from local currency, where needed, using the relevant 2019 monthly average exchange rates of 3.47 to 3.69
| (*) | The U.S. dollar amounts in the table above were converted from local currency, where needed, using the relevant 2021 monthly average exchange rates of 3.12 to 3.31 Israeli shekels per U.S. dollar and 0.82 to 0.88 |
| (a) | Amounts disclosed in this column reflect Company contributions and/or payments related totax-qualified andnon-qualified retirement plans and Israeli separation plan contributions, which include pension and severance, pursuant to Israeli law. |
| (b) | Amounts disclosed in this column reflect automobile allowances, participation in the Company’s car lease program, or use of a Company car and/or reimbursement ofnon-business automobile expenses. |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 65
Executive Compensation
| (c) | Amounts disclosed in this column reflect expenses related to relocation such as housing accommodation costs for Mr. Schultz ($ |
| (d) | Amounts disclosed in this column reflect taxgross-ups paid to our NEOs as follows:Mr. Schultz—gross-ups are provided for the income associated with accommodation in Israel, travel costs associated with travel allowance, other items related to his relocation (paid in accordance with Teva’s relocation policy), and costs associated with the Company-provided or leased automobile and cell |
| (e) | Amounts disclosed in this column reflect study fund contributions or payments for Mr. Kalif ($56,038) and Mr. Sabag ($57,397), as provided to all Israel-based employees (excluding those on relocation), life insurance premium payments made by the Company on behalf of the NEOs, and miscellaneous cash and other fringe benefits provided generally to all eligible employees in applicable countries. |
Employment Agreements
We have entered into employment agreements with all of our NEOs thatNEOs. The employment agreements provide for, among other things, the term of employment, the position and duties, the compensation and benefits payable during the term of the agreement and certain restrictive covenants. The agreements also set forth the terms in the event that the NEO’s employment is terminated under various conditions. The material provisions pertaining to termination of employment of the NEOs are set forth below under “—20192021 Potential Payments Upon Termination or Change in Control.”
Kåre Schultz
On September 7, 2017, we entered into an employment agreement with Mr. Schultz to serve as our CEO.CEO which was amended on June 9, 2020. The employment agreement provides for an employment term of fivesix years, subject to automatic renewal for subsequentone-year periods (or until the second anniversary following a change in control of the Company, if later than the otherwise applicable term end date) until a notice ofnon-renewal is provided or other termination circumstances occur.
| 64 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Under the employment agreement, Mr. Schultz receivedreceives an annual base salary of $2 million, a performance-based target annual incentive opportunity equal to 140% of his annual base salary (and a maximum opportunity of 200% of his annual base salary) and annual long-term equity incentives with a total target grant date fair value of $6$10 million with vesting terms similar to other senior executive officers, a meaningful portion70% of which are performance-based. Mr. Schultz is eligible for benefit plans provided to similarly situated executive officers, including medical, dental, group life and other programs, pension and severance contributions pursuant to Israeli law, relocation benefits in accordance with our policy, housing reimbursement up to 40,000 Israeli shekels per month ($11,22412,382 using a 20192021 average monthly exchange rate of 3.563.23 shekels per U.S. dollar) and personal travel reimbursement up to $100,000 per year. Under the agreement, Mr. Schultz is also provided with a company or leased car.
The agreement also contains noncompetition (except in the event of expiration of the term) and nonsolicitation covenants for 24 months after the term of the agreement, a nondisparagement covenant for 10 years after the term of the agreement, a nondisclosure covenant and an assignment of inventions.
Eli Kalif
On November 6, 2019, we entered into an employment agreement with Mr. Kalif. The agreement provides that Mr. Kalif will be employed as Executive Vice President and CFO, until his death, disability, termination with or without cause or resignation with or without good reason. The agreement provides for an initial annual base salary of 2,343,200 Israeli shekels (approximately $650,000 based on an$725,338 using a 2021 average monthly exchange rate of 3.60 Israeli3.23 shekels per U.S. dollar).
66 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Mr. Kalif is eligible to be considered for an annual cash incentive with a target of 100% of his then-current base salary, and for equity-based awards under our equity compensation plan. Under the agreement, Mr. Kalif is also provided with a company or leased car(grossed-up for applicable taxes), certain pension and severance fund contributions pursuant to Israeli law (by both the Company and Mr. Kalif), and group life insurance and other benefits customary for executives in Israel.
In addition, Mr. Kalif received asign-on equity award in February 2020 in the form of restricted stock units with a grant date fair value of $250,000 in consideration of certain equity grants with Mr. Kalif’s prior employer that were forfeited upon his resignation. These RSUs will vest in three equal installments on the second, third, and fourth anniversaries of the grant date, subject to his continued employment through the applicable vesting dates.
The agreement also contains noncompetition and nonsolicitation covenants for 6 months after the term of the agreement and nondisclosure and nondisparagement covenants and assignment of inventions.
Dr. Hafrun FridriksdottirSven Dethlefs
On June 18, 2017,5, 2018, we entered into an executive employment agreement with Dr. Fridriksdottir.Dethlefs. The agreement provides that Dr. Fridriksdottir will serve in a senior R&D position until her death, disability, termination with or without cause or resignation with or without good reason. The agreement provided for an initial annual base salary of $720,000.
Dr. Fridriksdottir is eligible to be considered for an annual cash incentive and for equity-based awards under our equity compensation plan. She is eligible for benefit plans provided to similarly situated executive officers, including medical, disability, dental, life, 401(k) plan, deferred compensation and other programs. Under the agreement, Dr. Fridriksdottir is also provided with a car allowance.
The agreement also contains noncompetition and nonsolicitation covenants for 12 months after the term of the agreement and nondisclosure and nondisparagement covenants and assignment of inventions.
Brendan O’Grady
On May 6, 2018, we entered into an executive employment agreement with Mr. O’Grady. The agreement provides that Mr. O’GradyDethlefs will serve as Executive Vice President, North America CommercialGlobal Marketing & Portfolio until his death, disability, termination with or without cause or resignation with or without good reason. The agreement providedprovides for an initial annual base salary of $600,000.$582,000.
Mr. O’GradyDr. Dethlefs is eligible to be considered for an annual cash incentive with a target of 100% of his then-current base salary, and for equity-based awards under our equity compensation plan. He is eligible for benefit plans provided to similarly situated executive officers, including medical, disability, dental, life, 401(k) plan, deferred compensation and other programs. Under the agreement, Mr. O’GradyDr. Dethlefs is also provided with a car allowance. In addition, Mr. O’Grady is eligible for housing reimbursement up to $4,000 per month, grossed up for applicable taxes, until he permanently relocates to Parsippany, NJ in 2021, as part of various initiatives to support employees in connection with the U.S. headquarters move from North Whales, PA to Parsippany, NJ.
The agreement also contains noncompetition and nonsolicitation covenants for 12 months after the term of the agreement and nondisclosure and nondisparagement covenants and assignment of inventions.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 65 | |
Executive Compensation
Effective August 15, 2021, we appointed Dr. Dethlefs to the position of Executive Vice President, North American Commercial with an initial base salary of $816,000 which would be used as eligible base salary for the 2021 bonus calculation. His employment remains subject to the terms of his employment agreement.
Gianfranco NazziEric Drapé
On April 1, 2019,March 12, 2020, we entered into an executive employment agreement with Mr. Nazzi.Drapé. The agreement provides that Mr. NazziDrapé will serve as Executive Vice President, International Markets CommercialTeva Global Operations until his death, disability, termination with or without cause or resignation.resignation with or without good reason. The agreement providedprovides for an initial annual
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 67
Executive Compensation
base salary of 464,100620,500 euros commencing April 1, 2018 (approximately $519,605$734,237 using a 20192021 average monthly exchange rate of 0.890.85 euros per U.S. dollar).
Mr. NazziDrapé is eligible to be considered for an annual cash incentive with a target of 100% of his then-current base salary, and for equity-based awards under our equity compensation plan. HeMr. Drapé is eligible for pension and benefit plans provided to similarly situated executive officers.officers, including medical, dental, group life and other programs, and pension and severance contributions pursuant to Israeli law, of which the pension portion and any supplement thereof is provided to Mr. Drapé as reimbursement of an amount equal to the required monthly French contribution, to be paid by Mr. Drapé to French social security to enable continued coverage. Under the agreement, Mr. Drapé is also provided with a company or leased car (grossed-up for applicable taxes). In conjunction with Mr. Nazzi’sDrapé’s relocation to Israel, he is entitled to relocation benefits in accordance with the terms of our relocation policy. He is entitled to a housing allowance of up to 32,00025,000 Israeli shekels per month ($8,9797,739 using a 20192021 average monthly exchange rate of 3.563.23 shekels per U.S. dollar).
The agreement also contains noncompetition and nonsolicitation covenants for 126 months after the term of the agreement and nondisclosure and nondisparagement covenants and assignment of inventions.
Michael McClellanMark Sabag
On February 8, 2018,December 22, 2013, we entered into an executive employment agreement with Mr. McClellan.Sabag. The agreement providedprovides that Mr. McClellan would be employedSabag will serve as Group Executive Vice President, CFO,Human Resources until his death, disability, aged retirement, termination with or without cause or resignation with or without good reason. The agreement providedprovides for an initial annual base salary of $700,000.1,518,000 Israeli shekels (approximately $469,897 using a 2021 average monthly exchange rate of 3.23 shekels per U.S. dollar).
Mr. McClellan wasSabag is eligible to be considered for an annual cash incentive with a target of 100% of his then-current base salary, and for equity-based awards under our equity compensation plan. He was eligibleMr. Sabag is also provided with a company or leased car (grossed-up for benefit plans providedapplicable taxes), certain pension and severance fund contributions pursuant to similarly situated executive officers, including medical, disability, dental,Israeli law (by both the Company and Mr. Sabag), and group life 401(k) plan, deferred compensationinsurance and other programs. In conjunction with Mr. McClellan’s relocation to Israel, he was entitled to relocation benefits customary for executives in accordance with the terms of our relocation policy. While he was based in Israel, he was entitled to a housing allowance of up to 21,500 Israeli shekels per month ($6,033 using a 2019 average monthly exchange rate of 3.56 shekels per U.S. dollar).Israel.
The agreement also containedcontains a noncompetition and nonsolicitation covenantscovenant for 12 months after the term of the agreement andtermination, nondisclosure and nondisparagement covenants and an assignment of inventions.
inventionsDr. Carlo de Notaristefani.
OnEffective as of August 6, 2012,15, 2021, we entered into anappointed Mr. Sabag to the position of Executive Vice President, International Markets Commercial. His employment agreement with Dr. de Notaristefani which was most recently amended and restated on February 7, 2018. The agreement provided that Dr. de Notaristefani would serve in a senior global operations position, until his death, disability, termination with or without cause or resignation with or without good reason. The agreement provided for an initial annual base salary of $836,400.
Dr. de Notaristefani was eligibleremains subject to participate in the Company’s annual cash incentive plan with a target of 100%terms of his then current base salary, and for equity-based awards under our equity compensation plan. He was eligible for benefit plans provided to similarly situated executive officers, including medical, disability, dental, life, 401(k) plan, deferred compensation and other programs. Under the agreement, Dr. de Notaristefani was also provided with a car or a car allowance.
The agreement also contained noncompetition and nonsolicitation covenants for 12 months after the term of the agreement and nondisclosure and nondisparagement covenants and assignment of inventions.employment agreement.
68 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 66 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
2019 Pay Ratio
The CEO pay ratio rule permits the use of a median employee for up to three years unless there has been a meaningful change to a company’s employee population. We determined that there was no meaningful change to our employee population and therefore we used the same median employee as was used in 2018 for pay ratio purposes.
We have estimated the compensation of the 2019 median employee to be $76,421. The annual total compensation of our CEO was $11,596,564. The ratio of the annual total compensation of our CEO to that of the annual total compensation of our median employee was 152 to 1.
Our “median employee” is a full-time, salaried employee located in Israel. We totaled all of the elements of the employee’s compensation for 2019 in the same manner as the CEO and in accordance with SEC Summary Compensation Table disclosure requirements, which resulted in an annual total compensation of $76,421, of which $29,640 is base salary, $5,715 isnon-equity incentive compensation, and $41,066 is comprised of Company contributions to a pension fund, as is required by Israeli law, and other compensation such as overtime pay, travel and other cash allowances, and Company contributions to a study fund, as is common practice for Israel-based employees of the Company.
Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters offices in different countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 69
Executive Compensation
20192021 Grants of Plan-Based Awards
| Estimated Future Payouts UnderNon-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Name
| Approval
| Grant
| Award Type
| Threshold
| Target ($)
| Maximum ($)
| Threshold
| Target (#)
| Maximum
| All (#) (3)
| All Other (#)
| Exercise
| Grant ($)
| |||||||||||||||||||||||||||||||||||||
Kåre Schultz | 2/12/2019 | 2/12/2019 | Annual Incentive | 500,000 | 2,800,000 | 4,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 39,788 | 198,938 | 477,452 | 2,999,985 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | RSU | 179,104 | 2,999,992 | ||||||||||||||||||||||||||||||||||||||||||||||
Dr. Hafrun Fridriksdottir | 2/12/2019 | 2/12/2019 | Annual Incentive | 180,000 | 720,000 | 1,440,000 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 12,600 | 62,997 | 151,193 | 949,995 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | RSU | 56,716 | 949,993 | ||||||||||||||||||||||||||||||||||||||||||||||
Brendan O’Grady | 2/12/2019 | 2/12/2019 | Annual Incentive | 169,231 | 676,923 | 1,353,846 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 12,600 | 62,997 | 151,193 | 949,995 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | RSU | 56,716 | 949,993 | ||||||||||||||||||||||||||||||||||||||||||||||
Gianfranco Nazzi | 2/12/2019 | 2/12/2019 | Annual Incentive | 135,395 | 541,580 | 1,083,160 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 8,621 | 43,103 | 103,448 | 649,993 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | RSU | 38,805 | 649,984 | ||||||||||||||||||||||||||||||||||||||||||||||
Michael McClellan | 2/12/2019 | 2/12/2019 | Annual Incentive | 150,769 | 603,077 | 1,206,154 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 11,274 | 56,366 | 135,279 | 849,999 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | RSU | 50,746 | 849,996 | ||||||||||||||||||||||||||||||||||||||||||||||
Dr. Carlo de Notaristefani | 2/12/2019 | 2/12/2019 | Annual Incentive | 209,100 | 836,400 | 1,672,800 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/12/2019 | 3/4/2019 | PSU | 16,579 | 82,891 | 198,939 | 1,249,996 | ||||||||||||||||||||||||||||||||||||||||||||
|
| 2/12/2019
|
|
| 3/4/2019
|
| RSU
|
| 74,626
|
|
| 1,249,986
|
| ||||||||||||||||||||||||||||||||||||||
Mr. Kalif was not eligible for any grants of plan-based awards in 2019.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Name | Approval Date | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All (#) (3) | All Other (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant ($) | |||||||||||||||||||||||||||||||||||||
Kåre Schultz |
|
|
|
|
|
| Annual Incentive | 500,000 | 2,800,000 | 4,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/9/2021 | 3/5/2021 | PSU |
|
|
|
|
|
|
|
|
| 147,867 | 739,332 | 1,774,397 |
|
|
|
|
|
|
|
|
| 6,999,995 | |||||||||||||||||||||||||
| 2/9/2021 | 3/5/2021 | RSU |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 285,171 |
|
|
|
|
|
| 2,999,999 | |||||||||||||||||||||
Eli Kalif |
|
|
|
|
|
| Annual Incentive | 186,794 | 747,175 | 1,494,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/9/2021 | 3/5/2021 | PSU |
|
|
|
|
|
|
|
|
| 19,012 | 95,057 | 228,137 |
|
|
|
|
|
|
|
|
| 900,000 | |||||||||||||||||||||||||
| 2/9/2021 | 3/5/2021 | RSU |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 85,551 |
|
|
|
|
|
| 899,997 | |||||||||||||||||||||
Dr. Sven Dethlefs |
|
|
|
|
|
| Annual Incentive | 204,000 | 816,000 | 1,632,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/9/2021 | 3/5/2021 | PSU |
|
|
|
|
|
|
|
|
| 22,180 | 110,899 | 266,158 |
|
|
|
|
|
|
|
|
| 1,049,992 | |||||||||||||||||||||||||
| 2/9/2021 | 3/5/2021 | RSU |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 99,809 |
|
|
|
|
|
| 1,049,991 | |||||||||||||||||||||
Eric Drapé |
|
|
|
|
|
| Annual Incentive | 189,027 | 756,108 | 1,512,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/9/2021 | 3/5/2021 | PSU |
|
|
|
|
|
|
|
|
| 20,068 | 100,337 | 240,809 |
|
|
|
|
|
|
|
|
| 949,991 | |||||||||||||||||||||||||
| 2/9/2021 | 3/5/2021 | RSU |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 90,304 |
|
|
|
|
|
| 949,998 | |||||||||||||||||||||
Mark Sabag |
|
|
|
|
|
| Annual Incentive | 191,324 | 765,294 | 1,530,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 2/9/2021 | 3/5/2021 | PSU |
|
|
|
|
|
|
|
|
| 21,124 | 105,618 | 253,484 |
|
|
|
|
|
|
|
|
| 999,991 | |||||||||||||||||||||||||
|
| 2/9/2021 | 3/5/2021 | RSU |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 95,057 |
|
|
|
|
|
| 1,000,000 | |||||||||||||||||||||
Annual Incentive Plan
| (1) | The amounts disclosed in these columns reflect the threshold, target and maximum annual cash incentive opportunities for |
Performance Share Units (PSUs)
| (2) | Amounts disclosed in these columns reflect the potential threshold, target and maximum number of PSUs that may be earned in respect of the PSUs awarded in |
Restricted Share Units (RSUs)
| (3) | Amounts disclosed in this column reflect the number of RSUs granted to our NEOs in |
70 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 67 | |
Executive Compensation
20192021 Outstanding Equity Awards at FiscalYear-End
Option Awards
|
Stock Awards
|
|
| Option Awards | Stock Awards |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name
| Award
| Grant
| Number of
| Number of
| Option
| Option
| Number
| Market
| Equity
| Equity
| Vesting Schedule
| Award Type | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Shares That Have Not Vested (#) (3) | Market Value of Shares or Units of Shares That Have Not Vested ($) (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That have Not Vested ($) (6) | Vesting Schedule (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kåre Schultz | Options | 11/3/2017 | 197,239 | 394,480 | 11.40 | 11/3/2027 | 33% in 2019, 2020 and 2021 | Options | 11/3/2017 | 591,719 |
| 11.40 | 11/3/2027 |
|
|
|
| vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 205,482 | 18.61 | 2/9/2028 | 33% in 2020, 2021 and 2022 |
| 2/9/2018 | 136,988 | 68,494 | 18.61 | 2/9/2028 |
|
|
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 11/3/2017 | 127,226 | 1,246,815 | 33% in 2019, 2020 and 2021 | RSUs | 11/3/2017 |
|
|
|
| 116,389 | 932,276 |
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/3/2017 | 349,163 | 3,421,797 | 33% in 2020, 2021 and 2022 |
| 2/9/2018 |
|
|
|
| 26,867 | 215,205 |
|
| 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 80,601 | 789,890 | 33% in 2020, 2021 and 2022 |
| 3/4/2019 |
|
|
|
| 119,403 | 956,418 |
|
| 33% in 2021, 2022 and 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019 | 179,104 | 1,755,219 | 33% in 2021, 2022 and 2023 |
| 2/28/2020 |
|
|
|
| 195,143 | 1,563,095 |
|
| 25% in 2021, 2022, 2023 and in 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PSUs | 11/3/2017 | 649,914 | 6,369,157 | 33% in 2020, 2021 and 2022, subject to performance |
| 3/5/2021 |
|
|
|
| 285,171 | 2,284,220 |
|
| 25% in 2022, 2023, 2024, and 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/3/2017 | 751,504 | 7,364,739 | 100% in 2022, subject to performance | PSUs | 11/3/2017 |
|
|
|
|
|
| 375,752 | 3,009,774 | 100% in 2022, subject to performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/3/2017 | 212,314 | 2,080,677 | 100% in 2020 |
| 3/4/2019 |
|
|
|
| 162,593 | 1,302,370 |
|
| 100% in 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 179,104 | 1,755,219 | 100% in 2021, subject to performance |
| 2/28/2020 |
|
|
|
|
|
| 289,100 | 2,315,691 | 100% in 2023, subject to performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019 | 198,938 | 1,949,592 | 100% in 2022, subject to performance |
| 6/9/2020 |
|
|
|
|
|
| 351,802 | 2,817,934 | 100% in 2023, subject to performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dr. Hafrun Fridriksdottir | Options | 7/1/2014 | 22,809 | 48.69 | 7/1/2024 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 3/5/2021 |
|
|
|
|
|
| 184,833 | 1,480,512 | 100% in 2024, subject to performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eli Kalif | RSUs | 2/13/2020 |
|
|
|
| 19,888 | 159,303 |
|
| 33% in 2022, 2023 and 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2/28/2020 |
|
|
|
| 55,290 | 442,873 |
|
| 25% in 2021, 2022, 2023 and 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 3/5/2021 |
|
|
|
| 85,551 | 685,264 |
|
| 25% in 2022, 2023, 2024, and 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PSUs | 2/28/2020 |
|
|
|
|
|
| 81,911 | 656,107 | 100% in 2023, subject to performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 3/5/2021 |
|
|
|
|
|
| 23,765 | 190,358 | 100% in 2024, subject to performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dr. Sven Dethlefs | Options | 2/24/2012 | 12,005 |
| 44.59 | 2/24/2022 |
|
|
|
| vested | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/2/2016 | 11,991 | 3,999 | 52.96 | 8/2/2026 | 25% in 2017, 2018, 2019 and 2020 |
| 12/13/2012 | 12,503 |
| 38.84 | 12/13/2022 |
|
|
|
| vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/9/2016 | 4,164 | 1,389 | 50.21 | 9/9/2026 | 25% in 2017, 2018, 2019 and 2020 |
| 2/24/2013 | 12,506 |
| 38.08 | 2/24/2023 |
|
|
|
| vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/30/2016 | 57,167 | 37.70 | 11/30/2026 | Vested |
| 3/12/2014 | 25,003 |
| 48.76 | 3/12/2024 |
|
|
|
| vested | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/14/2017 | 28,347 | 56,695 | 34.90 | 2/14/2027 | 33% in 2019, 2020 and 2021 |
| 3/12/2015 | 25,005 |
| 60.21 | 3/12/2025 |
|
|
|
| vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 123,288 | 18.61 | 2/9/2028 | 33% in 2020, 2021 and 2022 |
| 3/17/2016 | 25,006 |
| 53.50 | 3/17/2026 |
|
|
|
| vested | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 8/2/2016 | 748 | 7,330 | 25% in 2017, 2018, 2019 and 2020 |
| 3/3/2017 | 30,001 |
| 34.70 | 3/3/2027 |
|
|
|
| vested | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/9/2016 | 266 | 2,607 | 25% in 2017, 2018, 2019 and 2020 |
| 9/18/2017 | 8,721 |
| 16.99 | 9/18/2027 |
|
|
|
| vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/14/2017 | 10,708 | 104,938 | 33% in 2019, 2020 and 2021 |
| 2/9/2018 | 66,970 | 33,487 | 18.61 | 2/9/2028 |
|
|
|
| 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 48,361 | 473,938 | 33% in 2020, 2021 and 2022 | RSUs | 2/9/2018 |
|
|
|
| 13,135 | 105,211 |
|
| 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019 | 56,716 | 555,817 | 33% in 2021, 2022 and 2023 |
| 3/4/2019 |
|
|
|
| 27,861 | 223,167 |
|
| 33% in 2021, 2022 and 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PSUs | 2/14/2017 | 17,850 | 174,930 | 100% in 2020 |
| 2/28/2020 |
|
|
|
| 52,038 | 416,824 |
|
| 25% in 2021, 2022, 2023 and 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 53,731 | 526,564 | 100% in 2021, subject to performance |
| 3/5/2021 |
|
|
|
| 99,809 | 799,470 |
|
| 25% in 2022, 2023, 2024, and 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/11/2018 | 30,000 | 294,000 | 100% in 2021, subject to performance | PSUs | 3/4/2019 |
|
|
|
| 37,939 | 303,891 |
|
| 100% in 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019 | 62,997 | 617,371 | 100% in 2022, subject to performance |
| 2/28/2020 |
|
|
|
|
|
| 77,093 | 617,515 | 100% in 2023, subject to performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brendan O’Grady | Options | 12/6/2010 | 5,401 | 49.11 | 12/6/2020 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/7/2011 | 9,003 | 41.72 | 11/7/2021 | vested |
| 3/5/2021 |
|
|
|
|
|
| 27,725 | 222,077 | 100% in 2024, subject to performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/13/2012 | 12,503 | 38.84 | 12/13/2022 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/12/2014 | 17,502 | 48.76 | 3/12/2024 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/12/2015 | 15,502 | 60.21 | 3/12/2025 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/17/2016 | 18,753 | 6,253 | 53.50 | 3/17/2026 | 25% in 2017, 2018, 2019 and 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/3/2017 | 12,500 | 12,501 | 34.70 | 3/3/2027 | 25% in 2018, 2019, 2020 and 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/18/2017 | 7,485 | 16.99 | 9/18/2027 | vested | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 123,288 | 18.61 | 2/9/2028 | 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSUs | 3/17/2016 | 1,179 | 11,554 | 25% in 2017, 2018, 2019 and 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/3/2017 | 2,332 | 22,854 | 25% in 2018, 2019, 2020 and 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2018 | 48,361 | 473,938 | 33% in 2020, 2021 and 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019 | 56,716 | 555,817 | 33% in 2021, 2022 and 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PSUs | 2/9/2018 | 53,731 | 526,564 | 100% in 2021, subject to performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2019
|
| 62,997
|
|
| 617,371
|
| 100% in 2022, subject to performance
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 71
| 68 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Option Awards
|
Stock Awards
| |||||||||||||||||||||||||||||||||||||
Name
| Award
| Grant
| Number of
| Number of
| Option
| Option
| Number
| Market
| Equity
| Equity
| Vesting Schedule
| |||||||||||||||||||||||||||
Gianfranco Nazzi | Options | 3/12/2014 | 30,003 | 48.76 | 3/12/2024 | vested | ||||||||||||||||||||||||||||||||
| 3/12/2015 | 18,505 | 60.21 | 3/12/2025 | vested | ||||||||||||||||||||||||||||||||||
| 3/17/2016 | 13,875 | 4,628 | 53.50 | 3/17/2026 | 25% in 2017, 2018, 2019 and 2020 | |||||||||||||||||||||||||||||||||
| 3/3/2017 | 15,000 | 15,001 | 34.70 | 3/3/2027 | 25% in 2018, 2019, 2020 and 2021 | |||||||||||||||||||||||||||||||||
| 9/18/2017 | 15,914 | 16.99 | 9/18/2027 | vested | ||||||||||||||||||||||||||||||||||
| 2/9/2018 | 91,326 | 18.61 | 2/9/2028 | 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||
| RSUs | 3/17/2016 | 874 | 8,565 | 25% in 2017, 2018, 2019 and 2020 | ||||||||||||||||||||||||||||||||||
| 3/3/2017 | 2,799 | 27,430 | 25% in 2018, 2019, 2020 and 2021 | |||||||||||||||||||||||||||||||||||
| 2/9/2018 | 35,823 | 351,065 | 33% in 2020, 2021 and 2022 | |||||||||||||||||||||||||||||||||||
| 3/4/2019 | 38,805 | 380,289 | 33% in 2021, 2022 and 2023 | |||||||||||||||||||||||||||||||||||
| PSUs | 2/9/2018 | 39,800 | 390,040 | 100% in 2021, subject to performance | ||||||||||||||||||||||||||||||||||
| 3/4/2019 | 43,103 | 422,409 | 100% in 2022, subject to performance | |||||||||||||||||||||||||||||||||||
Michael McClellan | Options | 11/5/2015 | 13,927 | 60.92 | 11/5/2025 | vested | ||||||||||||||||||||||||||||||||
| 3/17/2016 | 10,500 | 53.50 | 3/17/2026 | vested | ||||||||||||||||||||||||||||||||||
| 3/3/2017 | 11,252 | 34.70 | 3/3/2027 | vested | ||||||||||||||||||||||||||||||||||
| 9/18/2017 | 12,341 | 16.99 | 9/18/2027 | vested | ||||||||||||||||||||||||||||||||||
Dr. Carlo de Notaristefani | Options | 8/1/2012 | 150,003 | 40.87 | 8/1/2022 | vested | ||||||||||||||||||||||||||||||||
| 3/12/2014 | 98,581 | 48.76 | 3/12/2024 | vested | ||||||||||||||||||||||||||||||||||
| 2/12/2015 | 89,376 | 57.35 | 2/12/2025 | vested | ||||||||||||||||||||||||||||||||||
| 2/12/2016 | 66,602 | 33,302 | 55.75 | 2/12/2026 | 33% in 2018, 2019 and 2020 | |||||||||||||||||||||||||||||||||
| 5/16/2016 | 5,564 | 2,782 | 50.43 | 5/16/2026 | 33% in 2018, 2019 and 2020 | |||||||||||||||||||||||||||||||||
| 2/14/2017 | 49,132 | 98,264 | 34.90 | 2/14/2027 | 33% in 2019, 2020 and 2021 | |||||||||||||||||||||||||||||||||
| 2/9/2018 | 159,819 | 18.61 | 2/9/2028 | 33% in 2020, 2021 and 2022 | ||||||||||||||||||||||||||||||||||
| RSUs | 2/14/2017 | 18,560 | 181,888 | 33% in 2019, 2020 and 2021 | ||||||||||||||||||||||||||||||||||
| 2/9/2018 | 62,690 | 614,362 | 33% in 2020, 2021 and 2022 | |||||||||||||||||||||||||||||||||||
| 3/4/2019 | 74,626 | 731,335 | 33% in 2021, 2022 and 2023 | |||||||||||||||||||||||||||||||||||
| PSUs | 2/14/2017 | 30,941 | 303,222 | 100% in 2020 | ||||||||||||||||||||||||||||||||||
| 2/9/2018 | 69,651 | 682,580 | 100% in 2021, subject to performance | |||||||||||||||||||||||||||||||||||
| 5/11/2018 | 70,000 | 686,000 | 100% in 2021, subject to performance | |||||||||||||||||||||||||||||||||||
| 3/4/2019
|
| 82,891
|
|
| 812,332
|
| 100% in 2022, subject to performance
| |||||||||||||||||||||||||||||||
Mr. Kalif did not have any outstanding equity awards as of December 31, 2019. In addition, upon resignation, Mr. McClellan forfeited his unvested equity and had 90 days to exercise vested options.
|
|
|
| Option Awards | Stock Awards |
| |||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Shares That Have Not Vested (#) (3) | Market Value of Shares or Units of Shares That Have Not Vested ($) (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That have Not Vested ($) (6) | Vesting Schedule (7) | |||||||||||||||||||||||||||
Eric Drapé | Options | 12/9/2013 | 25,005 |
|
|
| 40.15 | 12/9/2023 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 3/12/2014 | 15,002 |
|
|
| 48.76 | 3/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 2/12/2015 | 54,623 |
|
|
| 57.35 | 2/12/2025 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 2/12/2016 | 54,950 |
|
|
| 55.75 | 2/12/2026 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 2/14/2017 | 62,364 |
|
|
| 34.90 | 2/14/2027 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 9/18/2017 | 33,339 |
|
|
| 16.99 | 9/18/2027 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 2/9/2018 | 33,486 | 16,745 | 18.61 | 2/9/2028 |
|
|
|
|
|
|
|
|
|
|
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||||||
| RSUs | 2/9/2018 |
|
|
|
|
|
|
|
|
|
|
|
| 6,568 | 52,610 |
|
|
|
|
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||
|
| 3/4/2019 |
|
|
|
|
|
|
|
|
|
|
|
| 23,880 | 191,279 |
|
|
|
|
|
| 33% in 2021, 2022 and 2023 | |||||||||||||||
|
| 2/28/2020 |
|
|
|
|
|
|
|
|
|
|
|
| 58,543 | 468,929 |
|
|
|
|
|
| 25% in 2021, 2022, 2023 and 2024 | |||||||||||||||
|
| 3/5/2021 |
|
|
|
|
|
|
|
|
|
|
|
| 90,304 | 723,335 |
|
|
|
|
|
| 25% in 2022, 2023, 2024, and 2025 | |||||||||||||||
| PSUs | 3/4/2019 |
|
|
|
|
|
|
|
|
|
|
|
| 32,518 | 260,469 |
|
|
|
|
|
| 100% in 2022 | |||||||||||||||
|
| 2/28/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 86,730 | 694,707 | 100% in 2023, subject to performance | |||||||||||||||
|
| 3/5/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,085 | 200,931 | 100% in 2024, subject to performance | |||||||||||||||
Mark Sabag | Options | 2/24/2012 | 3,201 |
|
|
| 44.59 | 2/24/2022 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 12/13/2012 | 4,501 |
|
|
| 38.84 | 12/13/2022 |
|
|
|
|
|
|
|
|
|
|
|
| vested | |||||||||||||||||
|
| 2/24/2013 | 4,502 |
|
|
| 38.08 | 2/24/2023 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 11/11/2013 | 100,002 |
|
|
| 37.26 | 11/11/2023 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 3/12/2014 | 73,933 |
|
|
| 48.76 | 3/12/2024 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 2/12/2015 | 67,035 |
|
|
| 57.35 | 2/12/2025 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 2/12/2016 | 64,940 |
|
|
| 55.75 | 2/12/2026 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 2/14/2017 | 90,710 |
|
|
| 34.90 | 2/14/2027 |
|
|
|
|
|
|
|
|
|
|
|
| Vested | |||||||||||||||||
|
| 2/9/2018 | 79,148 | 39,576 | 18.61 | 2/9/2028 |
|
|
|
|
|
|
|
|
|
|
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||||||
| RSUs | 2/9/2018 |
|
|
|
|
|
|
|
|
|
|
|
| 15,523 | 124,339 |
|
|
|
|
|
| 33% in 2020, 2021 and 2022 | |||||||||||||||
|
| 3/4/2019 |
|
|
|
|
|
|
|
|
|
|
|
| 31,841 | 255,046 |
|
|
|
|
|
| 33% in 2021, 2022 and 2023 | |||||||||||||||
|
| 2/28/2020 |
|
|
|
|
|
|
|
|
|
|
|
| 61,795 | 494,978 |
|
|
|
|
|
| 25% in 2021, 2022, 2023, and 2024 | |||||||||||||||
|
| 3/5/2021 |
|
|
|
|
|
|
|
|
|
|
|
| 95,057 | 761,407 |
|
|
|
|
|
| 25% in 2022, 2023, 2024, and 2025 | |||||||||||||||
| PSUs | 3/4/2019 |
|
|
|
|
|
|
|
|
|
|
|
| 43,358 | 347,298 |
|
|
|
|
|
| 100% in 2022 | |||||||||||||||
|
| 2/28/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 91,548 | 733,299 | 100% in 2023, subject to performance | |||||||||||||||
|
|
| 3/5/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,405 | 211,504 | 100% in 2024, subject to performance | |||||||||||||||
| (1) | Amounts disclosed in this column reflect the number of options granted to our NEOs that were subject to |
| (2) | Amounts disclosed in this column reflect the number of options granted to our NEOs that were subject to |
| (3) | Amounts disclosed in this column reflect the number of unvested RSUs granted that were subject to |
| (4) | Amounts disclosed in this column reflect the market value of the RSUs and PSUs reported in the preceding column using the closing price of a Teva share as reported on the NYSE on December 31, |
| (5) | Amounts disclosed in this column reflect the number of unearned and unvested PSUs held by our NEOs, based on achievement of all applicable performance goals at target level for the open performance |
| (6) | Amounts disclosed in this column reflect the market value of the unvested PSUs held by our NEOs and reported in the preceding column using the closing price of a Teva share as reported on the NYSE on December 31, |
| (7) | This column discloses the vesting dates of outstanding awards held by our NEOs at year end which generally occur on the relevant anniversary of the date of grant. |
72 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 69 | |
Executive Compensation
20192021 Option Exercises and Stock Vested
The table below shows the number of shares each of our NEOs acquired and the values they realized upon the vesting of PSUs and RSUs during 2019.2021. Values are shown before payment of any applicable withholding taxes or brokerage commissions. There were no stock options exercised by the NEOs in 2019.2021.
Stock Awards | ||||||||
Name
| Number of
| Value Vesting ($) (2)
| ||||||
Dr. Hafrun Fridriksdottir | 20,303 | 257,770 | ||||||
Brendan O’Grady | 4,324 | 60,388 | ||||||
Gianfranco Nazzi | 5,792 | 72,339 | ||||||
Michael McClellan | 5,800 | 60,422 | ||||||
Dr. Carlo de Notaristefani
|
| 55,791
|
|
| 804,802
|
| ||
|
| Stock Awards | |||||||
Name | Number of on Vesting (#) (1) | Value Vesting ($) (2) | ||||||
Kåre Schultz | 557,788 | 6,244,792 | ||||||
Eli Kalif | 18,430 | 201,256 | ||||||
Dr. Sven Dethlefs | 101,098 | 1,228,572 | ||||||
Eric Drapé | 107,474 | 1,210,598 | ||||||
Mark Sabag | 160,976 | 1,882,462 | ||||||
| (1) | Amounts disclosed in this column reflect the number of PSUs and RSUs that vested during |
| (2) | Amounts disclosed in this column reflect the value realized upon vesting of the PSUs and RSUs, as calculated based on the price of a Teva share on the vesting date, multiplied by the number of shares underlying each award. |
20192021 Pension Benefits
None of our NEOs participate in or have accrued benefits under qualified ornon-qualified defined benefit plans sponsored by us.
20192021 Nonqualified Deferred Compensation
Name
| Plan Name
| Executive
| Company
| Aggregate
| Aggregate
| Aggregate
| ||||||||||||||||
Hafrun Fridriksdottir
| Supplemental Deferred Compensation Plan |
| 160,846
|
|
| 120,115
|
|
| 64,566
|
|
| (33,966
| )
|
| 529,465
|
| ||||||
| Actavis Executive Deferred Compensation Plan | — | — | 6,711 | — | 134,539 | |||||||||||||||||
Brendan O’Grady
| Supplemental Deferred Compensation Plan | — | — | 26,592 | — | 204,820 | ||||||||||||||||
| Teva Neuroscience Deferred Compensation Plan
| — | — | 47,160 | — | 287,702 | |||||||||||||||||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 73
Executive Compensation
Name | Plan Name | Executive Contributions in Last FY ($) (1) | Company Contributions in Last FY ($) (2) | Aggregate Earnings in Last FY ($) (3) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last FY ($) (4) | ||||||||||||||||
Michael McClellan | Supplemental Deferred Compensation Plan | 609,594 | 31,015 | 94,100 | — | 1,093,219 | ||||||||||||||||
Dr. Carlo de Notaristefani | Supplemental Deferred Compensation Plan | 660,887 | — | 398,364 | — | 2,814,570 | ||||||||||||||||
| Defined Contribution Supplemental Executive Retirement Plan
| — | 125,460 | 129,134 | — | 929,802 | |||||||||||||||||
Name | Plan Name | Executive Contributions in Last FY ($) (1) | Company Contributions in Last FY ($) (2) | Aggregate Earnings in Last FY ($) (3) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last FY ($) (4) | ||||||||||||||||
Dr. Sven Dethlefs | Supplemental Deferred Compensation Plan |
| 132,649
|
|
| 74,010
|
|
| 188,709 �� |
|
| 0
|
|
| 1,279,777
|
| ||||||
| (1) | Amounts disclosed in this column reflect elective deferrals made by our NEOs and are included in the amounts reported as “Salary” and“Non-Equity Incentive Plan Compensation,” as relevant, in the Summary Compensation Table above. |
| (2) | Amounts disclosed in this column are included within the amount reported in the “All Other Compensation” column of the Summary Compensation Table above. |
| (3) | Amounts disclosed in this column include earnings on the relevant plans as well as changes in the values of the underlying accounts. None of the amounts disclosed in this column were reported in the Summary Compensation Table because the Company does not credit above-market or preferential earnings on deferred compensation. |
| (4) | Amounts disclosed in this column reflect the cumulative value of the applicable NEO’s contributions and Company matching contributions, which have been included in the amounts reported as “Salary,”“Non-Equity Incentive Plan Compensation,” and “All Other Compensation,” as appropriate, in the applicable Summary Compensation Tables, and investment earnings thereon. |
| 70 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Teva’s North American subsidiaries provide a tax qualified defined contribution 401(k) Retirement Savings Plan for the benefit of employees. Under this plan, contribution amounts have been determined based on specified percentages of pay. The Code limits the benefits that may be contributed into the 401(k) plan. As a complement to this plan, the Company maintains twoa supplemental retirement plansplan, the Supplemental Deferred Compensation Plan, to bridge the gap between legally mandated limits on qualified plan benefits and the retirement benefits offered at comparable public companies, and to provide participants with supplemental benefits. The two plans include the Supplemental Deferred Compensation Plan and the DC SERP, which is available to grandfathered U.S. executive officers (no new U.S. executive officers are enrolled in this plan). While the Company has formally funded the 401(k) plan match contribution, the Supplemental Deferred Compensation Plan and the DC SERP areis not formally funded.
Supplemental Deferred Compensation Plan
The Supplemental Deferred Compensation Plan is a nonqualified, unfunded deferred compensation plan under which certain eligible employees may defer up to 75% of base salary, annual bonuses and sales bonuses. The Company matches 100% of the first 6% of all eligible compensation deferred above the IRS qualified compensation limit, and makes restorative matching contributions to restore the Company match that were lost to the participant under the Retirement Savings Plan. Participants are vested in 100% of Company contributions once three years of service are completed. There are 2726 investment options within the Supplemental Deferred Compensation Plan, and participants may change their investment allocations. Contributions plus earnings are paid out of the general assets of the Company. Participants that are age 55 with at least 15 years of service or age 65 with five years of service are retirement eligible, and may receive payment from the Plan in a lump sum or in annual installments for up to 20 years beginning on the first
74 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
distribution date (January or July) that is at least 13 months after their retirement. Participants that terminate employment prior to retirement receive a lump sum beginning on the first distribution date that is at least six months after termination. Participants may change their distribution election at least 12 months prior to the originally scheduled payment date and as long as the change results in the payment date being delayed at least five years.
Defined Contribution Supplemental Executive Retirement Plan
The DC SERP is a nonqualified, unfunded plan in which certain executive officers may participate. Under this plan, the Company establishes an account on behalf of each participant and credits that account on the last day of the year with an amount equal to 15% of the participant’s base salary paid during the applicable calendar year as a future retirement benefit. If the participant has a separation from service after age 65 or dies or becomes disabled, the Company will credit the account with apro-rata amount in respect of the portion of the year during which the participant qualified as a participant. The participant may direct percentages of the amounts credited to the participant’s account to be notionally invested in investment funds, and the account is credited with earnings that mirror the actual investment results of such investment funds. As of a valuation date, the notional realized and unrealized gains and losses and the notional income are allocated for the benefit of the participant’s account. Participants vest in their accounts upon either the earliest of five full years as a participant, attaining age 65 while employed by the Company, death, disability, or a change in control as defined under Code Section 409A. If a participant separates from service before they are 100% vested, they will forfeit the entire account balance. If a participant breaches any noncompete or nonsolicit or other similar restrictive covenants under the plan, is terminated for cause or fails to execute a release of claims against the Company upon a termination of employment, he or she will forfeit their account balance. A participant may receive the vested benefit in the account in a lump sum following the participant’s separation from service or, if the participant so elects, in installments. If a participant does not have 10 years of service and is 55 at the time of separation from service, payment will be in the form of a single lump sum. If a participant dies after separation from service and prior to benefits being paid, such benefits will continue to be paid in the same form as elected by the participant. If the participant dies or becomes disabled, the vested value of the account will be distributed in a single lump sum. If installment payments are elected, the installment amounts are determined as the remaining balance divided by the number of years over which the installments will be paid. Payments may be delayed due to certain tax rules or deferral elections made by the executive.
Actavis Executive Deferred Compensation Plan
In connection with Teva’s acquisition of Actavis Generics in November 2016, Teva assumed the Actavis Executive Deferred Compensation Plan. Certain former Actavis employees remain participants in the plan, although the plan has been frozen and further participant deferrals into the plan are no longer permitted. The plan is a nonqualified, unfunded deferred compensation plan under which certain eligible employees of Actavis Generics prior to its acquisition by Teva were able to defer up to 80% of base salary and 80% of performance bonus awards (100% after January 1, 2015). The plan also provided for Company matching credits, Company discretionary credits, and credits and debits for investment returns. Participants are fully vested in their base salary and performance bonus deferrals, and vest in Company matching contributions after certain numbers of years. Participants become 100% vested upon death or disability, and upon a change in control will receive a single lump sum payment within 12 months. Participants may elect to receive distributions in a lump sum or in annual installments of from two to 15 years.
Teva Neuroscience Deferred Compensation Plan
The Teva Neuroscience Deferred Compensation Plan is a nonqualifed, unfunded deferred compensation plan for certain employees of the Company. Under the plan, during the period 2001 to 2005, the Company contributed 10% of a participant’s total compensation up to the limits of Code Section 401 to an account for such participant. The participant was neither permitted nor required to make contributions to the plan,
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 75
Executive Compensation
and the balance in such participant’s account is fully vested at all times. Participants are entitled to a lump sum payment of their account balance on the date of their retirement after reaching age 65, disability, death or separation from service.
20192021 Potential Payments Upon Termination or Change in Control
In connection with any termination of employment, including if there is a termination in connection with a change in control of the Company, our NEOs would be eligible to receive certain payments, benefits and treatment of the various forms of equity that suchthe NEO holds (provided, in some cases, that certain conditions are met).
The amounts that the NEOs would receive are set forth below for the following types of termination of employment: termination for cause, death, disability, retirement, termination without cause, resignation for good reason, resignation without good reason and a change in control of the Company.
In accordance with SEC rules, we have used certain assumptions in determining the amounts shown. We have assumed that the termination of employment or change in control occurred on December 31, 2019,2021, and that the value of a Teva share on that day was $9.80,$8.01, the closing price on the NYSE on December 31, 2019,2021, the last trading day of 2019.2021.
Under these SEC rules, the potential payments upon termination do not include certain distributions or benefits which are not enhanced by a qualifying termination of employment or change in control. These payments and benefits are referred to as “vested benefits” and include:
| ∎ | Amounts payable when employment terminates under programs generally applicable to the Company’s salaried employees; |
| ∎ | Vested benefits accrued under the 401(k) and pension plans; and |
| ∎ | Vested benefits under the Supplemental Deferred Compensation Plan |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 71 | |
Executive Compensation
Kåre Schultz
Mr. Schultz’s employment terms generally require the Company and Mr. Schultz to provide three months’ notice of termination of employment, other than in connection with a non-renewal, which provides for one year notice, and in connection with termination for cause, death or disability. We may waive Mr. Schultz’s services during suchthe notice of termination period or any part thereof, or accelerate the termination date upon mutual agreement, on the condition that we pay him his monthly base salary and all additional compensation and benefits in respect of such waived period.
Mr. Schultz’s employment terms provide that in connection with his termination of employment, Mr. Schultz will be entitled to receive payments associated with termination as required pursuant to applicable Israeli law and certain accrued obligations. Upon termination by the Company without cause or by Mr. Schultz with good reason, Mr. Schultz will generally be entitled to receive cash severance, together with severance amounts accumulated in his severance account, equal to the product of twelve12 times his monthly base salary (or the minimum amount required under applicable law, if greater). Mr. Schultz is also entitled to receive an amount equal to twenty-four24 times his monthly base salary, in consideration for, and conditioned upon, his undertaking not to compete with Teva for two years following termination and other restrictive covenants, and his compliance with such undertaking, which amount would be paid in connection with terminations other than in the event of his termination by the Company for cause, non-renewalor his death. In the event that his employment is terminated by the Company without cause or by Mr. Schultz with good reason within one year following certain mergers and as a result thereof, Mr. Schultz will be entitled to an additional lump sum cash payment equal to his current annual salary.
76 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Executive Compensation
Upon his termination by the Company without cause, resignation by Mr. Schultz with good reason, non-renewal by the Company, and non-renewal by Mr. Schultz due to death, disability,his retirement, Mr. Schultz will receive continued vesting of outstanding awards in accordance with their terms. Upon his termination by the Company without cause and resignation by Mr. Schultz with good reason, Mr. Schultz will receive accelerated vesting of hissign-on RSU award on the date of termination. Upon his termination due to death and disability, default plan treatment will apply as described below except that Mr. Schultz will receive continued vesting of hissign-on PSU awardsaward (which will ultimately be settled based on actual performance through the end of the applicable three-year and five-year performance periods)period). In the event of a change in control before the terminations listed above, Mr. Schultz’ssign-on PSU awardsaward will be treated as earned based on the price paid per share to shareholders (or if none, then based on the last per share trading price before the change in control). The awardsaward may then either continue as a time-vested awardsaward over the remainder of the required vesting period or, if not assumed, settled upon the change in control. If thesign-on PSU awards areaward is assumed and continuecontinues as a time-vested awards, theyaward, it will be immediately settled upon termination following the change in control due to death, disability, termination without cause, and resignation with good reason.reason, non-renewal by the Company and non-renewal by Mr. Schultz due to his retirement.
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, in the event that he breaches his restrictive covenants. In addition, in the event of continuous and willful breach of his restrictive covenants, the Company shall be entitled to a repayment of such termination payments, including forfeiture of any post-termination equity vesting.
Eli Kalif
Mr. Kalif’s employment terms generally require the Company and Mr. Kalif to provide six months’ notice of termination of employment, other than in connection with a termination for cause, death or disability. We may waive Mr. Kalif’s services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay him his monthly base salary and all additional compensation and benefits in respect of such waived period.
| 72 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Mr. Kalif’s employment terms provide that in connection with his termination of employment, Mr. Kalif will be entitled to receive payments associated with termination as required pursuant to applicable Israeli law and certain accrued obligations. Upon termination by the Company without cause or by Mr. Kalif with good reason, Mr. Kalif will generally be entitled to receive cash severance, together with severance amounts accumulated in his severance account, equal to twice his monthly base salary multiplied by the number of years of employment, up to a maximum payment of eighteen18 times his monthly base salary (or the minimum amount required under applicable law, if greater). In the event that his employment is terminated by the Company without cause within one year following certain mergers anda change in control event (as such term is defined in the Compensation Policy as a result thereof,in effect on the date hereof), Mr. Kalif will be entitled to an additional lump sum cash payment equal to $1.5 million.
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, and Mr. Kalif shall repay Teva any such payments or benefits provided, in the event that he breaches his restrictive covenants, including an undertaking not to compete with Teva for six months following termination.
Dr. Hafrun FridriksdottirSven Dethlefs
Dr. Fridriksdottir’semploymentDethlefs’ employment terms generally require the Company and Dr. FridriksdottirDethlefs to provide six months’ notice of termination of employment, other than in connection with a termination for cause, death or disability. We may waive Dr. Fridriksdottir’s services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay her the monthly base salary and all additional compensation and benefits in respect of such waived period.
Upon termination by the Company without cause or by Dr. Fridriksdottir for good reason, Dr. Fridriksdottir will generally be entitled to receive cash severance equal to the product of six times her monthly base salary and payment of certain costs associated with continued medical insurance for eighteen months. Dr. Fridriksdottir is also entitled to receive an amount equal to twelve times her monthly base salary, in
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 77
Executive Compensation
consideration for, and conditioned upon, her undertaking not to compete with Teva for one year following termination and other restrictive covenants. In the event that her employment is terminated without cause within one year following certain mergers and as a result thereof, Dr. Fridriksdottir will be entitled to an additional lump sum cash payment of $1.5 million.
Because Dr. Fridriksdottir meets the requirements for a qualifying retirement and termination under the Company’s policy pursuant to its 2015 Long-Term Equity-Based Incentive Plan, if she is terminated without cause and the current retirement policy is in effect, she will be entitled to continued vesting of her outstanding awards granted by the Company after the acquisition of Actavis Generics. In addition, if she is terminated without cause, resigns for good reason, or resigns without good reason, she will be entitled to continued exercisability of vested options until the earlier of the applicable expiration date or two years after termination for equity awards originally granted to her by Allergan plc and converted into Company equity awards at the time she joined the Company following Teva’s acquisition of Actavis Generics, due to the legacy Allergan qualifying retirement policy.
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, and Dr. Fridriksdottir shall promptly repay Teva any such payments or benefits provided, in the event that she breaches her restrictive covenants.
Brendan O’Grady
Mr. O’Grady’s employment terms generally require the Company and Mr. O’Grady to provide three months’ notice of termination of employment, other than in connection with a termination for cause, death or disability. We may waive Mr. O’Grady’sDethlefs’ services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay him his monthly base salary and all additional compensation and benefits in respect of such waived period.
Upon termination by the Company without cause or by Mr. O’GradyDr. Dethlefs for good reason, Mr. O’GradyDr. Dethlefs will generally be entitled to receive cash severance equal to the product of six times his monthly base salary and payment of certain costs associated with continued medical insurance for eighteen18 months. Mr. O’GradyDr. Dethlefs is also entitled to receive an amount equal to twelve12 times his monthly base salary, in consideration for, and conditioned upon, his undertaking not to compete with Teva for one year following termination and other restrictive covenants. In the event that his employment is terminated without cause within one year following certain mergers and as a result thereof, Mr. O’GradyDr. Dethlefs will be entitled to an additional lump sum cash payment of $1.5 million.
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, and Mr. O’GradyDr. Dethlefs shall promptly repay Teva any such payments or benefits provided, in the event that he breaches his restrictive covenants.
Gianfranco NazziEric Drapé
Mr. Nazzi’sDrapé’s employment terms generally require the Company and Mr. Drapé to provide six months’ notice of termination of employment, (otherother than in connection with a termination for cause, and death) and Mr. Nazzi to provide three months’ notice of termination of employment.death or disability. We may waive Mr. Nazzi’sDrapé’s services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay him his monthly base salary and all additional compensation and benefits in respect of such waived period.
Mr. Drapé’s employment terms provide that in connection with his termination of employment, Mr. Drapé will be entitled to receive payments associated with termination as required pursuant to applicable Israeli law and certain accrued obligations. Upon termination by the Company (and other than termination forwithout cause death or disability),by Mr. NazziDrapé with good reason, Mr. Drapé will generally be entitled to receive thegreater of (1) Dutch statutorycash severance, and a cash supplement thereto,together with severance amounts accumulated in his severance account, equal to in aggregate eighteen months’the product of 15 times his monthly base salary or (2)(or the severance or damagesminimum amount required under applicable law, if greater). Mr. Drapé is also entitled to which Mr. Nazzireceive an
78 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 73 | |
Executive Compensation
would be entitled under any Teva Pharmaceuticals Europe, B.V. Social Plan. In the event that his employment is terminated by Company (other than termination for cause, death or disability) within one year following certain mergers and as a result thereof, Mr. Nazzi will be entitled to an additional lump sum cash payment of $1.5 million.
Upon resignation by Mr. Nazzi, Mr. Nazzi will generally be entitled to receive an amount equal to twelvethree times his monthly base salary, in consideration for, and conditioned upon, his undertaking not to compete with Teva for one yearsix months following termination and other restrictive covenants, unlessand his compliance with such undertaking, which amount would be paid in connection with terminations other than in the event of his termination by the Company werefor cause, his death or disability. In the event that his employment is terminated by the Company without cause within one year following a change in control event (as such term is defined in the Compensation Policy as in effect on the date hereof), Mr. Drapé will be entitled to release him from thenon-compete restrictions.an additional lump sum cash payment equal to $1.5 million.
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, and Mr. NazziDrapé shall promptly repay Teva any such excess payments or benefits provided, in the event that he breaches his restrictive covenants, includingcovenants.
Mark Sabag
Mr. Sabag’s employment terms generally require the Company and Mr. Sabag to provide nine months’ notice of termination of employment, other than in connection with a termination for cause, death or disability. We may waive Mr. Sabag’s services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay him his monthly base salary and all additional compensation and benefits in respect of such waived period.
Mr. Sabag’s employment terms provide that in connection with his termination of employment, Mr. Sabag will be entitled to receive payments associated with termination as required pursuant to applicable Israeli law. In the event of retirement to pension at the statutory age, termination due to death or disability, termination without cause, or resignation for good reason, Mr. Sabag will be entitled to a make-up payment equal to his then monthly base salary multiplied by the number of his years of service, that together with severance amounts accumulated in his pension insurance fund account cannot exceed twice his then monthly base salary multiplied by the number of his years of service. In the event of a resignation without good reason, the make-up payment will be equal to half his then monthly base salary multiplied by the number of his years of service, that together with severance amounts accumulated in his pension insurance fund account cannot exceed 1.5 times his then monthly base salary multiplied by the number of his years of service.
Mr. Sabag is also entitled to receive an amount equal to 12 times his monthly base salary, in consideration for and conditioned upon his undertaking not to compete with Teva for one year following termination. This amount would not be paid upon termination upon death and the Company has the sole discretion to determine if it is paid upon termination for cause. In the event that his employment is terminated without cause within one year following certain mergers and as a result thereof, Mr. Sabag will be entitled to an additional lump sum payment of $1.5 million. The non-compete payment is subject to compliance with the non-compete covenant. In the event of a material breach, payment will cease and the Company will be entitled to reclaim amounts already paid.
Mr. Sabag is also entitled to continued vesting of equity-based awards for 24 months following termination without cause. In addition, in the event that his employment is terminated without cause within one year following certain mergers and as a result thereof, Mr. Sabag will be entitled to accelerated vesting of unvested equity upon termination.
Potential Payments Upon Termination or Change In Control
The following tables summarize the payments the current NEOs would receive upon termination and completion of the required notice period at December 31, 2019 and the payments the former NEOs are eligible to receive upon termination and completion of the required notice period, as applicable. As the former NEOs have already received or given notice of termination, amounts for other termination events such as death, disability or change in control are not included.2021. The U.S. dollar amounts in the tables below were converted from local currency, where needed, using the December monthly average exchange rate of 3.473.13 Israeli shekels per U.S. dollar and 0.900.88 euros per U.S. dollar.
| 74 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Executive Compensation
Payments Resulting From Termination without Cause or Resignation with Good Reason
Category | Kåre Schultz | Eli Kalif | Dr. Hafrun Fridriksdottir | Brendan O’Grady | Gianfranco Nazzi | |||||||||||||||
Severance payments (1)
|
|
1,629,015
|
|
|
1,405
|
|
|
360,000
|
|
|
350,000
|
|
|
544,041
|
| |||||
Non-compete payments (2)
|
| 4,000,000
|
|
| 0
|
|
| 720,000
|
|
| 700,000
|
|
| 272,021
|
| |||||
Accrued vacation
|
|
258
|
|
|
4,258
|
|
|
0
|
|
|
0
|
|
|
0
|
| |||||
Health benefits continuation
|
|
0
|
|
|
0
|
|
|
12,533
|
|
|
41,103
|
|
|
0
|
| |||||
Post-termination equity vesting (3)(4)
|
|
17,155,694
|
|
|
0
|
|
|
2,757,495
|
|
|
0
|
|
|
0
|
| |||||
Total amount without merger
|
$
|
22,784,967
|
|
$
|
5,663
|
|
$
|
3,850,028
|
|
$
|
1,091,103
|
|
$
|
816,062
|
| |||||
Post-merger termination payment (5)
|
|
2,000,000
|
|
|
1,500,000
|
|
|
1,500,000
|
|
|
1,500,000
|
|
|
1,500,000
|
| |||||
Total amount with merger
|
$
|
24,784,967
|
|
$
|
1,505,663
|
|
$
|
5,350,028
|
|
$
|
2,591,103
|
|
$
|
2,316,062
|
| |||||
Category | Kåre Schultz | Eli Kalif | Dr. Sven Dethlefs | Eric Drapé | Mark Sabag | |||||||||||||||
Severance payments (1) | 1,233,361 | 124,573 | 408,000 | 792,608 | 1,015,856 | |||||||||||||||
Non-compete payments (2) | 4,000,000 | 0 | 816,000 | 182,348 | 796,590 | |||||||||||||||
Accrued vacation | 21,103 | 117,671 | 0 | 102,953 | 172,018 | |||||||||||||||
Health benefits continuation | 0 | 0 | 45,733 | 0 | 0 | |||||||||||||||
Post-termination equity vesting (3)(4) | 24,328,805 | 0 | 0 | 0 | 2,170,662 | |||||||||||||||
Total amount without change in control | $ | 29,583,269 | $ | 242,244 | $ | 1,269,733 | $ | 1,077,909 | $ | 4,155,126 | ||||||||||
Post-change in control cash termination payment (5) | 2,000,000 | 1,500,000 | 1,500,000 | 1,500,000 | 1,500,000 | |||||||||||||||
Additional post-change in control equity acceleration (6) | 0 | 0 | 0 | 0 | 1,391,705 | |||||||||||||||
Total amount with change in control | $ | 31,583,269 | $ | 1,742,244 | $ | 2,769,733 | $ | 2,577,909 | $ | 7,046,831 | ||||||||||
| (1) | In addition to the amounts reported above, Mr. Schultz would receive |
| (2) | For Mr. Schultz and Mr. Drapé, thenon-compete payment would be paid, assuming |
| (3) | Amounts reported are based on the price of a Teva share on December 31, |
| (4) | For Mr. Schultz, the equity vesting also applies in the event of |
| (5) |
|
| (6) | Mr. Sabag’s employment agreement provides for equity acceleration upon a post-merger involuntary termination without cause, which is the only change in control trigger for this equity acceleration. Amounts reported are based on the end of year stock price ($8.01) and, with respect to PSUs, target performance. The amount reported would be in addition to the amount reported under post-termination equity vesting. |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 79
Executive Compensation
Accelerated/ContinuedAccelerated Equity Vesting Upon Death or Disability
Under our 2015 and 2020 Long-Term Equity-Based Incentive Plan, upon death or disability, performance awards, such as PSUs, will immediately vest and pay out based on the target level of performance as of the
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 75 | |
Executive Compensation
date of termination, RSUs will immediately be vested and settled and options will immediately vest and remain exercisable through the original expiration date. For treatment of Mr. Schultz’ssign-on equity awards upon death or disability, see the summary of his termination terms above.
Category | Kåre Schultz | Eli Kalif | Dr. Hafrun Fridriksdottir | Brendan O’Grady | Gianfranco Nazzi | Kåre Schultz | Eli Kalif | Dr. Sven Dethlefs | Eric Drapé | Mark Sabag | ||||||||||||||||||||||||||||||
Value (1)
|
$
|
26,733,106
|
|
$
|
0
|
|
$
|
2,757,495
|
|
$
|
2,208,097
|
|
$
|
1,579,799
|
| $ | 24,328,805 | $ | 2,704,953 | $ | 3,354,380 | $ | 3,195,029 | $ | 3,562,367 | |||||||||||||||
| (1) | Amounts reported are based on the price of a Teva share on December 31, |
Michael McClellan2021 Pay Ratio
PursuantWe have estimated the compensation of the 2021 median employee to Mr. McClellan’s employment terms,be $75,944. The annual total compensation of our CEO was $14,681,772. The ratio of the annual total compensation of our CEO to that of the annual total compensation of our median employee was 193 to 1.
Our “median employee” is a full-time, salaried employee located in connectionIsrael. We totaled all of the elements of the employee’s compensation for 2021 in the same manner as the CEO and in accordance with his resignation, Mr. McClellan was entitled to receive three months’ notice. Mr. McClellan provided notice and completed his notice periodSEC Summary Compensation Table disclosure requirements, which resulted in 2019.
Dr. Carlo de Notaristefani
Pursuant to Dr. de Notaristefani’s employment terms, in connection with his terminationan annual total compensation of employment, Dr. de Notaristefani$75,944, of which $32,591 is entitled to receive nine months’ notice. We may waive Dr. de Notaristefani’s services during such notice period or any part thereof, or accelerate the termination date, on the condition that we pay him his monthly base salary, and all additional$4,732 is non-equity incentive compensation, and benefits$38,621 is comprised of Company contributions to a pension fund, as is required by Israeli law, other compensation such as overtime pay and other cash allowances, and Company contributions to a study fund, as is common practice for Israel-based employees of the Company.
The CEO pay ratio rule permits the use of a median employee for up to three years unless there has been a meaningful change to a company’s employee population. We determined that there was no meaningful change to our employee population and therefore we used the same median employee as was used in respect2020 for pay ratio purposes.
Because the SEC rules for identifying the median of such waived period. Dr. de Notaristefani will complete his notice period during 2020.
Under his employment agreement, Dr. de Notaristefani is entitledthe annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allow companies to receive cash severance equaladopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the product of twelve times his monthly base salary ($836,400)pay ratio for our Company, as other companies have headquarters offices in different countries, have different employee populations and payment of certain costs associated with continued medical insurance for eighteen months ($42,313). Dr. de Notaristefani is also entitled to receive an amount equal to twelve times his monthly base salary ($836,400),compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in consideration for, and conditioned upon, his undertaking not to compete with Teva for one year following termination and other restrictive covenants. Dr. de Notaristefani is also entitled to continued vesting in full of equity-based awards ($4,011,718 based on the price of a Teva share on December 31, 2019, the last trading day of 2019 and, with respect to PSUs, target performance, except for 2017-2019 PSUs, for which actual performance was used).
All termination payments and benefits in excess of those required to be paid pursuant to applicable law are subject to the execution of a release of claims, and shall immediately terminate without further obligation of Teva, and Dr. de Notaristefani shall promptly repay Teva any such payments or benefits provided, in the event that he breaches his restrictive covenants.calculating their pay ratios.
80 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 76 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
HR and Compensation Committee Interlocks and Insider Participation
The HR and Compensation Committee currently consists of Rosemary A. Crane (chair), Gerald M. Lieberman, and Nechemia (Chemi) J. Peres.Peres and Janet S. Vergis. During fiscal year 2019,2021, no member of the HR and Compensation Committee was an employee, officer or former officer of Teva or any of its subsidiaries. During fiscal year 2019,2021, no member of the HR and Compensation Committee had a relationship that must be described under the SEC rules relating to disclosure of related party transactions. During fiscal year 2019,2021, none of our executive officers served on the Board of Directors or compensation committee of any entity that had one or more of its executive officers serving on Teva’s Board of Directors or HR and Compensation Committee.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 81
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 77 | |
Proposal 2: Advisory Vote on Compensation of Named Executive Officers
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Schedule 14A of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our shareholders with the opportunity to approve, by advisory vote, the compensation of our NEOs, as disclosed in this Proxy Statement in accordance with the rules of the SEC.
This proposal, commonly referred to as the“say-on-pay” vote, gives our shareholders the opportunity to express their views on the compensation of our NEOs. This vote is not intended to address any specific item of compensation or any specific NEOs, but rather the overall compensation of our NEOs and our executive compensation philosophy, objectives and program, as described in this Proxy Statement. Accordingly, we ask our shareholders to approve the compensation of our NEOs, as disclosed pursuant to Item 402 of RegulationS-K of the Exchange Act in the section entitled “Executive Compensation” of this Proxy Statement, including the CD&A, the compensation tables and the related narrative disclosure, by casting anon-binding advisory vote “FOR” the following resolution:
“RESOLVED, that the shareholders of Teva Pharmaceutical Industries Limited approve, on anon-binding advisory basis, the compensation of its named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
As an advisory vote, the result will not be binding on the Board or the HR and Compensation Committee. Thesay-on-pay vote will, however, provide us with important feedback from our shareholders about our executive compensation philosophy, objectives and program. Our Board and the HR and Compensation Committee value the opinions of our shareholders and expect to take into account the outcome of the vote when considering future executive compensation decisions and when evaluating our executive compensation program. Following our 20202022 Annual Meeting, the next advisory vote on named executive officer compensation is expected to occur at the 20212023 annual meeting, unless the Board of Directors modifies its policy on the frequency of holding such advisory votes.
 |
The Board of Directors recommends that shareholders vote FOR the approval, on anon-binding advisory basis, of the compensation of Teva’s named executive officers, as disclosed in this Proxy Statement. |
82 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 78 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive PlanCompensation Policy
The Board of Directors has approved, and recommends that shareholders approve, the Company’s 2020 Long-Term Equity-Based Incentive Plan (the “2020 Plan”). The 2020 Plan allows for the grant of restricted shares, RSUs, performance awards, options, share appreciation rights (“SARs”) and other share-based awards.
If approved by our shareholders, the 2020 Plan will serve as the successorPursuant to the Company’s 2015 Long-Term Equity-Based Incentive Plan (the “2015 Plan”), which succeededIsraeli Companies Law, Israeli publicly traded companies are required to adopt a compensation policy regarding the Company’s 2010 Long-Term Equity-Based Incentive Plan (the “2010 Plan”) effective September 3, 2015.terms of office and employment of their office holders. The 2020 Plan will become effective on July 1, 2020, followingcompensation policy must be reviewed from time to time by the compensation committee and board of directors to ensure its approvalalignment with the company’s compensation philosophy and to consider its appropriateness. The compensation policy must further be approved once every three years by our shareholders. No additional grants may be made under the 2015 Plan uponboard of directors, after it considers the earlier of September 2, 2020 (the expiration daterecommendations of the 2015 Plan)compensation committee, and the effective datethen by a Disinterested Majority of shareholders. A “Disinterested Majority” of shareholders means: (i) at least a majority of the 2020 Plan,holders of ordinary shares who are not controlling shareholders and uponwho do not have a personal benefit or other interest in the expiration datematter who are present and voting (abstentions are disregarded) or (ii) the holders of ordinary shares who are not controlling shareholders and who do not have a personal benefit or other interest in the matter who were present and voted against the approval of such proposals hold, in the aggregate, two percent or less of the 2015 Plan any remaining shares available for grant thereunder will expire. The maximum number of shares available for deliveryvoting power in connection with awards under the 2020 Plan will be 68 million shares.
The terms and conditions ofcompany. To the 2015 Plan will continue to govern any outstanding awards granted under the 2015 Plan and the terms and conditions of the 2010 Plan will continue to govern any outstanding awards granted under the 2010 Plan. If the 2020 Planextent a compensation policy is not approved by the shareholders, then generally, following re-discussion of the matter, the compensation committee and board of directors may nonetheless approve the compensation policy based on detailed reasoning, provided such approval is in the company’s best interest. Revisions to the compensation policy require the same approval process, unless otherwise provided by applicable Israeli law. We note that this approval vote of the compensation policy is due to Israeli law requirements and in addition to and not in lieu of the annual advisory “say-on-pay” vote that we are required to hold as a U.S. domestic issuer, which appears above in Proposal 2.
Teva’s Compensation Policy was approved at our 2013 annual general meeting of shareholders it will not become effective;and amendments thereto were approved by shareholders at our 2015, 2016 and 2019 annual general meetings of shareholders. In 2019, in order to create a relevant and appropriate compensation framework to meet Teva’s needs, shareholders approved substantial changes and updates to the 2015 Plan will continue in effect until its expiration date.
Aspolicy. Pursuant to our Compensation Policy, the compensation that may be granted to an executive officer may include: base salary, cash bonuses, equity-based compensation, benefits and retirement and termination of December 31, 2019, 62.70 million shares remained availableservice arrangements. The cash bonus component aims to ensure that Teva’s executive officers are incentivized to reach Teva’s annual goals. The equity-based compensation component is intended to incentivize and reward for grant under the 2015 Plan. As of such date, awards covering 56.04 million shares were outstanding under the 2015 Planfuture long-term performance, to foster a long-term link between executive officers’ interests and the 2010 Plan.
Why Shareholders Should Vote to Approve the 2020 Plan
Equity Compensation Is Important in a Competitive Labor Market
In the global pharmaceutical industry, there is significant competition for experiencedinterests of Teva and educated individuals with the skills necessary to execute our strategyits shareholders, and advance our business. Our success depends on such key employees. To compete in a competitive market for talent, we believe that it is important to offer competitive compensation packages that include equity and cash components. Equity compensation is an important part of our employment value proposition.
Equity Awards Are a Key Part of Our Compensation Program
Equity compensation is a key element of the total compensation we provide because equity grants align our employees’ and directors’ interests with those of our other shareholders, effectuate a culture of ownership among our employees and other recipients and preserve our cash resources. Equity incentives link long-term performance and payouts through the value of our shares. We believe that employees and other recipients with a personal stake in the future success of the Company are motivated to achieve our objectives and increase shareholder value. These unique and valuable aspects of equity compensation have made it a key element of our compensation strategy, and thus we grant equity compensation to multiple levels of our organization to provide opportunities to participate in ownership of the Company.
Equity Compensation Is Important to Talent Acquisition and Retention
Equity compensation is important to our ability to attract, motivate and retain employeesexecutive officers for the long term. Our Compensation Policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation. In addition, our Compensation Policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enables our President and CEO to approve an immaterial change in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance with our Compensation Policy) and allow us to exculpate, indemnify and insure our executive officers and as noted above,directors to be successfulthe maximum extent permitted by Israeli law subject to certain limitations set forth therein. Our Compensation Policy also provides for compensation to the members of our board of directors in accordance with the principles determined in our Compensation Policy.
Unlike “say-on-pay,” which is a retrospective shareholder advisory vote based on actual executive compensation granted in the competitive market for highly skilled individuals. We use equity incentivesprevious year, the Compensation Policy serves as a key tool to motivateshareholder-approved prospective framework for the HR and reward recipients to execute our long-term strategyCompensation Committee and through their equity, share in the shareholder value they create. Long-term equity grants also promote retention because recipients usually must remain in service in orderBoard of Directors when making compensation decisions generally for their equity to vest.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 83
Proposal 3: Approvalthe following three-year period, which sets caps and other limitations. The HR and Compensation Committee and the Board of Directors generally cannot approve any compensation that does not fall within the framework of Teva’s 2020 Long-Term Equity-Based Incentive Plan
The 2020 Plan Is Intended to Protect Shareholder InterestsCompensation Policy, without seeking shareholder approval. Therefore, and Is Consistent with Good Corporate Governance
|
|
|
|
|
|
|
|
|
|
|
The Sizein light of Our Share Reserve Request Is Reasonable
If our request to approve the 2020 Plan and its share reserve is approved,previous experience, we will have 68 million shares available for grant after July 1, 2020. We currently anticipate that this reserve will be a sufficient amount of equity for attracting, motivating and retaining employees, directors and consultants for approximately 4 years.
84 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
In addition to the number of shares we plan to reserve for issuance under the 2020 Plan, we also note that the 2020 Plan does not contain a “fungible ratio,” which was included in the 2015 Plan. Under this “fungible ratio,” full-value awards, such as PSUs and RSUs, are charged against the plan limit on a higher basis than 1:1 as a means of equating full value awards and options. Absent a fungible ratio, if the Compensation Committee grants full-value awards in the future, they will be charged against the 2020 Plan limit on aone-for-one basis. Where an outstanding award under the 2015 Plan or the 2010 Plan expires or is canceled, forfeited, settled in cash or otherwise terminated without a delivery to the participant of the shares to which the award related, such undelivered shares would return to the 2020 Plan at the same rate at which they were originally charged against the plan limit, notwithstanding that the ratio for new awards would beone-to-one.
Monitoring of Dilution, Burn Rate and Overhang
In connection with contemplating the number of shares to authorize for issuance under the 2020 Plan, the Compensation Committee considered the potential dilution to current shareholders, as measured by the burn rate and overhang, and projected future share usage, among other things. The Compensation Committee is cognizant that the Company’s equity compensation programs have a dilutive effect on our shareholders, and continuously strives to balance this concern with our need to compete for talent using practices that are prevalent in the market, including equity grants.
Burn Rate
A company’s burn rate shows how rapidly it is depleting its shares reserved for equity compensation awards. We believe that our historical burn rate is reasonable for a company of our size in our industry. We will continueTeva’s Compensation Policy must maintain flexibility to monitor our equity use in future years in an attempt to ensure that our burn rate is within competitive market norms.
The following table sets forth information regarding historical awards granted for the 2017 through 2019 period,address Teva’s various human capital needs and the corresponding burn rate, which we define as the number of shares subject to time-based equity awards granted and performance-based equity awards granted in a year divided by the weighted-average number of ordinary shares outstanding for that year, for each of the last three fiscal years. Our three-year average annual burn rate, calculated using the Institutional Shareholder Services (“ISS”) methodology, is approximately 2.22%, which is well below the ISS burn rate threshold of 8.08% applied to the GICS Pharmaceuticals(3520) sub-industry for 2020.
A | B | B x 2.0 = C | D | (A + C) / D | ||||||
Fiscal Year | Option Awards | Full Value Awards | ISS Adjusted Full Value Awards | Weighted- Average Ordinary Shares Outstanding | Adjusted Burn Rate | |||||
2017 | 15.47 million | 5.46 million | 10.92 million | 1,016 million | 2.60% | |||||
2018 | 12.40 million | 5.90 million | 11.80 million | 1,021 million | 2.37% | |||||
2019 | 0 | 9.30 million | 18.61 million | 1,091 million | 1.70% | |||||
Three-year average | 2.22% |
Overhang
A company’s overhang reflects potential dilution of shareholders’ ownership by actual share-based awards as well as shares available for grant. In determining the number of shares that would become available under our 2020 Plan, the Compensation Committee considered the resulting overhang as an additional metric to measure the cumulative effect of equity compensation.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 85
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
The following tables set forth information regarding the current and proposed levels of overhang and dilution.
|
| ||
|
| ||
| |||
| |||
| ||||||
|
|
| ||||
| ||||||
| ||||||
| ||||||
| ||||||
Key Data
The following table includes information regarding outstanding equity awards and shares available for future awards under all of our equity incentive plans as of December 31, 2019:
| ||
| ||
| ||
| ||
| ||
| ||
Note Regarding Forecasts and Forward-Looking Statements
We do not, as a matter of course, make public forecasts as to our total shares outstanding and use of various equity awards due to the unpredictability of the underlying assumptions and estimates. In particular, the forecasts set forth above in this Proposal 3 include embedded assumptions regarding option exercises which are highly dependent on the public trading price of our ordinary shares and other factors, which we do not control and, as a result, we do not, as a matter of practice, provide forecasts. In evaluating these forecasts, our Compensation Committee and our Board recognized the high variability inherent in these assumptions.
The inclusion of the forecasts set forth above should not be regarded as an indication that these forecasts will be predictive of actual future outcomes, and the forecasts should not be relied upon as such. Neither we nor any other person makes any representation to any of our shareholders regarding actual outcomes compared to the information contained in the forecasts set forth above. Actual outcomes may be materially different than those reflected in the forecasts. We do not intend to update or otherwise revise the forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even if any or all of the assumptions underlying the forecasts are shown to be in error.
86 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive PlanCompensation Policy
challenges, including special circumstances that may arise during the respective three-year period. The forecasts are forward-looking statements within the meaning of Section 27A of the Securities Actcompensation elements, caps and Section 21A of the Exchange Act. These statements involve risks and uncertainties that could cause actual outcomes to differ materially from thoseother limitations set forth in the forward-looking statements, includingCompensation Policy do not create an obligation or a promise to actually grant such compensation. The actual executive compensation design and amounts granted to our abilityNEOs in the previous year are reflected in the CD&A and presented for a shareholder advisory vote under Proposal 2.
As noted above, under the Israeli Companies law, we are required to attractsubmit the Compensation Policy to shareholders at least once every three years for approval. Because three years have elapsed since our shareholders last approved the Compensation Policy in 2019, Teva is submitting to shareholders a proposal to re-approve the current Compensation Policy.
Our existing Compensation Policy reflects our unique status, being subject to both Israeli compensation policy requirements and retain talent, achievement of performance metrics, if any,U.S. compensation disclosure and “say-on-pay” requirements as well as providing us with respect to certain equity awards,a competitive compensation framework. Based on our positive experience in implementing the extent of option exercise activity,existing Compensation Policy over the past three years, and others described in this proxy statement.
Summary ofconsultation with the 2020 Plan
The following is a summary of certain material features of the 2020 Plan.
Purpose
The purpose of the 2020 Plan is to assist the Company in (a) attracting, retaining, motivating and rewarding certain key employees, officers and directors of, and consultants to, the Company and its affiliates and (b) promoting the creation of long-term value for shareholders of the Company by closely aligning the interests of such individuals with those of our shareholders. The 2020 Plan will be the primary plan under which equity-based awards are granted on a worldwide basis to “eligible persons” (including employees andnon-employee directors).
Term of the 2020 Plan
If approved by shareholders, the 2020 Plan will be effective as of July 1, 2020 and will be active for 10 years, unlessCompensation Committee’s independent compensation consultant, Semler Brossy, the Board of Directors terminatesrecommends re-approval of our existing Compensation Policy.
Following the 2020 Plan at an earlier date. No awards will be granted underrecommendation of the 2020 Plan on or after July 1, 2030, or on or after such earlier date thatHR and Compensation Committee, the Board of Directors terminateshas re-approved, and recommends that shareholders re-approve, our existing Compensation Policy adopted at our 2019 shareholder meeting, substantially in the 2020 Plan, although awards grantedform attached to this Proxy Statement as Appendix A. The Compensation Policy submitted for shareholder approval under this Proposal 3 addresses the 2020 Plan may have terms that extend, and awards that may be exercised, beyond those dates.
Shares Available for Issuance Under the 2020 Plan
In general, and subject to adjustment as described belowrequirements under “Changes in Capital Structure,” the number of ordinary shares, or American Depositary Shares representing ordinary shares (collectively, “Shares”) reserved and available for delivery in connection with awards under the 2020 Plan will be 68 million. Shares delivered under the 2020 Plan will consist of authorized and unissued shares or previously issued shares reacquired by the Company or its affiliates on the open market or by private purchase. No fractional shares will be issued under the 2020 Plan upon the exercise or settlement of any award. Upon the effective date of the 2020 Plan, shares available for issuance under the 2015 Plan will expire and no longer be available for issuance.
Any shares underlying an award granted under the 2020 Plan that are not delivered as a result of an award that has expired, or has been canceled, forfeited, settled in cash or otherwise terminated without delivery to the participant of the full number of shares to which the award related may be used for the grant of additional awards under the 2020 Plan; however, shares withheld from an award in payment of the exercise price, base price or taxes relating thereto, or shares purchased on the open market by the Company or its affiliates using option proceeds or shares not issued in connection with a SAR share settlement, will constitute shares delivered under the 2020 Plan and will not again be available for issuance thereunder. To the extent that any outstanding award granted prior to the effective date of the 2020 Plan under the 2015 Plan or the 2010 Plan expires or is canceled, forfeited, settled in cash or otherwise terminated without a delivery to the participant of the full number of shares to which the award related, the number of Shares that were reduced from the total number of available Shares under the 2015 Plan or 2010 Plan on account of such undelivered shares will increase the maximum number of shares available for grant under the 2020 Plan. Equity-based awards assumed or substituted by the Company or its affiliates as part of a corporate transaction (including, without limitation, from an entity that is merged into or with the Company or any of its affiliates, acquired by the Company or any of its affiliates or otherwise involved in a similar corporate transaction) will not count against the number of shares reserved and available for issuance pursuant to the Plan.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 87
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
Awards and the shares authorized under the 2020 Plan are subject to adjustment as described below under “Changes in Capital Structure.”
Plan Administration
Except as described below and as required by law, the 2020 Plan will be administered by a committee of the Board of Directors (the “Committee”) consisting of two or more members of the Board of Directors, each of whom will be an “independent director” for purposes of the rules and regulations of the NYSE or other principal United States national securities exchange on which the Company’s shares are listed and traded on the relevant date. Unless otherwise determined by the Board of Directors, the Compensation Committee will act as the Committee. Subject to applicable law, the Committee will have the power to, among other things, allocate shares to each subplan under the 2020 Plan (each a “Subplan” and, collectively, “Subplans”) and determine the types of awards to be granted thereunder, establish policies applicable to awards, approve eligible participants, determine the type or types of incentives to be granted to each participant, and the terms and conditions of any awards granted, and interpret and administer the 2020 Plan or applicable Subplan and any award agreement. The terms and provisions of awards and the related agreements need not be uniform among participants, whether or not such participants are similarly situated. Any action taken or to be taken by the Committee arising out of or in connection with the administration of the 2020 Plan or any Subplan will, to the extent permitted by applicable law, be within its discretion and will be final, binding and conclusive upon the Company, its affiliates and all participants (subject to and consistent with the provisions of the 2020 Plan).
The Committee may delegate its authority to perform certain functions to officers or employees of the Company or its affiliates, to the extent permitted under applicable law.
The Board of Directors retains exclusive authority to approve one or more Subplans that will be established within the parameters and in accordance with the overall terms of the 2020 Plan to facilitate local administration of the 2020 Plan in various jurisdictions in which the Company or its affiliates operate, to conform the 2020 Plan with legal requirements of such jurisdictions or to allow for favorable tax treatment under applicable tax laws.
Eligibility
Directors, employees and consultants of, and persons who have accepted employment with or entered into a service agreement with, the Company or its affiliates who have been approved by the Committee as participants will be eligible to receive awards under the 2020 Plan; except that any such person may not receive payment or exercise any right relating to any award until he or she has commenced employment or service with the Company or its affiliates. However, awards granted to “Office Holders” of the Company (as defined in the Israeli Companies Law) willLaw and shall be subject to the Company’s Compensation Policy, which was adopted by the Companyin effect in accordance with the Israeli Companies Law, unless otherwise approved byas long as such requirements are applicable law.
Types of Awards Available Under the 2020 Plan
Restricted Shares; RSUs; Performance Awards; Options; SARs; Other Share-Based Awards. Restricted shares, RSUs (which are notional units that each represent the right to receive one share (or the cash value thereof, if determined by the Committee) upon a specified settlement date), performance awards, options, SARs and other share-based awards may be granted to participants under the 2020 Plan on such terms and conditions as the Committee may determine, subject to certain limitations imposed by the 2020 Plan. While subject to vesting conditions, restricted shares may not be transferred, sold, pledged or otherwise encumbered.
88 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
The exercise price of each option or SAR will be set by the Committee and may not be less than 100% of the fair market value of one share on the date the option or SAR, as the case may be, is granted. The term of each option or SAR may not exceed 10 years from the date of grant.
Generally, the vesting of awards granted under the 2020 Plan will be subject to the participant’s continued employment or engagement with the Company or an affiliate, as applicable, during a period designated by the Committee at the time of grant. No awards granted under the 2020 Plan may vest, earlier than the first anniversary of the date of grant, and in the case ofnon-employee directors of the Company or its affiliates, earlier than the first anniversary of the date of grant or the next annual meeting of shareholders that occurs 50 weeks or more after the date of grant, subject to (i) acarve-out for 5% of the maximum number of shares available under the 2020 Plan that may be granted without regard to the minimum vesting conditions described below, (ii) any acceleration of vesting in connection with a change in control of the Company (as defined in the 2020 Plan) or certain similar corporate transactions, and (iii) any acceleration of vesting in connection with qualifying terminations of employment. In addition, the Committee may require that certain performance objectives be met for purposes of vesting of awards granted under the 2020 Plan.
Unless otherwise provided in a Subplan or award agreement, or otherwise determined by the Committee, if a participant ceases to be employed by or provide services to the Company or an affiliate, as applicable, for any reason other than death, disability, or by the Company or such affiliate for cause, such participant’s restricted shares, unvested RSUs and unearned and unvested performance awards will be forfeited for no consideration; such participant’s vested RSUs will be settled in accordance with the settlement schedule set forth in the applicable award agreement; and such participant’s options and SARs will remain exercisable, to the extent exercisable at the time of cessation of employment or service, generally for a period not extending beyond 90 days after the date of cessation of employment or service, and in no event beyond the original expiration date of the respective option or SAR. If a participant’s employment is terminated for cause, or the participant resigns in circumstances where the Company or an affiliate, as applicable, is entitled to terminate such participant’s employment for cause, such participant’s unvested restricted shares, RSUs (both vested and unvested) and performance awards (to the extent not yet paid or settled) will be forfeited for no consideration and such participant’s options and SARs (both vested and unvested) will expire immediately. In the event of termination due to death or disability, the participant’s restricted shares and RSUs will become immediately vested and the participant’s performance awards will become immediately vested and paid out based on the target level of performance, and any options or SARs will immediately become vested (with any performance-based options and SARs vesting based on the target level of performance) and will remain exercisable through the original expiration date of such options or SARs.
During the vesting period for restricted shares granted under the 2020 Plan, a participant will generally be entitled to vote such shares. Dividends, if any, with respect to the restricted shares shall be withheld by the Company for the participant’s account, and shall be subject to vesting and forfeiture to the same degree as the restricted shares to which such dividends relate. If so determined in an award agreement or Subplan, dividends or dividend equivalents, if any, with respect to RSUs, performance awards or other share-based awards may accrue and such dividends or dividend equivalents, if any, will be withheld by the Company for the participant’s account, and will be subject to vesting and forfeiture to the same degree as the awards to which such dividends or dividend equivalents relate. No dividends or dividend equivalents will accrue or be paid with respect to options or SARs.
The Committee, subject to applicable law, may grant other awards payable or denominated in shares, which may be granted to eligible persons based on such terms as deemed by the Committee to be consistent with the purposes of the 2020 Plan. The Committee may also grant shares as a bonus, or may grant other awards in lieu of obligations of the Company or an affiliate to pay cash or deliver other property under the 2020 Plan or under other plans or compensatory arrangements, subject to the terms of any Subplan and other terms determined by the Committee.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 89
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
Performance Objectives
As noted above, the Committee may condition the grant of restricted shares, RSUs, performance awards, options, SARs or other share-based awards on the satisfaction of performance objectives established by the Committee for participants who have received awards based on performance. A performance objective may consist of a single performance goal or may consist of a requirement to achieve a certain level of performance within a performance category.
Other Information
Amendments to or Termination of the Plan; Amendments to Awards. The Board of Directors may, at any time, and from time to time, amend the 2020 Plan, except that the Board will not, without shareholder approval, make any amendment to the 2020 Plan that requires shareholder approval pursuant to applicable law or the applicable rules of the national securities exchange on which the shares are principally listed, or effect any repricing of awards under the 2020 Plan. The Committee, at any time and from time to time, may amend the terms of any one or more awards, prospectively or retroactively, except that the rights under any award will not be impaired by any such amendment unless the participant consents in writing. The Committee may, without the participant’s consent, amend the terms of any one or more awards if necessary to bring the award into compliance with any applicable tax legislation, rule, regulation or guidance, including, without limitation, Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder. The Board of Directors may suspend or terminate the 2020 Plan at any time.
Transferability. Awards granted under the 2020 Plan are not assignable or transferable, except for limited circumstances upon a participant’s death or as determined by the Committee pursuant to the terms of any written award agreement, in accordance with applicable law, rule or regulation.
Changes in Capital Structure. In the event of any change in the outstanding shares or the capital structure of the Company, the declaration and payment of any extraordinary dividend, or any change in applicable laws or circumstances that result or could result in the substantial dilution or enlargement of participants’ rights, the Committee will equitably and proportionally adjust the aggregate number of shares that may be granted pursuant to awards, the number of shares covered by outstanding awards and the price per share of each award under the 2020 Plan, as applicable, and as determined by the Committee in its sole discretion.
Change in Control Provisions. Under the 2020 Plan, unless otherwise provided in a Subplan, an award agreement or guidelines under the 2020 Plan, or as approved by the Committee, in the event of a change in control of the Company: (i) all outstanding awards will be assumed or substituted in connection with such change in control, with any outstanding performance objectives deemed achieved at the greater of target and actual performance (as determined by the Committee); (ii) awards will be subject to adjustment for a change in capital structure; and (iii) the vesting, payment, purchase or distribution of an award will not be accelerated by reason of the change in control for any participant unless the participant’s employment is involuntarily terminated (other than for cause and including resignation for “good reason” or “constructive termination” or similar term) during thetwo-year period commencing on the change in control.
Events constituting a change in control of the Company or similar corporate transaction under the 2020 Plan generally include (i) a change in the ownership or control of the Company pursuant to which any person acquires more than 50% of the total combined voting power of the Company’s securities; (ii) the replacement of at least a majority of the members of the Board of Directors (other than directors whose election or nomination for election are approved bytwo-thirds of the then-current members of the Board of Directors) within a24-month period; (iii) a merger or consolidation in which the Company is not the surviving entity or in which the Company’s shareholders receive securities of another corporation, cash and/or other property; and (iv) a sale of all or substantially all of the Company’s assets.
90 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
Other Corporate Events. The Committee may provide that all outstanding awards will be assumed and may be subject to the adjustment provisions of the 2020 Plan, in connection with the following corporate events that are not a change in control: (i) a merger involving the Company in which the Company is not the surviving corporation; (ii) a merger involving the Company in which the Company is the surviving corporation but shareholders receive securities of another corporation and/or other property, including cash (iii) a sale, divesture,spin-off or other similar transaction in which any affiliate of the Company ceases to be an affiliate of the Company; (iv) the Company closing a business unit or facility or diminishing its ownership interests so that such operating unit ceases to be majority owned by the Company, with respect to outstanding awards held by participants that experience a termination on account of such event only; or (v) the reorganization or liquidation of the Company.
Withholding.As a condition to the grant, vesting, exercise, sale or other transaction of any award or any other rights associated with an award, the Committee may require that a participant satisfy, through deduction or withholding from any payment due to the participant, or through such other arrangements as are satisfactory to the Committee, the amount of all federal, state, and local income and other taxes or other mandatory payments of any kind required or permitted to be withheld in connection with such transaction, as well as amounts payable to any third party for escrow services and escrow fees, bank fees, exercise fees, account fees and other related fees and expenses.
United States Federal Income Tax Consequences
The following is a brief discussion of the U.S. federal income tax consequences for awards granted under the 2020 Plan. The 2020 Plan is not subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended, and it is not, nor is it intended to be, qualified under Section 401(a) of the Code. This discussion is based on current law, is not intended to constitute tax advice, and does not address all aspects of U.S. federal income taxation that may be relevant to a particular participant in light of his or her personal circumstances and does not describe foreign, state or local tax consequences, which may be substantially different.
Restricted Shares; RSUs; Options; SARs. With respect to restricted shares, RSUs,non-qualified options and SARs, generally no income is realized by a participant at the time the award is granted. Instead, for participants, ordinary income generally is required to be recognized (i) with respect to restricted shares, when the restricted shares vest, (ii) with respect to RSUs, upon the issuance of shares or the payment of cash pursuant to the terms of the RSUs when such RSUs vest and (iii) with respect to options or SARs, when such options or SARs are exercised in an amount equal to the difference between the exercise or base price paid for the shares and the fair market value of the shares on the date of exercise. No options granted under the 2020 Plan will qualify as incentive stock options intended to satisfy the requirements of Section 422 of the Code.
Other Share-Based Awards. The tax effects and treatment related to other share-based awards under the 2020 Plan are dependent upon the structure of the particular award.
Withholding. At the time a participant is required to recognize ordinary compensation income resulting from an award, such income generally will be subject to federal (including any applicable Social Security and Medicare tax) and applicable state and local income tax and applicable tax withholding requirements. The Company generally is required to report to the appropriate taxing authorities the ordinary income received by the participant, together with the amount of taxes withheld to the Internal Revenue Service and the appropriate state and local taxing authorities.
Section 409A. Certain awards under the 2020 Plan may be subject to Section 409A of the Code, which regulates “nonqualified deferred compensation” (as defined in Section 409A of the Code). Section 409A of the Code imposes complex rules on nonqualified deferred compensation arrangements, including requirements with respect to elections to defer compensation and the timing of payment of deferred
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 91
Proposal 3: Approval of Teva’s 2020 Long-Term Equity-Based Incentive Plan
amounts. If an award under the 2020 Plan (or any other Company plan) that is subject to Section 409A of the Code is not administered in compliance with Section 409A of the Code, then all compensation under the 2020 Plan that is considered “nonqualified deferred compensation” (and awards under any other Company plan that are required, pursuant to Section 409A of the Code, to be aggregated with the award under the 2020 Plan) with respect to a participant may be taxable to the participant as ordinary income in the year of the violation, or if later, the year in which the compensation subject to the award is no longer subject to a substantial risk of forfeiture. In addition, the participant may be subject to an additional tax equal to 20% of the compensation that is required to be included in income as a result of the violation, plus interest from the date that the compensation subject to the award was required to be included in taxable income.
New Plan Benefits
Because awards to be granted in the future under the 2020 Plan are generally at the discretion of the Committee, it is generally not possible to determine the benefits or the amounts received or that will be received under the 2020 Plan by eligible participants other than the awards described below. As of December 31, 2019, 10 executive officers, 10non-employee members of the Board of Directors and approximately 3,000 other employees and consultants were eligible to participate in the 2020 Plan. As of December 31, 2019, the closing price of the Company’s ordinary shares was $9.80. If the 2020 Plan is approved by our shareholders, the Company is expected to make the following annual grants to its CEO Kåre Schultz andnon-employee members of the Board of Directors under the 2020 Plan:
| ||||
| ||||
|
|
|
|
|
The overview above is a summary of material provisions included in Teva’s proposed 2020 Plan and is qualified in its entirety by reference to the full text of Teva’s proposed 2020 Plan, which is attached hereto asAppendix A.Teva.
|
The Board of Directors recommends that shareholders vote FOR the approval of |
92 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 80 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
Background
As required by the Israeli Companies Law, the Company seeks shareholder approval of our proposal to amend the terms of office and employment of our President and CEO, Mr. Kåre Schultz.
In September 2017, our Board appointed Mr. Schultz as President and CEO based on his experience as a leader with extensive global pharmaceutical experience and a strong track record in corporate turnarounds, as well as in driving growth and leading international expansion.
During his tenure to date, Mr. Schultz has successfully executed ourtwo-year restructuring plan, reduced the Company’s spend base by $3 billion, reduced debt and overseen the launch of new products, as described in more detail below. Through these achievements, Mr. Schultz has demonstrated his commitment to taking actions aimed at generating shareholder value and has positioned the Company for a return to growth. The Compensation Committee and the Board continue to believe that Mr. Schultz is best-suited to lead the organization forward at this critical juncture. To that end, the Compensation Committee and the Board seek to (i) extend the initial term of Mr. Schultz’s employment agreement by one year (from November 2022 to November 2023), which Mr. Schultz has agreed to do, and (ii) in light of Mr. Schultz agreeing to extend the term of his employment, amend his agreement to increase the performance-based portion of his target annual long-term incentive equity award and provide Mr. Schultz with the right to retain, subject to his continued compliance with certain restrictive covenants, annual long-term incentive equity awards in connection with certain qualifying terminations of employment described below. The Compensation Committee and the Board believe that the proposed changes establish an overall compensation program that motivates and retains Mr. Schultz through our turnaround period, within the bounds of market practices among our peer group.
Approval Requirements Under Israeli Law
The Israeli Companies Law provides that any arrangement between a company and a chief executive officer, who also serves as a director, relating to his or her compensation must be consistent with the company’s compensation policy and requires the approval of the compensation committee, the board of directors and the shareholders by a simple majority, in that order. Accordingly, the employment agreement amendments described above, which were approved, and recommended for shareholder approval, by our Compensation Committee and Board, also require shareholder approval at the Annual Meeting.
Unlike our“say-on-pay” vote, the shareholder vote on this matter is binding under Israeli law and is not merely advisory. If this Proposal 4 is not approved by the affirmative vote of our shareholders, the Company will NOT be authorized to enter into the amendment to employment agreement or award the additional equity value to our President & CEO in 2020 or thereafter.
Overall Compensation Strategy
In order to accomplish our key corporate objectives, we must attract, motivate and retain highly skilled and experienced people to execute our corporate strategy and lead our team. To that end, our executive officer compensation program is designed to:
|
|
|
|
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 93
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
Compensation Policy under the Israeli Companies Law. As required by the Israeli Companies Law, at our 2019 annual meeting of shareholders, our shareholders approved an update to our Compensation Policy regarding the terms of office and employment that can be offered to our “office holders” (as defined under the Israeli Companies Law), which includes the President and CEO, including cash compensation, equity-based awards and other items. Pursuant to the Israeli Companies Law, arrangements between Teva and our President and CEO must generally be consistent with the Compensation Policy.
CEO Performance Assessment
In seeking to amend the President and CEO’s employment agreement, the Compensation Committee and the Board evaluated the performance of our President and CEO, in his first two years, including the following:
|
|
|
|
|
Mr. Schultz has led all of these accomplishments and in so doing has positioned the Company for future growth. The Committee and the Board of Directors also considered the share price performance during Mr. Schultz’s tenure and noted certain factors contributing to external pressure on the Company’s share price, such as the opioid and alleged price-fixing litigations in the U.S., both of which involve events that largely predate Mr. Schultz’s tenure.
Benchmark Positioning Relative to Market Median
In order to understand how the level of President and CEO annual total direct compensation, and its individual components, compares to market practice of our peers, the Compensation Committee and the Board reviewed the President and CEO’s total direct compensation, including base salary, annual incentive target opportunity and actual payout, total cash compensation, annual long-term incentive equity target opportunity and actual payout, excluding any one time cash and equity awards, relative to the opportunities and amounts delivered to chief executive officers at companies in our peer group, as presented in a benchmark study prepared by Willis Towers Watson.
We continue to use the same peer group for benchmarking purposes, including publicly traded global companies from the pharmaceutical and biotechnology sectors with comparable revenues and size to Teva. The peer group contains 15 companies including AbbVie Inc., Allergan plc, Amgen Inc., Astellas Pharma Inc., AstraZeneca plc, Biogen Inc., Bristol-Myers Squibb Company, Eli Lilly and Company, Gilead Sciences Inc., GlaxoSmithKline plc, Merck KGaA, Mylan NV, Novo Nordisk A/S, Sanofi and Takeda Pharmaceutical Company Ltd.
The Compensation Committee and the Board also considered the Company’s compensation philosophy and objectives, internal fairness and market trends, and other relevant factors as required by law and the Compensation Policy. The Compensation Committee and the Board considered the pastsign-on cash and
94 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
equity awards granted to Mr. Schultz in 2017 and determined that they should not be included in the analysis as they wereone-time awards provided to Mr. Schultz to induce him to join the Company during challenging times.
The Compensation Committee and the Board’s review of the Willis Towers Watson study indicated that the President and CEO’s target annual total direct compensation of $10.8 million, which complied with the shareholder-approved Compensation Policy, was significantly below competitive market levels as a result of the CEO’s target annual long-term incentive equity component of $6.0 million being set substantially below the peer median. The Compensation Committee and the Board also considered the fact that since Mr. Schultz’s date of hire in 2017, no increases have been provided to the President and CEO’s target annual total direct compensation or to any component thereof.
For a detailed description of the compensation of our President and CEO, please see “Executive Compensation—Compensation Discussion and Analysis” above.
Proposed Amendments to Mr. Schultz’s Agreement
Extension of Employment Agreement Term. The Compensation Committee and the Board believe that Mr. Schultz is best-suited to lead the Company at this time, and in seeking to ensure the services of Mr. Schultz through a longer time horizon, the Company proposes to enter into an amendment to Mr. Schultz’s existing employment agreement that extends the initial term of Mr. Schultz’s employment by one year to a sixth year, from November 1, 2022 to November 1, 2023.
Align Target Annual Total Direct Compensation with Market Median. In general, the Compensation Committee and the Board seek to align executive officer compensation with the market median range in order to be able to attract, motivate and retain experienced executive talent who are critical to our long-term success, and especially so with the President and CEO.
The Compensation Committee and the Board reviewed the target annual total direct compensation of the President and CEO and each of its components. As described above, the Compensation Committee and the Board determined that the President and CEO’s target annual total direct compensation and target long-term incentive equity award were positioned below market median. In order to bring target annual total direct compensation to the market median range for the duration of the President and CEO’s tenure, and in accordance with our pay for performance and shareholder alignment philosophy, the Compensation Committee and the Board propose to increase the target grant date fair value of the President and CEO’s annual long-term incentive equity award by $4 million, all of which would vest solely subject to achievement ofpre-established performance metrics designed to further align the President and CEO’s interests with those of Teva’s shareholders. The resulting total target long-term incentive equity grant would remain below the limit set forth in the Company’s Compensation Policy as approved by shareholders.
No increases are proposed to the President and CEO’s annual base salary or annual cash incentive target opportunity. The pay mix, which in 2019 consisted of approximately 82% variable,at-risk pay, would increase to approximately 86% variable,at-risk pay. If this Proposal 4 is approved, his long-term incentive equity award (based on the 2019 allocation of the long-term incentive equity grants of 50% PSUs and 50% RSUs) would be increased to, in total, an award that is 70% performance-based.
| Base Salary | Target Annual Incentive | PSUs | RSUs | Target Total Compensation | ||||||||||
2019 | $2,000,000 | $2,800,000 | $3,000,000 | $3,000,000 | $10,800,000 | |||||||||
Proposed Additional Performance-Based Equity | $4,000,000 | |||||||||||||
Proposed 2020 | $2,000,000 | $2,800,000 | $7,000,000 | $3,000,000 | $14,800,000 | |||||||||
Proposed Pay Mix | 14% | 19% | 47% | 20% | ||||||||||
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 95
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
Post-Termination Equity Treatment. As part of the extension of the employment agreement, the Compensation Committee also approved a revision to Mr. Schultz’s employment agreement to change the treatment of outstanding long-term incentive awards upon certain qualifying terminations of employment. Following the effective date of the employment agreement amendment, in the event Mr. Schultz incurs a termination of employment with the Company (a) by the Company without “cause”, (b) by Mr. Schultz for “good reason”, (c) following the Company’s decision not to renew the employment agreement, or (d) by Mr. Schultz following his decision not to renew the employment agreement due to his retirement, defined as a cessation to work as an employee in a full-time managerial capacity for anyfor-profit organization, any then-outstanding long-term incentive equity grants (both time and performance-based equity grants) would continue to vest following such a termination of employment in accordance with their terms. Continued vesting following a qualifying termination of employment will be subject to Mr. Schultz’s continued compliance with thenon-compete,non-solicitation,non-disparagement and confidentiality covenants contained within his employment agreement. In addition, following the amendment to Mr. Schultz’s employment agreement, thenon-compete covenant will also apply following a termination of employment due to the Company’s decision not to renew the employment agreement and following Mr. Schultz’s decision not to renew the employment agreement due to his retirement.
SeeAppendix B to this Proxy Statement for the proposed amendment to Mr. Schultz’s employment agreement.
Additional Long-Term Incentive Equity Opportunity Value is Exclusively Performance-Based
In order to further enhance the link between pay and performance and promote the alignment of the interests of the President and CEO with those of Teva’s shareholders, the Compensation Committee and the Board allocate a substantial portion of target annual total direct compensation to long-term incentive equity grants. In 2019, 50% of the long-term incentive equity granted to the President and CEO was in the form of PSUs. If this Proposal 4 is approved, and based on the current allocation of the long-term incentive equity grants of 50% PSUs and 50% RSUs, 70% of future annual long-term incentive equity grants to the President and CEO will be performance-based and awarded in the form of PSUs while 30% will be awarded in the form of RSUs.
If this Proposal 4 is approved by the shareholders, the Company will grant the President and CEO, following the Annual Meeting, in addition to the RSUs and PSUs already granted as part of the 2020 annual grant in February 2020, an additional equity grant with target grant date fair value of $4 million in the form of PSUs, with the same performance targets, vesting and other terms as the PSUs granted at the 2020 annual grant, except for the vesting which will start at the grant date. The 2020 performance targets, as approved by our Compensation Committee and Board, are rigorous and challenging, requiring threshold level of 85% of target for each metric in order for the President and CEO to earn any PSUs for the respective metric, in addition to meeting relative TSR goals. The value of the PSUs also depends on the price of Teva shares.
96 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
|
|
|
|
| ||||
|
| |||||||
|
| |||||||
Responsible Use of Equity
A company’s burn rate shows how rapidly it is depleting its shares reserved for equity compensation awards. We believe that our historical burn rate is quite reasonable for a company of our size in our industry. Our three-year average burn rate, calculated using the ISS methodology, is approximately 2.19%, which is lower than the ISS burn rate threshold of 8.08% applied to the GICS Pharmaceuticals(3520) sub-industry for 2020. We will continue to monitor our equity use in future years to ensure that our burn rate is within competitive market norms.
Share Ownership Guidelines; Clawback Policy
Mr. Schultz is subject to the Company’s share ownership guidelines, which require the President and CEO to hold 6x base salary in Teva’s equity to further strengthen the alignment of interests between the CEO and our shareholders.
Mr. Schultz is also required to return any compensation paid to him on the basis of results included in financial statements that turned out to be erroneous and that were subsequently restated, during the three-year period following filing thereof. In addition, in the event that it is discovered that he engaged in conduct that resulted in a material inaccuracy in Teva’s financial statements or caused severe financial or reputational damage to Teva, or in the event that it is discovered that he breached confidentiality and/ornon-compete obligations to Teva (as determined by the Company), the Company shall have broad remedial and disciplinary authority.
For additional details on our stock ownership guidelines and clawback policy, see Compensation Discussion and Analysis in this Proxy Statement.
Conclusion and Proposed Resolution
The Compensation Committee and the Board believe that it is in the best interests of the Company and our shareholders to enter into the amendment to the employment agreement with Mr. Schultz to secure the services of Mr. Schultz as the Company seeks a return to growth, bring his target annual total direct compensation and long-term incentive equity awards in line with the market median range and provide a performance-based incentive that aligns with the interests of shareholders and links pay to performance.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 97
Proposal 4: Approval of An Amendment to the Terms of Office and Employment of Teva’s President and Chief Executive Officer
If this Proposal 4 is not approved, it could affect our ability to execute on our executive compensation program including motivating Mr. Schultz and retaining him over a longer period of time.
As noted above, unlike our“say-on-pay,” the shareholder vote on this matter is binding under Israeli law and is not merely advisory. If this Proposal 4 is not approved by the affirmative vote of our shareholders, the Company will NOT be authorized to enter into the amendment to employment agreement or award the additional equity value to our President & CEO in 2020 or thereafter.
 |
|
98 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Proposal 5: Approval of an Amendment to Teva’s Articles of Association
Our Board of Directors believes that itin light of the COVID-19 pandemic, limited travel and health and safety concerns which are anticipated to continue, there is an increasing need to allow for flexibility in relation to holding in-person meetings, which have proven to be less critical than in the past. In addition, in order to enable the Company to retain highly qualified and experienced leadership, while maintaining the center of management in Israel, the Company’s Articles of Association should be composed of directors with diverse, complementary backgrounds with proven leadership capabilitiesless restrictive in relation to physical and experience, and with a high level of expertise within their chosen fields. Given our growing need to identify candidates with broad experience in global markets outside of Israel and interritorial requirements.
Therefore, the global pharmaceutical industry, the Corporate Governance and Nominating Committee and our Board of Directors viewrecommends to the requirement for a majority of Board members to be Israeli residents as constraining the Company’s ability to identify the best candidates. Therefore, we are asking shareholders to approve an amendment to Teva’s Articles of Association, which would eliminate the requirement thatfor a minimum number of in-person meetings of the Board of Directors, and would further provide the Chairman of the Board of Directors with discretion to determine, with respect to each year, whether a majority of the membersin-person meetings of ourthe Board of Directors shall be residentsconvened in Israel and which will further provide that the CEO shall lead the management team and manage the Company from its headquarters in Israel.
In addition, it is further proposed to amend certain additional provisions of Israel, as well as two otherthe Company’s Articles of Association, including (i) that the English language version of the Articles of Association shall be the binding version, in light of the Company’s global operation and shareholder base, (ii) clarifying that the Board shall set the maximum number of directors to be appointed at each general meeting, and (iii) amending or removing certain additional provisions that either are obsolete or no longer bear on thedesirable due to changes in Teva’s governance of Teva and are no longer necessary understructure or amendments to the Israeli Companies Law (in the latter case, generally due to amendments to the law over the years.
The current text of Article 59 states:
|
|
|
The complete text of Article 59, as amended (English translation of official Hebrew original which is attached hereto asAppendix C), will read:
“The Board shall consist of a meaningful representation of Israeli resident directors, which need not be a majority, unless the Company’s center of management shall have been transferred to another country in accordance with the provisions of these Articles.”
Teva is proud of its Israeli heritage and committed to upholding this legacy and connection through its approach to corporate governance and in many other manners. However, after careful consideration, the Board believes that the Company and its shareholders would be best served by a more relaxed requirement for Israeli representation on the Board. Replacing the current majority requirement with that of “meaningful representation of Israeli residents” will afford the Board greater flexibility in director recruitment—facilitating the constitution of a Board with appropriate expertise for Teva, both geographically and otherwise. Still, the requirement of meaningful Israeli representation affirms Teva’s longstanding commitment to Israel and assures that this heritage will be appropriately accounted for in governance decisions.
Candidates for Teva’s Board are selected for their integrity, experience, leadership and ability to exercise sound judgment. The Board considers candidates representing a diversity of backgrounds, perspectives, ethnicity and genders. When selecting candidates, the Board will also assess and ensure that a meaningful representation of Israeli residents is maintained.
In addition, Teva proposes to remove the provision specifying that Directors are not required to hold Teva shares, and the provision that a corporation is not qualified to serve as a Director of the Company. These items relate to provisions that are no longer necessary under the Israeli Companies Law dueno longer requiring such governance provisions or providing that such provisions apply mandatorily under the law without the need for express inclusion in a company’s articles), (iv) to address Teva’s unique status as a company subject to both applicable Israeli and U.S. laws, rules and regulations, and (v) correcting minor ambiguities.
Following the recommendation of the Corporate Governance and Nominating Committee and the Board of Directors, shareholders are asked to approve the proposed amendments to the law over the years.
If this Proposal 5 is not approved by our shareholders, and the composition of our Board following the Annual Meeting would not otherwise comply with our Articles of Association dueas reflected in the amended articles of association, in the form attached to a majoritythis Proxy Statement as Appendix B. A comparison of the membersproposed amended Articles of Association against the English version of the Board not being residents of Israel, then we expect that the Board will appoint individuals who are Israeli residents to fill such vacancies in such number as is required so that a majority of the members of the Board are residents of Israel.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 99
Proposal 5: Approval of an Amendment to Teva’s Articles of Association
The Hebrew language version of Teva’sexisting Articles of Association is attached to this Proxy Statement as Appendix C; the binding version. The English translation above is for convenience purposes only.words proposed to be added are underlined, and the words proposed to be deleted are indicated by a strikethrough.
|
The Board of Directors recommends that shareholders vote FOR the |
100 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 81 | |
Proposal 6:5: Appointment of Independent Registered Public Accounting Firm
The Audit Committee recommends that, as required under Israeli law, shareholders appoint Kesselman & Kesselman, an independent registered public accounting firm in Israel and a member of PricewaterhouseCoopers International Limited (“PwC”), as Teva’s independent registered public accounting firm until Teva’s 20212023 annual meeting of shareholders. PwC has been our independent registered public accounting firm since at least 1976.
Pursuant to Teva’s Articles of Association, the Board of Directors is authorized to determine the remuneration of Teva’s independent registered public accounting firm.
Representatives of PwC are expected to be present at the Annual Meeting and will also be available to respond to questions from shareholders. They also will have the opportunity to make a statement if they desire to do so.
Audit Committee Report
The Audit Committee has reviewed and discussed with management Teva’s audited consolidated financial statements as of and for the year ended December 31, 2019.2021.
The Audit Committee has also discussed with Kesselman & Kesselman the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301, Communications with Audit Committees.
The Audit Committee has received and reviewed the written disclosures and the letter from Kesselman & Kesselman required by the applicable requirements of the PCAOB regarding Kesselman & Kesselman’s communication with the Audit Committee concerning independence and has discussed with Kesselman & Kesselman their independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in Teva’s Annual Reporton Form 10-K for the year ended December 31, 20192021 for filing with the SEC.
Audit Committee of the Board of Directors
Gerald M. Lieberman, Chair
Amir Elstein
Murray A. Goldberg
Roberto A. Mignone
Dr. Tal Zaks
Policy onPre-Approval of Audit andNon-Audit Services of Independent Auditors
Teva’s Audit Committee is responsible for overseeing the work of its independent auditors. The Audit Committee’s policy is topre-approve all audit andnon-audit services provided by PwC and other members of PricewaterhouseCoopers International Limited. These services may include audit services, audit-related services, tax services and other services, as further described below. The Audit Committee sets forth the basis for itspre-approval in detail, listing the particular services or categories of services which arepre-approved, and setting forth a specific budget for such services. Other services are approved by the Audit Committee on an individual basis. Once services have beenpre-approved, PwC and management then report to the Audit Committee on a periodic basis regarding the extent of services actually provided in accordance with the applicablepre-approval, and regarding the fees for the services performed. Such fees for 20192021 and 20182020 werepre-approved by the Audit Committee in accordance with these procedures.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 101
| 82 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Proposal 6:5: Appointment of Independent Registered Public Accounting Firm
Principal Accountant Fees and Services
Teva incurred the following fees for professional services rendered by PwCKesselman & Kesselman and other members of PricewaterhouseCoopers International Limited,PwC member firms, for the years ended December 31, 20192021 and 2018:2020:
2019 | 2018 | 2021 | 2020 | |||||||||||||
| (U.S. $ in thousands) | (U.S. $ in thousands) | |||||||||||||||
Audit fees | $ | 17,280 | $ | 15,690 | $ | 13,488 | $ | 15,682 | ||||||||
Audit-related fees | 480 | 535 | 180 | 571 | ||||||||||||
Tax fees | 3,445 | 2,450 | 2,588 | 3,820 | ||||||||||||
All other fees | 266 | 265 | 20 | 4 | ||||||||||||
Total | $ | 21,472 | $ | 18,940 | $ | 16,276 | $ | 20,077 | ||||||||
The audit fees for the years ended December 31, 20192021 and 2018 were for2020 included professional services rendered for the integrated audit of Teva’s annual consolidated financial statements and its internal control over financial reporting as of December 31, 20192021 and 2018,2020, review of consolidated quarterly financial statements, statutory audits of Teva and its subsidiaries, issuance of comfort letters, consents and assistance with review of documents filed with the SEC.SEC and other services that can only be provided by the independent auditor.
The audit-related fees for the years ended December 31, 20192021 and 2018 were for the following services:2020 included sale side due diligence related to dispositions, accounting consultations, and employee benefit plan audits, attest servicesagreed upon procedures that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
Tax fees for the years ended December 31, 20192021 and 2018 were for the following services: (i)2020 included services related to tax compliance including the preparation of tax returns and claims for refund, (ii) tax planning and tax advice including assistance with tax audits and appeals, (iii) advice related to mergers and acquisitions, (iv) tax services for employee benefit plans (v)and assistance with respect to requests for rulings from tax authorities and (vi) other permitted tax services requested by management.authorities.
All other fees for the years ended December 31, 20192021 and 20182020 were mainly for thepre-implementation review of an ERP system, providing general advice related to new processes,benchmarking data, as well as for license fees for the use of accounting research tools and training regarding general financial reporting developments.
The Audit Committee believes that the provision of allnon-audit services rendered is compatible with maintaining PwC’s independence.
| The Board of Directors recommends that shareholders vote FOR the approval of the appointment of Kesselman & Kesselman, a member of PwC, as Teva’s independent registered public accounting firm until Teva’s |
102 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 83 | |
Presentation of 20192021 Financial Statements
The Board of Directors has approved, and is presenting to shareholders for receipt and consideration at the Annual Meeting, Teva’s annual consolidated financial statements for the year ended December 31, 2019,2021, which are included in Teva’s Annual Report on Form10-K for the year ended December 31, 2019,2021, available on Teva’s website at www.tevapharm.com.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 103
| 84 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
The following table describes, as of March 10, 2020,8, 2022, the beneficial ownership of Teva ordinary shares (and ADSs representing ordinary shares) by:
| ∎ | each person we believe beneficially holds more than 5% of the outstanding ordinary shares based solely on our review of SEC filings; |
| ∎ | each of our NEOs; |
| ∎ | each of our directors and director nominees; and |
| ∎ | all of our directors and executive officers as a group. |
Beneficial Owner | Ordinary Shares Beneficially Owned*** | Percent of Ordinary Shares Outstanding**** | ||||||
Beneficial Owners of More than 5% of Our Ordinary Shares | ||||||||
Capital Research Global Investors (1) | 130,950,677 | 11.956 | % | |||||
Wellington Management Group LLP (2) | 81,123,996 | 7.406 | % | |||||
Named Executive Officers and Directors:* | ||||||||
Dr. Sol J. Barer | 222,912 | * | * | |||||
Kåre Schultz | 553,452 | * | * | |||||
Rosemary A. Crane | 10,792 | * | * | |||||
Amir Elstein | 1,998,648 | * | * | |||||
Murray A. Goldberg | — | * | * | |||||
Jean-Michel Halfon | 4,942 | * | * | |||||
Gerald M. Lieberman | 10,342 | * | * | |||||
Roberto A. Mignone | 1,500,000 | (3) | * | * | ||||
Dr. Perry D. Nisen | — | * | * | |||||
Nechemia (Chemi) J. Peres | — | * | * | |||||
Prof. Ronit Satchi-Fainaro | — | * | * | |||||
Eli Kalif | — | * | * | |||||
Dr. Hafrun Fridriksdottir | 246,773 | * | * | |||||
Brendan O’Grady | 167,586 | * | * | |||||
Gianfranco Nazzi | 186,498 | * | * | |||||
Michael McClellan (4) | — | * | * | |||||
Dr. Carlo de Notaristefani (4) | 665,799 | * | * | |||||
All directors and executive officers as a group (20 persons) | 6,050,626 | * | * | |||||
Beneficial Owner | Ordinary Shares Beneficially Owned*** | Percent of Ordinary Shares Outstanding**** | ||||||
Beneficial Owners of More than 5% of Our Ordinary Shares |
|
|
|
|
|
| ||
Capital Research Global Investors (1) | 132,350,750 | 11.9 | % | |||||
Named Executive Officers and Directors:* |
|
|
|
|
|
| ||
Dr. Sol J. Barer | 317,563 | * | * | |||||
Kåre Schultz | 2,223,283 | * | * | |||||
Rosemary A. Crane | 52,218 | * | * | |||||
Amir Elstein | 2,042,934 | * | * | |||||
Jean-Michel Halfon | 49,228 | * | * | |||||
Gerald M. Lieberman | 54,628 | * | * | |||||
Roberto A. Mignone | 1,544,286 | (2) | * | * | ||||
Dr. Perry D. Nisen | 44,286 | * | * | |||||
Nechemia (Chemi) J. Peres | 44,286 | * | * | |||||
Prof. Ronit Satchi-Fainaro | 36,880 | * | * | |||||
Janet S. Vergis | 12,668 | * | * | |||||
Dr. Tal Zaks | 17 |
|
|
| ||||
Eli Kalif | 64,876 | * | * | |||||
Mark Sabag | 701,992 | * | * | |||||
Dr. Sven Dethlefs | 404,583 |
|
|
| ||||
Eric Drapé | 373,586 | * | * | |||||
All directors and executive officers as a group (21 persons) | 9,142,488 | * | * | |||||
| * | The address of each named executive officer and director is c/o Teva Pharmaceutical Industries Limited, |
104 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
Security Ownership
| ** | Represents less than 1%. |
| *** | For purposes of this table, “beneficial ownership” is determined in accordance with Rule13d-3 under the Exchange Act pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any ordinary shares with respect to which such person has (or has the right to acquire within 60 days) sole or shared voting power or investment power. |
| **** | Percentage of beneficial ownership is based on |
| (1) | Based solely on a Schedule |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 85 | |
Security Ownership
| the beneficial owner of |
| (2) |
|
|
| ||
| 86 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 105
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth, as of December 31, 2019,2021, certain information related to our equity compensation plans:
Plan Category
|
Number of
|
Weighted-
|
Number of Securities
| Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | ||||||||||||||||||
Equity compensation plans approved by security holders
|
|
|
| |||||||||||||||||||||
2020 Long-Term Equity-Based | 11,832,332 | — | 78,834,174 | (1) | ||||||||||||||||||||
2015 Long-Term Equity-Based
|
|
41,107,981
|
|
| $31.52
|
|
| 62,699,737
| (1)
| 32,726,804 | $ | 31.25 | — | (2) | ||||||||||
2010 Long-Term Equity-Based
|
| 14,933,128
|
|
| $48.64
|
|
| —
| (2)
| 8,868,430 | $ | 49.93 | — | (2) | ||||||||||
2008 Employee Stock Purchase Plan For U.S. Employees
|
|
—
|
|
| —
|
|
| 748,842
| (3)
| — | — | 552,264 | (3) | |||||||||||
Equity compensation plans not approved by security holders
|
|
—
|
|
| —
|
|
| —
|
| — | — | — | ||||||||||||
Total
|
|
56,041,109
|
|
|
$37.9
|
|
|
63,448,579
|
(1)
| 53,427,566 | $ | 36.96 | 79,386,438 | (1) | ||||||||||
| (1) | Includes awards that were cancelled or forfeited under the 2010 and 2015 Long-Term Equity-Based Incentive |
| (2) | This plan expired and no future grants are available thereunder. |
| (3) | A total of 8,500,000 shares have been authorized for purchase at a discount under the plan. |
106 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 87 | |
Certain Relationships and Related Party Transactions
In November 2019, Teva entered into two collaborative research agreements with Tel Aviv University pursuant to which Teva will provideprovided funding in the amounts of€250,000 and $94,500, respectively, and will workworked with the Tel Aviv University scientists to advance cancer and brain studies. Following finalization of the research plans, Teva entered into two continuation research agreements with Tel Aviv University in May 2021, to conduct additional and further research plans, to which Teva provided funding in the amount of NIS 1,238,490 and NIS 313,275, respectively. Prof. Ronit Satchi-Fainaro, a member of our Board of Directors, has been a professor at Tel Aviv University since 2015. Prof. Ronit Satchi-Fainaro holds various other positions at Tel Aviv University, including Head of the Cancer Research and Nanomedicine Laboratory since 2006, Chair of the Department of Physiology and Pharmacology at the Sackler Faculty of Medicine since 2014, Chair of The Kurt and Herman Lion CathedraChair in Nanosciences and Nanotechnologies since 2017, Director of the Cancer Biology Research Center since 2020 and a member of the Preclinical Dean’s Committee since 2015.
The related party transaction described above was reviewed and approved in accordance with the provisions of the Israeli Companies Law, Teva’s Articles of Association and Teva policy, as described below. Any extensions to these agreements will also be reviewed accordingly.
Approval of Related Party Transactions
The Israeli Companies Law requires that an “office holder” (as defined in the Israeli Companies Law) of a company promptly disclose any personal interest that he or she may have and all related material information known to him or her, in connection with any existing or proposed transaction of the company.
Pursuant to the Israeli Companies Law, the Audit Committee shall determine whether any transaction with an office holder or in which the office holder has a personal interest (other than with respect to such office holder’s Terms of Office and Employment, see “Executive Compensation—Compensation Discussion and Analysis—Compensation-Related Requirements of the Israeli Companies Law”) must be brought before the Audit Committee, in order to determine whether such transaction is an “extraordinary transaction” (defined as a transaction not in the ordinary course of business, not on market terms or likely to have a material impact on the company’s profitability, assets or liabilities).
Pursuant to the Israeli Companies Law, the Articles of Association and Teva written policy, in the event that the Audit Committee determines that the transaction is not an extraordinary transaction, the transaction will require only Audit Committee approval; if, however, it is determined to be an extraordinary transaction,and Board approval is alsoare required and, in some circumstances, shareholder approval may also be required. Such arequired; if however, it is determined that the transaction is not an extraordinary transaction, the transaction will not require Board or shareholder approval. An interested party transaction may only be approved if it is determined to be in the best interests of Teva.
A person with a personal interest in the matter generally may not be present at meetings of the Board or certain committees where the matter is being considered and, if a member of the Board or a committee, may generally not vote on the matter.
Transactions with Controlling Shareholders
Under Israeli law, extraordinary transactions with a controlling shareholder, or in which the controlling shareholder has a personal interest, and any engagement with a controlling shareholder, or a controlling shareholder’s relative, with respect to the provision of services to the company or their Terms of Office and Employment as an office holder or their employment, if they are not an office holder, generally require the approval of the Audit Committee (or with respect to Terms of Office and Employment, the HR and Compensation Committee), the Board of Directors and the shareholders. If required, shareholder approval
| 88 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Related Party Transactions
must include (i) at least a majority of the shareholders who do not have a personal interest in the transaction and are present and voting at the meeting (abstentions are disregarded), or, alternatively, that (ii) the total shareholdings of the disinterested shareholders who vote against the transaction do not represent more than two percent of the voting rights in the company. Transactions for a period of more than three years generally need to be brought for approval in accordance with the above procedures every three years.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 107
Related Party Transactions
A shareholder who holds 25% or more of the voting rights in a company is considered a controlling shareholder for these purposes if no other shareholder holds more than 50% of the voting rights. If two or more shareholders are interested parties in the same transaction, their shareholdings are combined for the purposes of calculating percentages.
Change of Control
Subject to certain exceptions, the Israeli Companies Law generally requires that a merger between two Israeli companies be approved by both the board of directors and by the shareholders of each of the merging companies by a simple majority (unless a higher majority is required by the articles of association).
Furthermore, the Israeli Companies Law generally requires that an acquisition of shares in a public company be made by means of a tender offer if as a result of the acquisition the purchaser would hold 25% or more of the voting rights of the company if there is no other holder of 25% or more of the company’s voting rights, or more than 45% of the voting rights of the company if there is no other holder of more than 45% of the company’s voting rights. The Israeli Companies Law generally further requires that such offer be consummated only if at least 5% of the company’s voting rights will be acquired, and that subject to certain exceptions, the majority of the offerees who responded to the offer accepted the offer.
108 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 89 | |
Shareholder Proposals for the 20202022 Annual Meeting and the 20212023 Annual Meeting
Under Israeli law, one or more shareholders holding 1% or more of the voting rights of Teva may propose to include any matter appropriate for deliberation at a shareholders meeting to be included on the agenda of a shareholders meeting (including proposing the nomination of a candidate to the Board of Directors which will be brought for consideration by Teva’s Corporate Governance and Nominating Committee) by submitting such proposal within seven days of publication of Teva’s notice with respect to its general meeting of shareholders, unless Teva publishes a preliminary notice (as done with respect to this Annual Meeting) at leasttwenty-one days prior to a publication of the notice of the meeting, stating its intention to convene such meeting and the agenda thereof, in which case the shareholder proposal should be submitted within fourteen days of such preliminary notice. The Annual Meeting notice attached to this preliminary proxy statement serves as a preliminary notice regarding the Annual Meeting pursuant to Section 5C of the Israeli Companies Regulations (Notice and Announcement of a General Meeting and a Class Meeting in Public Company and Adding Subjects to the Agenda), 5760-2000. Accordingly, any one or more shareholders holding 1% or more of the voting rights of Teva may request to include a proposal on the agenda of this Annual Meeting by submitting such proposal in writing to Teva no later than April 2, 2020,March 29, 2022, at its executive offices located at 5 Basel124 Dvora HaNevi’a Street, P.O. Box 3190, Petach Tikva 4951033,Tel Aviv, 6944020, Israel, Attn: Dov Bergwerk, Company Secretary. UnderIn addition, under Teva’s current Articles of Association, one or more shareholders holding 1% or more of the voting rights in Teva (or a shareholder interested in proposing the nomination of certain candidate(s) for election as director(s) for consideration by the Corporate Governance and Nominating Committee) may propose to include a matter on the agenda of the 2021following annual meeting of shareholders by submitting the proposal in writing to Teva at its executive offices at 5 Basel Street, P.O. Box 3190, Petach Tikva 4951033, Israel, Attn: Dov Bergwerk, Company Secretary, no later than 14 days after the date of first publication by Teva of its 2020 consolidated financial statements.statements for the preceding year. No such proposals were made with respect to this Meeting.
Any such shareholder proposal must comply with the requirements of applicable law and Teva’s Articles of Association. The requirements under Teva’s Articles of Association include providing information such as: (i) the number of ordinary shares held by the proposing shareholder, directly or indirectly, and, if any such ordinary shares are held indirectly, an explanation of how they are held and by whom; (ii) the shareholder’s purpose in making the request; and (iii) any agreements, arrangements, understandings or relationships between the shareholder and any other person with respect to any securities of Teva or the subject matter of the request; and (iv) if the shareholder wishes to include a statement in support of his or her proposal in Teva’s proxy statement, if provided or published, a copy of such statement.request. If the proposal is to nominate a candidate for election to the Board of Directors, the proposing shareholder must also provide (a) a declaration signed by the nominee and any other information required under the Israeli Companies Law, (b) additional information in respect of the nominee as would be required in response to the applicable disclosure requirements in Israel or abroad, including the information responsive to Items 401, 403 and 404 of RegulationS-K under the Securities Act, to the extent applicable, (c) a representation made by the nominee of whether the nominee meets the objective criteria for an independent director of a company such as Teva under any applicable law, regulation or stock exchange rules, in Israel or abroad, and if not, then an explanation of why not, and (d) details of all relationships and understandings between the proposing shareholder and the nominee.
Under Rule14a-8 of the Exchange Act, a shareholder proposal to be included in the proxy statement and proxy card for the 20212023 annual general meeting of shareholders pursuant to Rule14a-8 must be received at our principal office on or before December , 20202022 and must comply withRule 14a-8.
Teva Pharmaceutical Industries Ltd. 2020 Proxy Statement 109
| 90 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act or the Exchange Act that might incorporate this Proxy Statement or future filings made by Teva under those statutes, the information included under the caption “Compensation“HR and Compensation Committee Report” and those portions of the information included under the caption “Audit Committee Report” required by the SEC’s rules to be included therein shall not be deemed to be “soliciting material” or “filed” with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by Teva under those statutes, except to the extent we specifically incorporate these items by reference.
Householding of Proxy Materials
Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements. This means that only one copy of the proxy materials may have been sent to multiple shareholders in your household. Teva will promptly deliver a separate copy of the proxy statement, as well as its Annual Report, to you if you write or call the Company at: TevaIR@tevapharm.com or mailing address: Teva Pharmaceutical Industries Ltd., 5 Basel124 Dvora HaNevi’a Street, Petach Tikva,Tel Aviv, 6944020, Israel, Attn: Investor Relations, or phone: +972(3) 914-8171.914-8262. If you want to receive copies of Teva’s proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact us at the above address and phone numbers.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 91 | |
Questions and Answers about the Annual Meeting
The Meeting
When and how will the Annual Meeting be held?
The Annual Meeting will be conducted in a virtual format on Thursday, June 23, 2022, at 4:00 p.m., Israel time, 9:00 a.m., Eastern time.
In the interest of the health and safety of our shareholders, directors, officers and employees, in light of the ongoing COVID-19 pandemic, shareholders will not be able to physically attend the Annual Meeting.
For additional information on how to vote and participate at the Annual Meeting see below under “Participating and Voting at the Annual Meeting.”
Who may attend the Annual Meeting?
Attendance at the Annual Meeting, including any adjournments or postponements thereof, will be limited to holders of record as of the close of business on May 16, 2022 (the “Record Date”) who hold ordinary shares or American Depositary Shares (“ADSs”), directly in their own name, and beneficial owners who hold ordinary shares or ADSs through a broker, bank or other nominee rather than directly in their own name, and each of their legal proxy holders or their authorized persons.
What is a quorum for the Annual Meeting?
A minimum of two holders of ordinary shares (or ADSs representing such ordinary shares) who are present at the Annual Meeting, in person or by proxy or represented by their authorized persons, and who hold in the aggregate twenty-five percent or more of such ordinary shares (or ADSs representing such ordinary shares), will constitute a legal quorum. At the close of business on March 8, 2022, 1,110,352,397 ordinary shares were outstanding and entitled to vote. Ordinary shares held in treasury will not be included in the calculation to determine if a quorum is present. Abstentions and broker non-votes will be considered present and entitled to vote for the purpose of determining the presence of a quorum. Should no legal quorum be present one half hour after the scheduled time, the Annual Meeting will be adjourned to one week from that day, at the same time and in virtual format. Should such legal quorum not be present one half hour after the time set for the Annual Meeting, as adjourned, any two holders of ordinary shares present, in person or by proxy, who jointly hold twenty percent or more of such ordinary shares (or ADSs representing ordinary shares) will then constitute a legal quorum.
Who may vote at the Annual Meeting?
Ordinary Shares
Holders of record of ordinary shares as of the Record Date may vote at the Annual Meeting.
Beneficial owners who hold ordinary shares through a nominee company pursuant to Section 177(1) of the Israeli Companies Law, as of the Record Date (a “Non-Registered Holder”), rather than directly in their own name, have the right to direct their broker, bank or other nominee how to vote using the instructions provided by the broker, bank or other nominee, but may not vote their shares at the Annual Meeting unless they obtain a proof of share ownership as of the Record Date (“Proof of Ownership”), which must be approved by a member of the Tel Aviv Stock Exchange (“TASE”).
| 92 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Questions and Answers about the Annual Meeting
ADSs
As an ADS holder, you will not be entitled to vote at the Annual Meeting through the online meeting platform. To the extent you provide the Depositary (as defined below) or your broker, bank or other nominee, as applicable, with voting instructions, the Depositary has advised us that it will vote the ordinary shares underlying your ADSs in accordance with your instructions.
You also may exercise the right to vote the ordinary shares underlying your ADSs by surrendering your ADSs to Citibank, N.A., as depositary for the ADSs (the “Depositary”) for cancellation and withdrawal of the corresponding ordinary shares pursuant to the terms described in the Second Amended and Restated Deposit Agreement (the “Deposit Agreement”), dated as of December 4, 2018, by and among the Company, the Depositary, and the holders and beneficial owners of ADSs. In order to be able to vote at the Annual Meeting, you must complete the ADS cancellation process and become a holder of the corresponding ordinary shares by the Record Date. However, it is possible that you may not have sufficient time to withdraw your ordinary shares and vote them at the upcoming Annual Meeting as a holder of record of ordinary shares as of the Record Date. Holders of ADSs may incur additional costs associated with the ADS cancellation process.
The Israeli Companies Law does not permit shareholders of public companies to act by written consent.
Participating and Voting at the Annual Meeting
How can I access the online meeting platform and vote my ordinary shares or ADSs?
To access the Annual Meeting, holders of Teva’s ADSs and ordinary shares should visit www.meetnow.global/MF9UVZ6 and enter their control number (as described below).
Your vote is very important and we encourage you to vote your shares and submit your proxy regardless of whether or not you plan to attend the Annual Meeting. Each issued and outstanding ordinary share (or ADS representing an ordinary share) shall entitle its holder to one vote on each matter properly submitted at the Annual Meeting. Ordinary shares held in treasury by Teva do not entitle Teva to vote in respect thereof at the Annual Meeting.
Ordinary Shares
Record holders of ordinary shares: If you are the record holder of ordinary shares as of the Record Date, you have the right to (i) vote at the Annual Meeting through the online meeting platform, (ii) vote by submitting your proxy card by mail or by email to TevaAGM2022@tevapharm.com, or (iii) grant your voting proxy to an authorized person.
If you choose to submit your proxy card by mail or by email to TevaAGM2022@tevapharm.com, mark the enclosed proxy card in accordance with the instructions, date, sign and return it to Teva. To be taken into account, your proxy card must be received by Teva, by 4:00 p.m., Israel time, on June 19, 2022, unless determined otherwise by the chairman of the Annual Meeting.
In order to access the Annual Meeting online platform, record holders of ordinary shares must enter a control number. The control number will consist of the holder’s Israeli identification number or Israeli company registration number as it appears in Teva’s share register. Holders of Teva’s ordinary shares as of the Record Date will also be able to ask questions through the online meeting platform, which will be open for questions 24 hours prior to and throughout the Annual Meeting.
If you appoint another person to act as your authorized proxy, such proxy must be submitted in writing by mail or by email to TevaAGM2022@tevapharm.com (in a form approved by the Company Secretary) from
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 93 | |
Questions and Answers about the Annual Meeting
the record holder of ordinary shares, including such record holder’s Israeli identification number or company registration number, along with the authorized proxy’s name, Israeli identification number, proof of identification and email address, and must be received by Teva by 4:00 p.m., Israel time, on June 19, 2022, unless determined otherwise by the chairman of the Annual Meeting. The submission of a proxy by the aforementioned deadline will also serve to register the authorized proxy in advance in order to participate in the Annual Meeting, vote your shares and ask questions through the online meeting platform. Such authorized proxy will then be able to use their Israeli identification number as it appears on the proof of Israeli identification provided to Teva as the control number to access the online platform.
Non-registered holders of ordinary shares: If you are a Non-Registered Holder, you may (i) direct your broker, bank or other nominee how to vote using the instructions provided by such broker, bank or other nominee; (ii) vote through the electronic voting system of the Israeli Securities Authority at least 2 days prior to the Annual Meeting (i.e., before 4:00 p.m., Israel time, on June 21, 2022); or (iii) if you obtain a Proof of Ownership as detailed above, submit your vote (a) by submitting your proxy card by mail or by email to TevaAGM2022@tevapharm.com, together with the Proof of Ownership, by 4:00 p.m., Israel time, on June 19, 2022, unless determined otherwise by the chairman of the Annual Meeting; or (b) vote at the Annual Meeting through the online meeting platform.
In order to access the online meeting platform, Non-Registered Holders of ordinary shares must register in advance to participate in the Annual Meeting, vote their shares and ask questions through the online meeting platform, which will be open for questions 24 hours prior to and throughout the Annual Meeting.
To register, Non-Registered Holders must submit the Proof of Ownership (including Israeli identification number or company registration number) reflecting the number of ordinary shares beneficially owned as of the Record Date, along with their name and email address, to Teva at TevaAGM2022@tevapharm.com. Requests for registration must be received no later than June 19, 2022 at 4:00 p.m., Israel time.
Non-Registered Holders will then be able to use their Israeli identification number or company registration number as it appears on the Proof of Ownership provided to Teva as the control number to access the online platform. If a Non-Registered Holder would like to appoint another person to act as his/her authorized proxy, such proxy must be submitted to Teva along with the Proof of Ownership, following the instructions set forth above.
ADSs
The Deposit Agreement sets out the rights of ADS holders as well as the rights and obligations of the Depositary. Each ADS represents the right to receive one ordinary share deposited with Citibank Tel Aviv, as custodian for the Depositary under the Deposit Agreement or any successor custodian.
Record holders of ADSs: If you are a record holder of ADSs as of the Record Date, you will receive instructions from the Depositary for the ordinary shares underlying your ADSs to be voted. If you held ADSs directly as of the Record Date, you have the right to instruct the Depositary how to vote. So long as the Depositary receives your voting instructions by 8:00 a.m., Eastern time, on June 21, 2022, it will, to the extent practicable and subject to Israeli law and the terms of the Deposit Agreement, vote the underlying ordinary shares as you instruct.
Record holders of ADSs as of the close of the Record Date will be able to participate in the Annual Meeting and ask questions through the online meeting platform, which will be open for questions 24 hours prior to and throughout the Annual Meeting; however, they may not vote through the online meeting platform.
To access the online meeting platform, record holders of ADSs should enter the 15-digit control number on the proxy card or Notice of Internet Availability of Proxy Materials received.
| 94 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Questions and Answers about the Annual Meeting
Beneficial owners of ADSs that are registered in the name of a broker, bank or other agent: If you beneficially own ADSs as of the Record Date through a broker, bank or other nominee, such intermediary will provide you instructions on how you may vote the ordinary shares underlying your ADSs. Please check with your broker, bank or other nominee, as applicable, and carefully follow the voting procedures provided to you.
To participate in the Annual Meeting and ask questions through the online meeting platform, which will be open for questions 24 hours prior to and throughout the Annual Meeting, beneficial holders of ADSs that are registered in the name of a broker, bank or other agent must register in advance; however, they may not vote through the online meeting platform.
To register, beneficial holders of ADSs must submit proof of ownership reflecting the number of ADSs beneficially owned as of the Record Date, along with their name and email address, to Computershare at legalproxy@computershare.com. Requests for registration must be labeled as “TEVA MEETING REQUEST” and must be received no later than Tuesday, June 21, 2022 at 8:00 a.m., Eastern time. Beneficial holders of ADSs will then receive a confirmation of registration with a 15-digit control number by email from Computershare.
How will my ordinary shares or ADSs be voted if I do not vote?
Ordinary Shares
If you hold ordinary shares and do not (i) vote at the Annual Meeting through the online meeting platform, (ii) vote by submitting your proxy card by mail or by email, (iii) grant your voting proxy to an authorized person or (iv) as a Non-Registered Holder, vote by submitting your proxy card and proof of ownership by mail, by email or through the electronic voting system of the Israeli Securities Authority, your ordinary shares will not be counted as votes cast and will have no effect on the outcome of the vote with respect to any matter.
ADSs
If you are a record holder of ADSs and do not instruct the Depositary how to vote the ordinary shares underlying your ADSs, the ordinary shares underlying your ADSs will not be counted as votes cast and will have no effect on the outcome of the vote with respect to any matter.
If you are a beneficial owner whose ADSs are held of record by a broker, your broker has “discretionary voting” authority under the New York Stock Exchange (“NYSE”) rules to vote the shares represented by your ADSs on “routine” matters, such as the ratification of appointment of Kesselman & Kesselman, a member of PricewaterhouseCoopers International Ltd., as our independent registered public accounting firm, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority absent specific instructions from you to vote on the following “non-routine” matters: the election of directors, the advisory vote on the compensation of our named executive officers, the approval of the Compensation Policy and the approval of the Amendments to the Articles of Association, in which case a broker non-vote will occur and the shares represented by your ADSs will not be voted on these matters.
What are the voting requirements to elect the directors and to approve each of the proposals discussed in this Proxy Statement?
According to the Israeli Companies Law, our Articles of Association and with respect to Proposal 4 (Amendments to Teva’s Articles of Association) also the resolution of our Board of Directors to allow a simple majority for the approval of such proposal pursuant to Article 106 of our current Articles of Association, the voting requirements of the various proposals are as follows:
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 95 | |
Questions and Answers about the Annual Meeting
Proposal 1, Proposal 2, Proposal 4 and Proposal 5—each require a simple majority for approval, with a simple majority requiring the affirmative vote of the holders of a majority of Teva’s ordinary shares participating and voting at the Annual Meeting, in person or by proxy or through their representatives. Abstentions and broker non-votes are disregarded. Broker discretionary voting is permitted only for Proposal 5.
Proposal 3 (Approval of Teva’s Compensation Policy)—requires a simple majority for its approval and further requires that either (i) such majority includes at least a majority of the holders of ordinary shares who are not controlling shareholders and who do not have a personal benefit or other interest in the matter who are present and voting (abstentions and broker non-votes are disregarded) or (ii) the holders of ordinary shares who are not controlling shareholders and who do not have a personal benefit or other interest in the matter who were present and voted against the approval of such proposals hold, in the aggregate, two percent or less of the voting power in Teva (the “Disinterested Majority”). Accordingly, each shareholder voting on Proposal 3 is required to inform Teva prior to voting whether or not the shareholder is a controlling shareholder of Teva and whether or not the shareholder has a personal benefit or other interest in the proposal. Otherwise, pursuant to the Israeli Companies Law, the shareholder’s vote on such proposal cannot be counted in determining whether the above Disinterested Majority approval requirements are satisfied.
Under the Israeli Companies Law, a “controlling shareholder” is a shareholder who has the ability to direct the activities of the Company (other than by holding a position in the Company). A shareholder holding 50% or more of the voting rights of the Company is presumed to be a controlling shareholder. The Company is not currently aware of any “controlling shareholder,” as defined under the Israeli Companies Law. In addition, it believes that the vast majority of its shareholders should not have a personal benefit or other interest in Proposal 3.
Under the terms of the Deposit Agreement, the Depositary shall endeavor (insofar as is practicable and in accordance with our Articles of Association) to vote or cause to be voted the number of ordinary shares represented by ADSs in accordance with the instructions provided by the holders of ADSs to the Depositary by the deadline set. If instructions are not received by the Depositary by the deadline, the ordinary shares represented by such uninstructed ADSs shall not be voted at the Annual Meeting. If instructions are signed and timely returned to the Depositary, but no specific voting instruction is marked for a proposal, the holder shall be deemed to have directed the Depositary to give voting instructions “FOR” the unmarked proposal.
Can I change my vote?
Ordinary Shares
If you hold ordinary shares of record and submit your proxy card to vote by mail, by email, or appoint a proxy in advance of the Annual Meeting, you may change your vote by delivering a valid later-dated proxy within the time limitations set forth above, or voting at the Annual Meeting through the online meeting platform.
If you are a Non-Registered Holder of ordinary shares and vote through the electronic voting system of the Israeli Securities Authority, you may revoke your vote through such voting system at least two days prior to the Annual Meeting (i.e., before 4:00 p.m., Israel time, on June 21, 2022), or by voting at the Annual Meeting through the online meeting platform. If you are a Non-Registered Holder of ordinary shares and submit your proxy card to vote by mail, by email, or appoint an authorized proxy in advance of the Annual Meeting, you may change your vote by delivering a valid later-dated proxy within the time limitations set forth above, or voting at the Annual Meeting through the online meeting platform and subject to the instructions set forth above.
| 96 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Questions and Answers about the Annual Meeting
Attendance at the Annual Meeting will not cause your previous vote to be revoked unless you specifically so request.
ADSs
If you are the record owner of ADSs, you must follow the instructions provided by the Depositary in order to change your vote. If you hold your ADSs through a broker, bank or other nominee, you must follow the instructions provided by your broker, bank or other nominee, in order to change your vote. The last instructions you submit prior to the deadline indicated by the Depositary or the broker, bank or other nominee, as applicable, will be used to instruct the Depositary how to vote the ordinary shares underlying your ADSs. Attendance at the Annual Meeting will not cause your previous vote to be revoked.
Additional information for holders of ordinary shares and ADSs on how to participate at the virtual Annual Meeting
| ∎ | Access the Annual Meeting online platform at www.meetnow.global/MF9UVZ6 and enter your 15-digit control number (for holders of ADSs) or Israeli identification number or company registration number (for holders of ordinary shares) beginning on Thursday, June 23, 2022 at 3:45 p.m., Israel time, 8:45 a.m., Eastern time. |
| ∎ | To submit a question, visit www.meetnow.global/MF9UVZ6 and enter your 15-digit control number (for holders of ADSs) or Israeli identification number or company registration number (for holders of ordinary shares) within 24 hours prior to or throughout the Annual Meeting with your control number and click on the Q&A icon to submit your question. |
| ∎ | If you encounter any technical difficulties with the meeting platform on the date of the Annual Meeting, please call the support team at the numbers listed on the log-in screen, technical support will be available during this time and will remain available until the Annual Meeting has ended. |
| ∎ | Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance by one of the methods described above and in the other proxy materials for the Annual Meeting. |
| ∎ | No recording of the Annual Meeting is allowed, including audio and video recording. |
Proxy Materials
Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?
We distribute our Notice of Annual Meeting of Shareholders, Proxy Statement and Annual Report (collectively, the “proxy materials”) to certain shareholders via the Internet under the “Notice and Access” approach permitted by rules of the SEC. This approach conserves natural resources and reduces our distribution costs, while providing a timely and convenient method of accessing the materials and voting. On or by April , 2022, we expect to have mailed a “Notice of Internet Availability of Proxy Materials” to participating shareholders containing instructions on how to access the proxy materials on the Internet.
Can I access the proxy materials on the Internet?
The proxy materials are available on our website at www.tevapharm.com/2022proxymaterials. Information on our website is not part of the proxy materials and is not incorporated into the proxy statement by reference. Record owners of our ADSs may also access the proxy materials at www.investorvote.com/teva by following the instructions provided by the Depositary. Beneficial owners of our ADSs may also access the proxy materials at www.proxyvote.com by following the instructions provided by their broker, bank or other nominee. Instead of receiving future proxy statements and accompanying materials by mail, most shareholders and ADS holders can elect to receive an e-mail that will provide electronic links to them.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | 97 | |
Questions and Answers about the Annual Meeting
Opting to receive your proxy materials online will conserve natural resources and will save us the cost of producing documents and mailing them to you.The proxy materials are also available through Teva’s public filing on MAGNA (the Israeli Securities Authority’s electronic filing system) at www.magna.isa.gov.il, on the TASE’s website at www.maya.tase.co.il, or on the SEC’s website at www.sec.gov.
How do I request paper copies of the proxy materials at no charge?
You may contact Investor Relations by sending an email to TevaIR@tevapharm.com, or you may contact our proxy solicitor, MacKenzie Partners, Inc., by sending an email to proxy@mackenziepartners.com, by May , 2022.
If you are a record owner of ADSs, you may request proxy materials at www.investorvote.com/teva, by calling toll-free within the U.S. at (866) 641-4276 or by sending an email to investorvote@computershare.com, by May , 2022 and following the instructions provided by the Depositary.
If you are a beneficial owner of ADSs, you may request proxy materials by following the instructions at www.proxyvote.com or by calling toll free within the U.S. at (800) 579-1639 or by sending an email to sendmaterial@proxyvote.com by May , 2022 and following the instructions provided by your broker, bank or other nominee.
Other Questions
Could other matters be decided at the Annual Meeting?
The only items of business that our Board of Directors intends to present at the Annual Meeting are set forth in this Proxy Statement. As of the date of this Proxy Statement, no shareholder has advised us of the intent to present any other matter, and we are not aware of any other matter to be presented at the Annual Meeting. However, according and subject to the Israeli Companies Law and our Articles of Association, certain shareholders are entitled to propose items to the agenda. For more information, please see “Shareholder Proposals for the 2022 Annual Meeting and the 2023 Annual Meeting” above.
Who will pay for the cost of this proxy solicitation?
Teva will bear the entire cost of solicitation of proxies, including preparation, assembly, printing, and mailing of this Proxy Statement, the voting instruction card and any additional information furnished to shareholders. Teva may reimburse brokerage firms and other persons representing beneficial owners of ordinary shares or ADSs for reasonable expenses incurred by them in forwarding proxy soliciting materials to such beneficial owners. We retained MacKenzie Partners, Inc. to assist with the solicitation of proxies for a fee in the amount of $23,500, plus reimbursable expenses. In addition to solicitation by mail, certain of our directors, officers and regular employees, without additional remuneration, may solicit proxies by telephone, facsimile or personal contact.
Who can I contact if I require further assistance?
If you need assistance in submitting your proxy or have questions regarding the Annual Meeting, please contact our Investor Relations department by email at TevaIR@tevapharm.com or by mail at Teva Pharmaceutical Industries Ltd., 124 Dvora HaNevi’a Street, Tel Aviv, 6944020 Israel, attention: Investor Relations, or by telephone at +972-3-914-8262. You may also contact our proxy solicitor, MacKenzie Partners, Inc., by email at proxy@mackenziepartners.com or by calling toll free within the U.S. at +1 (800) 322-2885 or outside the U.S. at + 1 (212) 929-5500.
* * *
110 Teva Pharmaceutical Industries Ltd.2020 Proxy Statement
| 98 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
TEVA PHARMACEUTICAL INDUSTRIES LIMITEDRevised June [•], 2022
2020 LONG-TERM EQUITY-BASED INCENTIVE PLAN
|
The purpose of the Plan is to assist the Company (a) in attracting, retaining, motivating, and rewarding certain key employees, officers and directors of and consultants to the Company and its Affiliates and (b) promoting the creation of long-term value for shareholders of the Company by closely aligning the interests of such individuals with those of such shareholders. The Plan authorizes the award of Share-based incentives to Eligible Persons to encourage such persons to expend their maximum efforts in the creation of shareholder value. The Plan shall serve as the primary plan under which equity-based incentives are awarded on a worldwide basis to Eligible Persons.
The Plan succeeds the 2015 Plan for Awards granted on or after the Effective Date. The 2015 Plan will expire on September 2, 2020; however, as of the Effective Date, no additional awards may be made under the 2015 Plan. The adoption and effectiveness of the Plan will not affect the terms or conditions of any outstanding awards granted prior to the Effective Date under the 2015 Plan or the 2010 Plan.
|
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) “2010 Plan” means the Teva Pharmaceutical Industries Limited 2010 Long-Term Equity-Based Incentive Plan.Ltd.
(b) “2015 Plan” means the Teva Pharmaceutical Industries Limited 2015 Long-Term Equity-Based Incentive Plan.
(c) “ADS” means an American Depositary Share, which represents one Ordinary Share.
(d) “Affiliate” means, with respect to any entity, any other entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity and any other entity determined by the Committee to be an “Affiliate” for purposes of the Plan.
(e) “Award” means an Option, a Restricted Share, a Restricted Share Unit, a Share Appreciation Right, a Performance Award, or any other Share-based award granted under the Plan.
(f) “Award Agreement” means a written agreement (which may be in electronic form) between the Company and a Participant evidencing the terms and conditions of such Participant’s Award.
(g) “Board” means the Board of Directors of the Company.
(h) “Cause” means, in the absence of an Award Agreement or Participant Agreement otherwise defining Cause, (i) a Participant’s conviction of or indictment for any criminal act (whether or not involving the Company or its Affiliates) (A) constituting a felony, (B) evidencing moral turpitude, or (C) that has, or could reasonably be expected to result in, an adverse impact on the performance of the Participant’s duties to the Employer, or otherwise has, or could reasonably be expected to result in, an adverse impact to the business or reputation of the Company or its Affiliates; (ii) conduct of the Participant, in connection with his or her employment, that has, or could reasonably be expected to result in, material injury to the business or reputation of the Company or its Affiliates; (iii) any material violation of the policies of the Company or its
Affiliates, including, but not limited to, those relating to sexual harassment, corruption, the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Company or its Affiliates; or (iv) willful neglect in the performance of the Participant’s duties for the Employer or willful or repeated failure or refusal to perform such duties;provided,however, that if, subsequent to the Participant’s voluntary Termination for any reason or involuntary Termination by the Company or an Affiliate without Cause, it is discovered that the Participant’s employment could have been terminated for Cause, such Participant’s employment shall be deemed to have been terminated for Cause. In the event there is an Award Agreement or Participant Agreement defining Cause, “Cause” shall have the meaning provided in such agreement, and a Termination by the Employer for Cause hereunder shall not be deemed to have occurred unless all applicable notice and cure periods in such agreement are complied with.
(i) “Change in Control” means:
(i) Ownership Change. A change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed with the United States Securities and Exchange Commission, the Israeli Securities Authority or such other governmental authorities regulating the issuance of securities in other countries, or pursuant to aNon-Control Transaction) whereby any “person” (as defined in Section 3(a)(9) of the Exchange Act) or any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), directly or indirectly acquire “beneficial ownership” (within the meaning of Rule13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition (“Company Voting Securities”) excluding, however, the following: (A) any acquisition directly from the Company; (B) any acquisition by the Company or any of its Affiliates; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Affiliates; or (D) any underwriter temporarily holding securities pursuant to an offering of such securities;
(ii) Board Change. The cessation for any reason (other than death) by the individuals who, as of the Effective Date, constitute the Board (the“Incumbent Board”), to constitute at least a majority of the Board, within any consecutive twenty-four-month period commencing on or after the Effective Date;provided,however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at leasttwo-thirds of the directors then constituting the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director, without objection to such nomination) shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (including, but not limited to, a consent solicitation) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;
(iii) Reorganization. The consummation of a merger, consolidation, share exchange, or similar form of corporate transaction involving the Company or any of its Affiliates (a “Reorganization”), unless immediately following such Reorganization (1) more than fifty percent (50%) of the total voting power of (A) the corporation resulting from such Reorganization (the “Surviving Company”) or (B) if applicable, the ultimate parent corporation that has, directly or indirectly, beneficial ownership of one hundred percent (100%) of the voting securities of the Surviving Company (the “Parent Company”), is represented by Company Voting Securities that were outstanding immediately prior to such Reorganization (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Reorganization), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among holders thereof immediately prior to the Reorganization, (2) no person, other than an employee
benefit plan sponsored or maintained by the Surviving Company or the Parent Company (or its related trust), becomes, as a result of the Reorganization, the beneficial owner, directly or indirectly, of fifty percent (50%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Company, or if there is no Parent Company, the Surviving Company, and (3) at least a majority of the members of the board of directors of the Parent Company, or if there is no Parent Company, the Surviving Company, following the consummation of the Reorganization, are members of the Incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization (any Reorganization which satisfies all of the criteria specified in (1), (2), and (3) above shall be a “Non-Control Transaction”); or
(iv) Asset Transaction. The sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” (as defined in Section 3(a)(9) of the Exchange Act) or to any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Company’s Affiliates.
Notwithstanding the foregoing, (x) a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of fifty percent (50%) or more of the Company Voting Securities as a result of an acquisition of Company Voting Securities by the Company that reduces the number of Company Voting Securities outstanding;provided,however, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then occur, and (y) with respect to the payment of any amount that constitutes a deferral of compensation subject to Section 409A of the Code payable upon a Change in Control, a Change in Control shall not be deemed to have occurred unless the Change in Control constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company under Section 409A(a)(2)(A)(v) of the Code.
(j) “Code” means the United States Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.
(k) “Committee” means a committee of the Board consisting of two or more members of the Board, each of whom shall be an “independent director” as defined under the rules and regulations of the New York Stock Exchange or any other principal United States national securities exchange on which the Shares are listed and traded on the relevant date. Unless otherwise determined by the Board, the Human Resources and Compensation Committee of the Board shall act as the Committee hereunder.
(l) “Companies Law” means the Israeli Companies Law, 5759-1999, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.
(m) “Company” means Teva Pharmaceutical Industries Limited, an Israeli corporation.
(n) “Company Voting Securities” has the meaning set forth inSection 2(i)(i) hereof.
(o) “Compensation Policy” means the Teva Pharmaceutical Industries Limited Compensation Policy for Executive Officers and Directors
This document sets forth the compensation policy (the “Policy”) for executive officers and directors of Teva Pharmaceutical Industries Ltd. (“Teva” or the “Company”).
For purposes of this policy, “executive officers” shall mean “office holders” as such term is defined in the Israeli Companies Law, 5759-1999 (the “Israeli Companies Law”), including Teva’s Chief Executive Officer (the “CEO”) but excluding Teva’s directors, unless otherwise expressly indicated. This policy is subject to applicable law and is not intended, and should not be interpreted, to limit or derogate from applicable law to the extent adopted bynot permitted.
Teva’s Human Resources and Compensation Committee (the “Committee”) and its Board of Directors (the “Board”) will periodically review this policy to ensure that its provisions and implementation are aligned with Teva’s compensation philosophy and applicable legal and regulatory requirements. This policy (as may be amended from time to time) shall apply to any compensation arrangement of an executive officer or director that is approved following its adoption.
The purpose of this policy is to address the Companyrequirements under the Israeli Companies Law and shall be in effect in accordance with the Israeli Companies Law and as in effect from time to time.
(p) “Consultant” means each person who (i) is a natural person, (ii) provides bona fide consulting or advisory serviceslong as such requirements are applicable to the Company and/Company.
This policy is not intended and should not be interpreted as providing for the grant or its Affiliates (including throughcreating an entity which is a wholly owned alter ego of such person) and (iii) is designated as eligible byobligation on the Committee. For purposespart of the Plan,Company to grant any compensation to all or any particular executive officer or director. Accordingly, the upper limits described herein are maximum parameters and not an entitlement or right for all or any particular executive officer or director.
Executive Officer Compensation
Objectives: To remain competitive in the caseglobal market for executive officers, Teva must attract and retain highly talented professionals with the necessary skills and capabilities to promote creativity and manage global operations while embodying the Company’s values. Due to Teva’s unique position as an Israeli company with an extensive global footprint, it aims to adopt a compensation program that matches those of a Consultant, references to employment shall be deemed to refer to such Consultant’s service in such capacity, but in no event shallsimilar global companies, while complying with applicable local laws.
Compensation Elements: Teva’s executive officers’ compensation packages are generally composed of the Plan or any action taken hereunder be construed to create an employer-employee relationship between any such Consultant and the Company or of any of its Affiliates.following elements:
| ∎ | Base salary |
| ∎ | Cash bonuses |
| ∎ | Equity-based compensation |
| ∎ | Benefits and perquisites |
| ∎ | Termination arrangements |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | A-1 | |
Appendix A
(q) “Corporate Event” means (i) a Change in Control; (ii) a merger or consolidation involvingPay Mix: Teva’s target range for the Company in whichpay mix between the Companyannual base salary, annual cash bonus and annual equity-based compensation granted to its executive officers is notset forth below:
Target Range:
The target ranges express the surviving corporation; (iii) a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of Shares receive securities of another corporation and/or other property, including cash; (iv) a sale, divesture,spin-off or other similar transaction in which any Affiliate of the Company ceases to be an Affiliate of the Company; (v)optimal pay mix in the event that the Company or any Affiliate of the Company closes or disposes of a business unit or facility or diminishes or eliminates ownership interests in any business unit of the Company or any Affiliate of the Company so that such operating unit ceases to be majority owned by the Company or any of its Affiliates, with respect to outstanding Awards held by Participants that experience a Termination on account of such event only; or (vi) the reorganization or liquidation of the Company.
(r) “Disability” means, in the absence of an Award Agreement or Participant Agreement otherwise defining Disability, the permanent and total disability of a Participantall performance measures are achieved at target levels as defined by applicable law or in an applicable Subplan or, in the absence of such definition, as defined in guidelines approved by the Board or the Committee. In the event there is an Award Agreement or Participant Agreement defining Disability, “Disability” shall have the meaning provided in such agreement.
(s) “Double Trigger Termination” means a Participant’s involuntarily termination other than for Cause (including the Participant’s resignation for “good reason” or “constructive termination” (or similar term) under an Award Agreement or Participant Agreement), or a Participant’s termination under circumstances which entitle the Participant to mandatory severance payment(s) pursuant to applicable law, in each case, at any time beginning on the date of a Change in Control up to and including the second anniversary of the Change in Control.
(t) “Effective Date” means July 1, 2020.
(u) “Eligible Person” means (i) each employee of the Company or of any of its Affiliates, including each such person who may also be a director of the Company and/or its Affiliates; (ii) eachnon-employee director of the Company and/or its Affiliates; (iii) each Consultant; and (iv) any natural person who has accepted an offer of employment from the Company or an Affiliate of the Company or entered into a Participant Agreement;provided,however, that any such person may not receive any payment or exercise any right relating to an Award until such person has commenced employment or service with the Company or its Affiliates. An employee on an approved leave of absence (including maternity leave) shall be considered as still in the employment of the Company or its Affiliates for purposes of eligibility for participation in the Plan.
(v) “Employer” means either the Company or an Affiliate of the Company by which the Participant is principally employed or to which the Participant provides services (including services as anon-employee director), as applicable (in each case determined without regard to any transfer of an Award in accordance withSection 17 hereof).
(w) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time, including rules and regulations thereunder and successor provisions and rules thereto.
(x) “Fair Market Value” means, as of any date when the Shares are listed on one or more United States securities exchanges, the closing price reported on the principal United States national securities exchange on which such Shares are listed and traded on such date, or, if not quoted on such date, then on the last preceding date on which the Shares were quoted. If the Shares are not listed on a United States exchange, or representative quotes are not otherwise available, the Fair Market Value shall mean the amount determined by the Board in good faith, and in a manner consistent with Section 409A of the Code, to be the fair market value per Share.
(y) “Federal Reserve Board” means the Board of Governors of the United States Federal Reserve System.
(z) “GAAP” means accounting principles generally accepted in the United States from time to time.
(aa) “Grant Date” means the date on which the Committee and, if required by applicable law, the Board, formally acts to grant an Awardand assume that all compensation elements described in the chart above are granted with respect to a Participantfull calendar year. Performance in any given calendar year that is lower than target levels or exceeds target levels may result in a payout in different percentages than those described above.
Base Salary: Base salaries provide stable compensation to executive officers, allow Teva to attract and retain qualified global executive talent and maintain a stable management team. Base salaries vary among executive officers, and will be individually determined according to each executive officer’s areas of responsibility, role and experience based on a variety of considerations, which may include, inter alia, professional background (education, skills, expertise, professional experience and achievements and previous compensation arrangements, as relevant), external competitiveness, job criticality and internal fairness.
Cash Bonuses:Generally, the cash bonus component aims to ensure that Teva’s executive officers are incentivized to reach Teva’s annual goals. Cash bonuses are designed to provide a significant pay-for-performance element of Teva’s executive compensation package. Cash bonuses may include annual and other cash awards.
| ∎ | Annual cash bonus measurement criteria: The payout amount of annual cash bonuses with respect to any calendar year will be subject to achievement of quantitative and qualitative performance criteria and target levels as shall generally be determined by the Committee and, if required by applicable law, the Board. |
The performance criteria may include measures which are based on: (i) actual financial and operational results, such as net revenues, sales, profit, cash flow, product quality, stock price, total shareholder return (“TSR”) and other datestrategic business criteria; and/or (ii) evaluation of the executive officer’s individual performance based on quantitative and/or qualitative performance measures, such as forming and implementing the Company’s strategy, leadership, professional achievements and team collaboration, or other Committee and, if applicable, the Board, shall so designate at the time of taking such formal action and as set forth in the Award Agreement.
(bb) “Incumbent Board” has the meaning set forth inSection 2(i)(ii) hereof.
(cc) “Non-Control Transaction” has the meaning set forth inSection 2(i)(iii) hereof.
(dd) “Office Holder” has the meaning ascribed to such term in the Companies Law.
(ee) “Option” means a conditional right granted to a Participant underSection 8 hereof, to purchase one Share at a specified price during a specified period. No Option granted pursuant to the Plan shall be considered an “incentive stock option” (within the meaning ascribed to such term in Section 422 of the Code).
(ff) “Option Expiration Date” has the meaning set forth inSection 8(b) hereof.
(gg) “Ordinary Shares” means the Company’s ordinary shares, par value NIS 0.10 per share.
(hh) “Parent Company” has the meaning set forth inSection 2(i)(iii) hereof.
(ii) “Participant” means an Eligible Person who has been granted an Award under the Plan or, if applicable, such other person or entity who holds an Award.
(jj) “Participant Agreement” means an employment or other services agreement between a Participant and the Employer that describes the terms and conditionsevaluation of such Participant’s employment or service with the Employer and is effective as of the date of determination.
(kk) “Performance Award” means an Award granted to a Participant underSection 7 hereof, which Award is subject to the achievement of Performance Objectives during a Performance Period. A Performance Award shall be designated as a Performance Share or Performance Unit at the time of grant.
(ll) “Performance Objectives” means the performance objectives established by the Committee for Participants who have received Awards based onexecutive officer’s performance. A Performance Objective may consist of a single performance goal or may consist of a requirement to achieve a certain level of performance within a performance category.
(mm) “Performance Period” means the period designated for the achievement of Performance Objectives. A performance period may expire on a predefined date or upon the achievement of the Performance Objectives.
(nn) “Performance Share” means a Performance Award representing one Share which may be earned based upon the achievement of Performance Objectives during a Performance Period.
(oo) “Performance Unit” means a Performance Award representing the right to receive one Share (or the cash value of one Share, if so determined by the Committee) which may be earned based upon the achievement of Performance Objectives during a Performance Period.
(pp) “Plan” means this Teva Pharmaceutical Industries Limited 2020 Long-Term Equity-Based Incentive Plan. The Plan shall be deemed to include any Subplans, supplements to or amendments, restatements or alternative versions of the Plan or any Subplan approved by the Board which, in the aggregate, shall constitute one Plan governed by the terms set forth herein.
| ∎ | Target annual cash bonus: The target annual cash bonus, which is the annual cash bonus amount that an executive officer will be entitled to receive upon achievement of 100% of his or her performance measures, will be up to 100% of the executive officer’s annual base salary. The target annual cash bonus for the CEO will be up to 150% of the CEO’s annual base salary. |
| ∎ | Maximum annual cash bonus payout: The maximum annual cash bonus payout will not exceed 200% of such executive officer’s target annual cash bonus. |
| A-2 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix A
(qq) “Qualified Member” means a member of the Committee whoEquity-based Compensation: Equity-based compensation is a“Non-Employee Director” within the meaning of Rule16b-3 of the Exchange Act.
(rr) “Qualifying Committee” has the meaning set forth inSection 3(c) hereof.
(ss) “Qualifying Retirement” means the Termination of a Participant which meets guidelinesintended to incentivize and reward for Qualifying Retirement under the Plan approvedfuture long-term performance, as reflected by the Boardmarket price of Teva’s ordinary shares or American Depositary Shares and/or other performance criteria, and is used to foster a long-term link between executive officers’ interests and the Committee.interests of Teva and its shareholders. Equity-based compensation is also intended to attract, motivate and retain executive officers for the long term by (i) providing them with a meaningful interest in Teva’s share performance; (ii) linking equity-based compensation to potential and sustained performance; and (iii) spreading benefits over a longer performance cycle through the vesting period mechanism. Equity-based compensation may include annual and other equity awards.
(tt) “Reorganization” has
| ∎ | Time-based equity awards: Time-based equity awards may include a time-vesting period with no additional performance conditions. Time-based equity awards will have an overall vesting term of several years, structured in order to retain executive officers and maintain their commitment to increasing Company and shareholder value. These types of awards may include stock options, restricted stock, restricted stock units and/or other share-based awards. |
| ∎ | Performance-based equity awards: The amount and/or vesting of performance-based equity awards will be subject to achievement of performance criteria and target levels as shall be determined by the Committee and, if required under applicable law, the Board. Performance measurement criteria or targets will reflect, or will be steps toward the achievement of, key long-term goals that Teva seeks to achieve. Following the performance measurement period, additional vesting requirements may apply. The performance criteria will be based on measures, including, but not limited to, financial and/or operational measures, which may be determined as an absolute parameter (e.g., earnings per share, TSR, stock price and strategic goals) and/or a parameter that is relative to a peer group or index or other comparator group (e.g., ratio of Teva’s TSR to the peer group TSR). Performance-based equity awards may include performance stock units, shares and/or other share-based awards. The maximum number of shares settled for a performance-based equity award shall not exceed 250% of the target number of shares granted. |
| ∎ | Vesting of equity-based awards: The minimum full vesting period of all equity-based awards will be three years from the date of grant. Partial vesting can occur before this date. |
| ∎ | Maximum value of annual awards at grant date:The maximum monetary grant date fair value of the annual equity-based compensation granted to the CEO shall not exceed $11 million at target and to any other executive officer $4.5 million at target, provided, however, that the Committee and the Board shall have the authority to front-load up to two future annual awards and in such case the target pay mix shall be calculated to reflect such frontloading over the applicable years. |
The Company may allow settlement in cash of equity-based compensation granted in accordance with the meaning set forth inSection 2(i)(iii) hereof.
(uu) “Restricted Share” means a Share granted to a Participant underSection 5 hereof that is subject to certain restrictions and to a risk of forfeiture. For the avoidance of doubt, any performance-based Restricted Share shall not be deemed granted underSection 5 hereof and shall be deemed a Performance Share granted underSection 7 hereof.
(vv) “Restricted Share Unit” means a notional unit, granted to a Participant underSection 6 hereof, representing the right to receive one Share (or the cash value of one Share, if so determined by the Committee) on a specified settlement date. For the avoidance of doubt, any performance-based Restricted Share Unit shall not be deemed granted underSection 6 hereof and shall be deemed a Performance Unit granted underSection 7 hereof.
(ww) “SAR Expiration Date” has the meaning set forth inSection 9(b) hereof.
(xx) “Securities Act” means the United States Securities Act of 1933, as amendedCompany’s long-term equity-based incentive plan. In addition, from time to time, including rules and regulations thereunder and successor provisions and rules thereto.
(yy) “Share” means an Ordinary Share and/or an ADS, as the context may require, and such other securities as may be substituted for such Share pursuant toSection 11 hereof.
(zz) “Share Appreciation Right” means a conditional right, granted to a Participant underSection 9 hereof, to receive an amount of Shares (or the cash value of such Shares, if so determined by the Committee) equal to the increase in the Fair Market Value of one Share over a specified period.
(aaa) “Subplan” has the meaning set forth inSection 3(a) hereof.
(bbb) “Surviving Company” has the meaning set forth inSection 2(i)(iii) hereof.
(ccc) “Termination” means the termination of a Participant’s employment or service, as applicable, with the Employer;provided,however, that (i) the transfer of employment or service, as applicable, to another Employer, (ii) the change of a Participant’s status in relation to the Employer from an employee to a Consultant or vice versa and (iii) such other change of a Participant’s status in relation to the Employer if so determined by the Committee at the time of such change in status, will not be deemed to be a Termination hereunder. Unless otherwise determined by the Committee in the event that any Employer ceases to be an Affiliate of the Company (by reason of sale, divesture,spin-off or other similar transaction), unless a Participant’s employment or service with such Employer is transferred to another entity that would constitute an Employer immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction. Notwithstanding anything herein to the contrary, a Participant’s change in status in relation to the Employer (for example, a change from employee to consultant) shall not be deemed a Termination hereunder with respect to any Awards constituting nonqualified deferred compensation subject to Section 409A of the Code that are payable upon a Termination unless such change in status constitutes a “separation from service” within the meaning of Section 409A of the Code.
|
(a) Authority of the Board. The Board has the exclusive authority to approve one or more subplans that will be established, within the parameters and according to the overall terms and provisions of the Plan, to facilitate local administration of the Plan in any jurisdiction in which the Company or its Affiliates operate and to conform the Plan to the legal requirements of any such jurisdiction or to allow for favorable tax treatment under any applicable provision of tax law (each, a “Subplan”).
(b) Authority of the Committee. Except as otherwise provided herein or required under applicable law, the Plan shall be administered by the Committee. Subject to applicable law, the Committee shall have full and final authority, in its sole and absolute discretion, in each case subject to and consistent with the provisions of the Plan, to (i) allocate from within the aggregate number of Shares covered by the Plan, a portion thereof to be specifically utilized in connection with each of the Subplans, and determine the types of Awards available for grant under each Subplan; (ii) establish, as permitted by law, policies, guidelines or parameters applicable to Awards granted under the Subplans; (iii) select Eligible Persons to become Participants; (iv) grant Awards; (v) determine the type, number of Shares subject to, and other terms and conditions of, and all other matters relating to, Awards; (vi) prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan and each of the Subplans; (vii) construe and interpret the Plan, any Subplan and any Award Agreement and correct defects, supply omissions, or reconcile inconsistencies therein; (viii) suspend the right to exercise Awards during any period that the Committee deems appropriate to comply with applicable securities laws, and thereafter extend the exercise period of an Award by an equivalent period of time; and (ix) make any and all decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan and each Subplan. Any action of the Committee shall not be subject to review by any person and shall be final, conclusive, and binding on all persons, including, without limitation, the Company, its Affiliates, Eligible Persons, Participants, and beneficiaries of Participants.
(c) Manner of Exercise of Committee Authority. At any time that a member of the Committee is not a Qualified Member, subject to applicable law, any action relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Company may be taken by a subcommittee, designated by the Committee or the Board, composed solely of two or more Qualified Members (a “Qualifying Committee”), or by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself from such action;provided that, upon such abstention or recusal, the Committee remains composed of two or more Qualified Members. Any action authorized by such a Qualifying Committee or by the Committee upon the abstention or recusal of suchnon-Qualified Member(s) shall be deemed to be the action of the Committee for purposes of the Plan. The express grant of any specific power to the Committee and the taking of any action byBoard may consider determining a cap for the Committee, shall not be construed as limiting any power or authority of the Committee.
(d) Delegation. To the extent permitted by applicable law, the Committee may delegate to officers or employees of the Company or any of its Affiliates, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including, but not limited to, administrative functions, as the Committee may determine appropriate. The Committee may appoint agents to assist it in administering the Plan. Notwithstanding the foregoing or any other provision of the Plan to the contrary, any Award granted under the Plan to any person or entity who is not an employee of the Company or any of its Affiliates (including anynon-employee director of the Company or any Affiliate) or to any person who is subject to Section 16 of the Exchange Act shall be expressly approved by the Committee or Qualifying Committee in accordance withSection 3(b) hereof. To the extent necessary to comply with applicable law, the Board retains the authority to concurrently administer the Plan with the Committee, in which case the Board shall be deemed to be the Committee for purposes of the Plan and all references in the Plan to the Committee shall be deemed references to the Board.
|
(a) Number of Shares Available for Delivery. Subject to adjustment as provided inSection 11hereof, the maximum number of Shares reserved and available for delivery in connection with Awards under the Plan shall be 68,000,000 Shares. For the avoidance of doubt and without derogating from Section 4(b)(iii) hereof, all Shares that remain available for issuance as awards under the 2015 Plan will expire on the Effective Date and will no longer be available to grant awards thereunder. Shares delivered under the Plan shall consist of authorized and unissued Shares or previously issued Shares reacquired by the Company or its Affiliates on the open market or by private purchase. In no event shall fractional shares be issued under the Plan upon the exercise or settlement of any Award.
(b) Share Counting Rules. The Committee may adopt reasonable counting procedures to ensure appropriate counting and avoid double counting (as, for example, in the case of tandem or substitute Awards) and may make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.
(i) The maximum number of available Shares will be reduced by one Share for every Share subject to any Award.
(ii) To the extent that an Award expires or is canceled, forfeited, settled in cash, or otherwise terminated without a delivery to the Participant of the full number of Shares to which the Award related, the number of Shares that were reduced pursuant toSection 4(b)(i) hereof from the total number of available Shares on account of such undelivered Shares will again be available for grant. The number of Shares that were reduced pursuant toSection 4(b)(i) hereof from the total number of available Shares on account of Shares withheld in payment of the exercise price or base price or taxes relating to an Award shall constitute Shares delivered to the Participant and shall not be deemed to again be available for Awards under the Plan. Notwithstanding anything herein to the contrary, the following Shares shall not be added to the total number of available Shares pursuant toSection 4(a)hereof and shall not be available for grants of Awards: (i) Shares subject to a Share Appreciation Right that are not issued in connection with the stock settlement of the Share Appreciation Right upon exercise thereof; and (ii) Shares purchased on the open market by the Company or its Affiliates with the cash proceeds receivedbenefit deriving from the exercise of Options.equity-based compensation.
(iii) ToOther Cash or Equity-based Awards: In special circumstances, the extentCompany may determine that an executive officer is entitled to a cash and/or equity-based award in recognition of a significant achievement or for completion of an assignment. Such awards provide Teva the flexibility to adapt to unexpected or unaccounted for events or occurrences. The total value of such other awards granted in cash and/or in equity (at target based on grant date fair value) to an executive officer for any outstanding grant prior togiven calendar year will not exceed 50% of such executive officer’s annual base salary on the Effective Date under the 2015 Plan date granted. The payment of such cash amount and/or the 2010 Plan expiresvesting or is canceled, forfeited, settled in cash, or otherwise terminated without a delivery to the holder of the full number of Shares to which the grant related, the number of Shares that were reduced from the total number of available Shares under the 2015 Plan or 2010 Plan pursuant to Section 4 of the 2015 Plan or 2010 Plan, as applicable, on accountsettlement of such undelivered shares will increase the maximum number of Shares available forequity grant, under the Plan.
(iv) Notwithstanding anything herein to the contrary, equity-based awards assumed or substituted by the Company or its Affiliates as part of a corporate transaction (including, without limitation, from an entity merged into or with the Company or any of its Affiliates, acquired by the Company or any of its Affiliates, or otherwise involved in a similar corporate transaction) shall not count against the number of Shares reserved and available for issuance pursuant to the Plan.
(c) Shares Available Under Acquired Plans. Additionally, to the extent permitted by New York Stock Exchange Listed Company Manual Section 303A.08 or other applicable stock exchange rules, subject to applicable law, in the event that a company acquired by the Company or with which the Company combines has Shares available under apre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the Shares available for grant pursuant to the terms of suchpre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to such acquisition or combination)relevant, may be used for Awards under the Plan and shall not reduce the number of Shares authorized for grant under the Plan;provided that Awards using such available Shares shall not be made after the date awards could have been made under the terms of suchpre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by the Company or any subsidiary of the Company immediately prior to such acquisition or combination.
(d) Minimum Vesting Condition. No Award granted to any Participant shall vest prior to the first anniversary of the Grant Date (or, if earlier, the next annual meeting of shareholders that occurs fifty weeks or more after the Grant Date in connection with awards tonon-employee directors of the Company), unless the Committee determines to accelerate vesting upon the occurrence of a specific event, such as a termination of a Participant’s employment or service or Corporate Event or other corporate transaction, and this provision may not be waived or superseded by any Award Agreement or Participant Agreement;provided that (i) up to five percent (5%) of the maximum number of Shares available for issuance under the Plan may be granted without being subject to the foregoing restrictions and (ii) any dividends or dividend equivalents issued in connection with any Award granted at any time under the Plan shall not be subject to or counted for either such restrictions or such five percent (5%) share issuance limit. The foregoing five percent (5%) share issuance limit shall be subject to adjustment consistent with the adjustment provisionsfulfilment ofSection 11 hereof and the share counting rules ofSection 4(b) hereof.
|
(a) General. Restricted Shares may be granted to Eligible Persons in such form and having such additional terms and conditions asor based on a Committee and, if applicable, Board, evaluation, and the Committee shall deem appropriate. The terms and conditions of each Restricted Shares award shall be evidenced by an Award Agreement, which agreements need not be identical. Subject to the restrictions set forth inSection 5(b) hereof, except as otherwise set forth in a Subplan or an Award Agreement, the Participant shall generally have the rights and privileges of a shareholder as to such Restricted Shares, including the right to vote such Restricted Shares. Dividends, if any, with respect to the Restricted Shares shall be withheld by the Company for the Participant’s account, and shall be subject to vesting and forfeiture to the same degree as the Restricted Shares to which such dividends relate. Except as otherwise determined by the Committee, no interest will accrue orcash amount may be paid on the amount of any dividends withheld, and if the Committee determines to accrue interest on the amount of dividends withheld, no interest will be paid before the applicable vesting date.
(b) Restrictions on Transfer/Vesting. In addition to any other restrictions set forth in the Plan, a Subplan or in a Participant’s Award Agreement, until such time that the Restricted Shares have vested pursuant to the terms of the Award Agreement, the Participant shall not be permitted to sell, transfer, pledge, or otherwise encumber the Restricted Shares. Restricted Shares shall vest in such manner, on such date or dates, in each case,several installments, as may be determined by the Committee and set forththe Board.
Benefits and Perquisites: Benefit plans and perquisites have two main objectives: (i) compliance with legal requirements to provide certain benefits that are mandatory under applicable law (e.g., paid time off and
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | A-3 | |
Appendix A
pension plans) and (ii) attracting, motivating and retaining highly talented professionals from various locations and enabling relocation. Benefits and perquisites may vary depending on geographic location and other circumstances.
| ∎ | Types of benefits and perquisites: Benefits and perquisites may include, in addition to benefits that are mandated by applicable law and/or generally provided to other employees (including related costs and expenses): car, transportation, travel, relocation (including family-related expenses, such as tuition and commuting), life and medical insurance and benefits (including for one’s family), accommodations (including fees associated with accommodation), telecommunication devices, media and computer equipment and expenses, and legal fee reimbursement. |
One-time Grants: In circumstances deemed appropriate by the Company, executive officers may be awarded a one-time fixed cash or equity-based amount upon recruitment, promotion or due to special retention needs.
Termination Arrangements: Depending on the circumstances, Teva may provide certain post-service or post-employment benefits, compensation or protection to its executive officers, in addition to those mandated by applicable law, to help attract and retain highly talented professionals globally for leadership positions, and express recognition of such executive officers’ contributions to Teva during their tenure with the Company. Termination of service or employment arrangements will be determined considering the following factors, as relevant: circumstances of such termination (whether upon retirement, resignation, termination by the Company or otherwise), term of service or employment of the executive officer, his/her compensation package during such period, market practice in the Award Agreement. Exceptrelevant geographic location, Teva’s performance during such period and the executive officer’s contribution to Teva achieving its goals and maximizing its profits.
| ∎ | Post-service or post-employment benefits, compensation or protection: Executive officers’ post-service or post-employment benefits, compensation or protection may include none, one or more of the arrangements described below, which are intended to encompass potential termination arrangements in a wide range of circumstances, including local market practice. |
| ∎ | Advance notice:Advance notice of termination for a certain period of time, not to exceed nine months, during which an executive officer will be entitled to receive regular compensation and benefits and will be required to continue to perform his or her duties, unless otherwise determined by the Company. |
| ∎ | Severance payment: A severance payment of (i) up to two times the executive officer’s annual base salary or with respect to the CEO, three times the CEO’s annual base salary, upon termination, or (ii) any amount provided under an executive officer’s terms prior to the Company’s 2022 annual general meeting of shareholders. This payment or any part thereof may also be subject to and/or in consideration for the executive officer’s undertaking not to compete with Teva or other customary covenants. |
| ∎ | Change in control:Upon termination of service or employment by the Company or, in certain circumstances by the executive officer, during the one year period following a change in control event as defined in Teva’s 2020 Long-Term Equity-Based Incentive Plan or any subsequent shareholder approved plan, an additional cash award of up to $1.5 million or with respect to the CEO, one times the CEO’s annual base salary upon termination. Such “double-trigger” arrangements may be granted in addition to any other post-service or employment arrangement, including equity benefits. |
| ∎ | Medical benefits:Continuation of medical and life insurance benefits for an executive officer and family for a period of up to 18 months following termination of service or employment. |
| A-4 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix A
| ∎ | Acceleration, continued vesting and exercisability of equity-based compensation:The acceleration or continued vesting of equity-based compensation awards, as well as the post-termination exercise period for vested stock options, following termination of service or employment. |
Internal fairness:The Company will review relevant internal ratios between executive officer compensation and the compensation of other employees, specifically the average and median values of other employee compensation, and its potential effect on the Company’s labor relations in connection with the review and approval of compensation to executive officers.
Other variable compensation parameters: The Committee and the Board have the right to reduce any executive officer’s variable compensation due to special circumstances as otherwise specifically determined by the Committee or provided inand the Plan, the vesting ofBoard. In addition, unless a Restricted Share shall occur only while the Participantlarger proportion is employed or rendering servicespermissible under applicable law and subject to the Employer or during any perioddiscretion of paid leave, and all vesting shall cease upon a Participant’s Termination for any reason. To the extent permitted by applicable law, vesting may be suspended at the Committee any time duringand the periodBoard, no more than 20% of any unpaid leave and shall resume upon the Participant’s return to employment.
(c) Termination of Employment or Service. Except as otherwise provided in a Subplan or an Award Agreement or determined by the Committee (including in the case of a Qualifying Retirement in accordance withSection 21(j) hereof):
(i) Regular Termination; Forfeiture. In the event of a Participant’s Termination prior to a vesting date for any reason other than (A) the Participant’s death or Disability or (B) by the Employer for Cause, (1) all vesting with respect to such Participant’s Restricted Shares shall cease and (2) all of such Participant’s unvested Restricted Shares shall immediately be forfeited for no consideration as of the date of such Termination.
(ii) Death or Disability; Acceleration. In the event of a Participant’s Termination prior to a vesting date by reason of such Participant’s death or Disability, all of such Participant’s Restricted Shares shall immediately become vested as of the date of such Termination.
(iii) Cause; Immediate Forfeiture. In the event of a Participant’s Termination for Cause prior to a vesting date, all of such Participant’s unvested Restricted Shares shall immediately be forfeited for no consideration as of the date of such Termination.
|
(a) General. Restricted Share Units may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate. The terms and conditions of each Restricted Share Units awardexecutive officer’s total variable compensation at target shall be evidenced by an Award Agreement, which agreements need not be identical. No dividend equivalents shall be paid on Restricted Share Units. If so determined in a Subplan discretionary and/or an Award Agreement, dividend equivalents may accrue on Restricted Share Units, and such accrued dividend equivalents, if any, shall be withheld by the Company for the Participant’s account, and shall be subject to vesting and forfeiturediscretionary criteria.
Non-material changes to the same degree as the Restricted Share Units to which such dividend equivalents relate. Except asexecutive officers’ terms:Unless otherwise determined by the Committee no interest will accrue or be paid onand the amount of any dividend equivalents withheld, and ifBoard, the Committee determines to accrue interest on the amount of dividends withheld, no interestCEO will be paid before the applicable vesting date.
(b) Vesting. Restricted Share Units shall vest in such manner, on such date or dates, in each case, as may be determined by the Committee and set forth in the Award Agreement. Except as otherwise specifically determined by the Committee or provided in the Plan, the vesting of a Restricted Share Unit shall occur only while the Participant is employed or rendering servicesauthorized to the Employer or during any period of paid leave, and all vesting shall cease upon a Participant’s Terminationapprove changes to terms for any reason. Toother executive officer, provided that the extent permitted by applicable law, vesting may be suspended by the Committee any time during the period of any unpaid leave and shall resume upon the Participant’s return to employment.
(c) Settlement of Restricted Share Units. As soon as practicable following the vesting date, or at such other time specified in an Award Agreement, unless earlier forfeited, subject to the terms of any Subplan, the Company shall settle each Restricted Share Unit by delivering one Share (or the cash value of one Share, if so determined by the Committee).
(d) Termination of Employment or Service. Except as otherwise provided in a Subplan or an Award Agreement or determined by the Committee (including in the case of a Qualifying Retirement in accordance with Section 21(j) hereof):
(i) Regular Termination; Forfeiture. In the event of a Participant’s Termination prior to a vesting date for any reason other than (A) the Participant’s death or Disability or (B) by the Employer for Cause, (1) all vestingsuch changes with respect to such Participant’s Restricted Share Units shall cease, (2) allany calendar year does not exceed the value of such Participant’s unvested Restricted Share Units shall immediately be forfeited for no consideration as of the date of such Termination and (3)executive officer’s one month base salary.
Clawback: Teva’s executive officers are required to the extent not already settled, all of such Participant’s vested Restricted Share Units shall be settled in accordance with the settlement schedule set forth in the applicable Award Agreement.
(ii) Death or Disability; Acceleration. In the event of a Participant’s Termination priorreturn any compensation paid to a vesting date by reason of such Participant’s death or Disability, all of such Participant’s Restricted Share Units shall immediately become vested as of the date of such Termination and shall be settled promptly following the date of such Termination.
(iii) Cause; Immediate Forfeiture. In the event of a Participant’s Termination for Cause prior to settlement, all of such Participant’s Restricted Share Units shall immediately be forfeited for no consideration as of the date of such Termination.
|
(a) General. Performance Awards may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate. The terms and conditions of each Performance Award, including the determination of the Committee with respect to the form of payout of the Performance Award, shall be evidenced by an Award Agreements, which agreements need not be identical. No dividends or dividend equivalents shall be paid on Performance Awards. If so determined in a Subplan or an Award Agreement, dividends or dividend equivalents may accrue on Performance Awards, and such accrued dividends or dividend equivalents, if any, shall be withheld by the Company for the Participant’s account and shall become payable if and to the extent the underlying Performance Awards are earned and vested. Except as otherwise determined by the Committee, no interest will accrue or be paidthem on the amountbasis of any dividends or dividend equivalents withheld,results included in financial statements that turned out to be erroneous and ifwere subsequently restated, during the Committee determines to accrue interest on the amount of dividends withheld, no interestthree year period following filing thereof. In such case, compensation amounts will be paid beforereturned net of taxes that were withheld thereon, unless the applicable vesting date.executive officer has reclaimed or is able to reclaim such tax payments from the relevant tax authorities (in which case the executive officer will also be obligated to return such tax amounts).
(b) Value of Performance Awards. Each Performance Award shall have an initial value equal to the Fair Market Value per Share on the Grant Date unless a different initial value is established by the Committee at the time of grant. In addition, to any othernon-performance terms included in the Award Agreement, the Committee shall set the applicable Performance Objectives and Performance Period, which objectives, depending on the extent to which they are met, will determine the value and/or number of Performance Units or Performance Shares, as the case may be, that will be paid or settled in respect of a Performance Award.
(c) Earning of Performance Units and Performance Shares. Except as otherwise provided in a Subplan or an Award Agreement, upon the expiration of the applicable Performance Period or othernon-performance-based vesting period, if longer, the holder of Performance Units or Performance Shares, as the case may be, shall be entitled to receive payout on the value and/or number of the applicable Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Objectives have been achieved and any othernon-performance-based terms met, all as determined by the Committee. The Committee may specify a minimum acceptable level of achievement below which no Performance Units or Performance Shares shall be earned and may set forth a formula for determining the amount of Performance Units or Performance Shares earned if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Objectives. Except as otherwise specifically determined by the Committee or provided in the Plan, a Participant shall be eligible to earn a Performance Award only while the Participant is employed or rendering services to the Employer or during any period of paid leave. To the extent permitted by applicable law, in the event that it is discovered that an executive officer engaged in conduct that resulted in a Participant takes unpaid leave priormaterial inaccuracy in Teva’s financial statements or caused severe financial or reputational damage to a Performance Award becoming earned and vested, (i) vesting may be suspendedTeva, or in the event that it is discovered that an executive officer breached confidentiality and/or non-compete obligations to Teva (as determined by the Committee atCompany), the Company shall have broad remedial and disciplinary authority. Such disciplinary action or remedy would vary depending on the facts and circumstances, and may include, without limitation, (i) termination of employment, (ii) initiating an action for breach of fiduciary duty, and (iii) seeking reimbursement of performance-based or incentive compensation paid or awarded to the executive officer, including by means of an offset to, or cancellation of, outstanding grants or opportunities.
The Company will determine applicable terms to enforce repayment of clawback amounts and may modify this clawback policy in accordance with applicable law and regulations.
Non-Employee Director Compensation
Objectives: Teva aims to attract and retain highly talented directors with outstanding educational background, qualifications, skills, expertise, professional experience and achievements, by providing a fair and competitive compensation program. This policy governs compensation to non-employee directors; any time duringmanagement or other employee directors will not receive separate compensation for their service as a director of the period of such unpaid leave and shall resume upon such Participant’s return to employment or (ii) the Performance Award may be forfeited for no consideration byCompany.
When considering director compensation, the Committee at any time duringand the periodBoard will review those matters mandated by Israeli law, and may review benchmarking data with respect to compensation of such unpaid leave.a peer group defined by Teva. The Committee and the Board may also consider directors’ previous and existing compensation arrangements, as well as changes in the scope of their duties or responsibilities.
(d) Form and Timing of Settlement of Performance Units and Performance Shares. SubjectDirector compensation shall be subject to shareholder approval to the terms of the Plan and any Subplan, the Committee may pay earned Performance Units and Performance Shares in the form of cash, Shares, or other Awards (or in a combination thereof) equal to the value of the earned Performance Units or Performance Shares, as the case may be, at the close of theextent required under applicable Performance Period, or as soon as practicable after the end of the Performance Period, or at such other time specified in an Award Agreement. Any cash, Shares, or other Awards issued in connection with a Performance Award may be issued subject to any restrictions deemed appropriate by the Committee.law.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | A-5 | |
Appendix A
(e) Termination of Employment or Service. Except as otherwise provided in a Subplan or an Award Agreement or determined by the Committee (including in the case of a Qualifying Retirement in accordance with Section 21(j) hereof)Elements:
(i) Regular Termination; Forfeiture. In the event of a Participant’s Termination for any reason other than (A) the Participant’s death or Disability or (B) by the Employer for Cause, in each case, prior to a Performance Award becoming earned and vested, such Performance Award shall immediately be forfeited for no consideration as of the date of such Termination.
(ii) Death or Disability; Acceleration. In the event of a Participant’s Termination by reason of such Participant’s death or Disability prior to a Performance Award becoming earned and vested, such Performance Award shall immediately become vested based on target level of performance as of the date of such Termination and be paid or settled promptly following the date of such Termination.
(iii) Cause; Immediate Forfeiture. In the event of a Participant’s Termination for Cause prior to payment or settlement of a Performance Award, such Performance Award shall immediately be forfeited for no consideration as of the date of such Termination.
(f) Performance Objectives. Each Performance Award shall specify the Performance Objectives that must be achieved before such Award shall become earned.
(g) Adjustments. At any time following the grant of the Performance Award and prior to the payout of the Performance Award, the Committee may (A) designate additional business criteria on which the Performance Objectives Director compensation may be based or (B) provide for adjustments, modifications or amendments to anycomprised of the Performance Objectives, including, without limitation, adjustments, modifications or amendments for one or more of the following items of gain, loss, profit or expense: (1) determined to be extraordinary, unusual ornon-recurring in nature; (2) related to changes in accounting principles under GAAP or tax laws; (3) related to currency fluctuations; (4) related to financing activities (e.g., effect on earnings per share of issuing convertible debt securities); (5) related to restructuring, divestitures, productivity initiatives or new business initiatives; (6) related to discontinued operations that do not qualify as a segment of business under GAAP; (7) attributable to the business operations of any entity acquired by the Company during the fiscal year;(8) non-operating items; and (9) acquisition expenses.
(h) Negative Discretion. Notwithstanding satisfaction of any completion of any Performance Objectives, the number of Shares, cash or other benefits granted, issued, retainable and/or vested under a Performance Award on account of satisfaction of such Performance Objectives may be reduced by the Committee on the basis of such further considerations as the Committee will determine.elements:
| ∎ |
|
(a) General. Options
| ∎ | Committee membership fees. Directors will generally be entitled to receive an annual cash payment by virtue of their membership on one or more committees of the Board, which payments may vary by committee; |
| ∎ | Board/committee chairperson fees. The chair of the Board and/or the various committees of the Board may also receive additional annual cash payments for their extra service in such capacities; |
| ∎ | Annual equity-based compensation. Directors may also receive equity-based awards, which are intended to align directors’ interests with those of the Company and its shareholders over the long term. Such awards will generally be granted on an annual basis with a fixed grant date fair value and a time-based vesting or holding period of no less than one year from the date of grant which may be accelerated upon termination of service, all as approved by the Company’s shareholders from time to time; and |
| ∎ | Special contribution award/Additional fee. Any director who takes on increased duties on behalf of the Company as determined by the Board may receive additional cash payments and/or equity-based awards, in recognition of their increased duties. |
The above compensation is designed to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate. The terms and conditions of each Options award shall be evidenced by an Award Agreement, which agreements need not be identical. No dividends or dividend equivalents shall accrue or be paid on Options.
(b) Term. The term of each Option shall expire on the date set by the Committee in an Award Agreement at the time of grant (the “Option Expiration Date”), subject to earlier expiration upon the conditions set forth in the Plan or the applicable Award Agreement;provided,however, that no Option granted hereunder shall be exercisable after the tenth (10th) anniversary of the Grant Date (or, if such anniversary is not a business day in the United States, the next succeeding United States business day).
(c) Exercise Price. The exercise price per Sharecompensate directors for each Option shall be set by the Committee and shall not be less than the Fair Market Value of the underlying Shares on the Grant Date.
(d) Payment for Shares. Payment of the exercise price for Shares acquired pursuant to Options granted hereunder shall be made in full, upon exercise of the Options (i) in immediately available funds, or by certified or bank cashier’s check payabletheir services to the Company, (ii) solelywithout payment of additional per-meeting fees. Applicable value-added tax will be added to such compensation in accordance with applicable law.
Teva will reimburse or cover its directors for expenses (including travel and related expenses) incurred in connection with Board and committee meetings or performing their services for Teva in their capacity as directors, in accordance with Company policy.
Insurance, Indemnification and Release
Teva will release its directors and executive officers from liability and provide them with indemnification to the fullest extent permitted by applicable law and authorizedits Articles of Association, and will provide them with indemnification and release agreements for this purpose. In addition, Teva’s directors and executive officers will be covered by the Committee, by delivery of Shares to the Company (either by actual delivery or attestation) having a value equal to the exercise price, (iii) solely to the extent permitted by applicable lawdirectors’ and authorized by the Committee, by a broker-assisted cashless exercise in accordance with procedures approved by the Committee under Regulation T as promulgated by the Federal Reserve Board, whereby payment of the Option exercise price (and, if applicable, tax withholding obligations) may be satisfied, in whole or in part, with Shares subject to the Option by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Committee) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate exercise price (and, if applicable, the amount necessary to satisfy the Company’s withholding obligations prior to the issuance of the Shares subject to the Option), (iv) solely to the extent permitted by applicable law and authorized by the Committee, by delivery of a notice of “net exercise” to the Company, pursuant to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate exercise price),provided,however, that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole Shares to be issued, or (v) by any other means approved by the Committee and specified in the Award Agreement. Anything herein to the contrary notwithstanding, if the Committee determines that any form of payment available hereunder would be in violation of Section 402 of the Sarbanes-Oxley Act of 2002, such form of payment shall not be available.officers’ liability insurance policies.
(e) Vesting. Options shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of any Performance Objectives, in each case, as may be determined by the Committee and set forth in the Award Agreement. Except as otherwise specifically determined by the Committee or provided in the Plan, the vesting of an Option shall occur only while the Participant is employed or rendering services to the Employer or during any period of paid leave, and all vesting shall cease upon a Participant’s Termination for any reason. To the extent permitted by applicable law, vesting may be suspended by the Committee at any time during the period of any unpaid leave and shall resume upon the Participant’s return to employment.
(f) Termination of Employment or Service. Except as otherwise provided in a Subplan or an Award Agreement or determined by the Committee (including in the case of a Qualifying Retirement in accordance withSection 21(j) hereof):
(i) Regular Termination; Forfeiture. In the event of a Participant’s Termination prior to the applicable Option Expiration Date for any reason other than (A) the Participant’s death or Disability or (B) by the Employer for Cause, (1) all vesting with respect to such Participant’s Options shall cease, (2) all of such Participant’s unvested Options shall immediately expire and be forfeited for no consideration as of the date of such Termination, and (3) all of such Participant’s vested Options shall remain exercisable until the earlier of the applicable Option Expiration Date and the date that is ninety days after the date of such Termination. Notwithstanding the foregoing, if the date that is ninety days after the date of such Termination occurs when trading in the Shares is prohibited by law or the Company’s insider trading policy, then the exercise period of such Option shall expire on the earlier of (x) the thirtieth (30th) day after the expiration of such prohibition and (y) the applicable Option Expiration Date.
(ii) Death or Disability; Acceleration. In the event of a Participant’s Termination prior to the applicable Option Expiration Date by reason of such Participant’s death or Disability, all of such Participant’s Options shall immediately become vested (with any performance-based Options vesting based on target level of performance) as of the date of such Termination and shall remain exercisable until the applicable Option Expiration Date. In the event of a Participant’s death, such Participant’s
Options shall be exercisable by the person or persons to whom a Participant’s rights under the Options pass by the applicable laws of descent and distribution, in each case as determined by a probate court of competent jurisdiction, until the applicable Option Expiration Date.
(g) Cause; Immediate Forfeiture. In the event of a Participant’s Termination prior to the applicable Option Expiration Date by the Employer for Cause, all of such Participant’s Options (whether or not vested) shall immediately expire and be forfeited for no consideration as of the date of such Termination.
|
(a) General. Share Appreciation Rights may be granted to Eligible Persons in such form and having such terms and conditions as the Committee shall deem appropriate. The terms and conditions of each Share Appreciation Rights award shall be evidenced by an Award Agreement, which agreements need not be identical. No dividends or dividend equivalents shall accrue or be paid on Share Appreciation Rights.
(b) Term. The term of each Share Appreciation Right shall expire on the date set by the Committee in an Award Agreement at the time of grant (the “SAR Expiration Date”), subject to earlier expiration upon the conditions set forth in the Plan, Subplan or the applicable Award Agreement;provided,however, that no Share Appreciation Right granted hereunder shall be exercisable after the tenth (10th) anniversary of the Grant Date (or, if such anniversary is not a business day in the United States, the next succeeding United States business day).
(c) Base Price. The base price per Share for each Share Appreciation Right shall be set by the Committee at the time of grant and shall not be less than the Fair Market Value of the underlying Shares on the Grant Date.
(d) Vesting. Share Appreciation Rights shall vest and become exercisable in such manner, on such date or dates, or upon the achievement of any Performance Objectives, in each case as may be determined by the Committee and set forth in the Award Agreement. Except as otherwise specifically determined by the Committee or provided in the Plan, the vesting of a Share Appreciation Right shall occur only while the Participant is employed or rendering services to the Employer or during any period of paid leave, and all vesting shall cease upon a Participant’s Termination for any reason. To the extent permitted by applicable law, vesting may be suspended by the Committee at any time during the period of any unpaid leave and shall resume upon the Participant’s return to employment.
(e) Payment upon Exercise. Subject to the terms of any Subplan, payment upon exercise of a Share Appreciation Right may be made in cash, Shares, or property as specified in the Award Agreement or determined by the Committee, in each case having a value in respect of each Share underlying the portion of the Share Appreciation Right so exercised, equal to the difference between the base price of such Share Appreciation Right and the Fair Market Value of one Share on the exercise date. For purposes of clarity, each Share to be issued in settlement of a Share Appreciation Right is deemed to have a value equal to the Fair Market Value of one Share on the exercise date.
(f) Termination of Employment or Service. Except as otherwise provided in a Subplan or an Award Agreement or determined by the Committee (including in the case of a Qualifying Retirement in accordance withSection 21(j) hereof):
(i) Regular Termination; Forfeiture. In the event of a Participant’s Termination for any reason prior to the applicable SAR Expiration Date other than (A) the Participant’s death or Disability or (B) by the Employer for Cause, (1) all vesting with respect to such Participant’s Share Appreciation Rights shall cease, (2) all of such Participant’s unvested Share Appreciation Rights shall immediately expire and be forfeited for no consideration as of the date of such Termination, and (3) all of such Participant’s vested Share Appreciation Rights shall remain exercisable until the earlier of the applicable SAR Expiration Date and the date that is ninety days after the date of such Termination. Notwithstanding the
foregoing, if the date that is ninety days after the date of such Termination occurs when trading in the Shares is prohibited by law or the Company’s insider trading policy, then the exercise period of such Share Appreciation Right shall expire on the earlier of (x) the thirtieth (30th) day after the expiration of such prohibition and (y) the applicable SAR Expiration Date.
(ii) Death or Disability; Acceleration. In the event of a Participant’s Termination prior to the applicable SAR Expiration Date by reason of such Participant’s death or Disability, all of such Participant’s Share Appreciation Rights shall immediately become vested (with any performance-based Share Appreciation Rights vesting based on target level of performance) as of the date of such Termination and shall remain exercisable until the applicable SAR Expiration Date. In the event of a Participant’s death, such Participant’s Share Appreciation Rights shall be exercisable by the person or persons to whom a Participant’s rights under the Share Appreciation Rights pass by the applicable laws of descent and distribution, in each case as determined by a probate court of competent jurisdiction, until the applicable SAR Expiration Date.
(iii) Cause; Immediate Forfeiture. In the event of a Participant’s Termination prior to the applicable SAR Expiration Date by the Employer for Cause, all of such Participant’s Share Appreciation Rights (whether or not vested) shall immediately expire and be forfeited for no consideration as of the date of such Termination.
|
The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan. The Committee may also grant Shares as a bonus, or may grant other Awards in lieu of obligations of the Company or an Affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to the terms of any Subplan and such terms as shall be determined by the Committee. The terms and conditions applicable to each such Award shall be determined by the Committee and evidenced by an Award Agreement. No dividends or dividend equivalents shall be paid on such Awards. If so determined in a Subplan or an Award Agreement, dividends or dividend equivalents may accrue on such Awards, and such accrued dividends or dividend equivalents, if any, shall be withheld by the Company for the Participant’s account and shall become payable if and to the extent the underlying Awards are earned and vested. Except asUntil otherwise determined, by the Committee, no interest will accrue or be paid on the amount of any dividends or dividend equivalents withheld,release from liability and if the Committee determines to accrue interest on the amount of dividends withheld, no interest will be paid before the applicable vesting date.
|
(a) Capitalization Adjustments. The aggregate number of Shares that may be granted or purchased pursuant to Awards (as set forth inSection 4 hereof), the number of Shares covered by each outstanding Award, and the price per Share thereof in each such Award shall be equitably and proportionally adjusted or substituted, as determined by the Committee as to the number, price, or kind of a Share or other consideration subject to such Awards (i) in the event of changes in the outstanding Shares or in the capital structure of the Company by reason of share dividends, share splits, reverse share splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the approval by the Committee of any such Award (including any Corporate Event); (ii) in connection with any extraordinary dividend declared and paid in respect of Shares, whether payable in the form of cash, Shares, or any other form of consideration; or (iii) in the event of any change in applicable laws or any other change in circumstances that results in or could result in any substantial dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(b) Change in Control. Notwithstanding the foregoing, except as otherwise provided in a Subplan, an Award Agreement, in guidelines under the Plan, orindemnification as approved by the Committee, in connection with a Change in Control, (i) all outstanding Awards will be assumed or substituted in connection with such Change in Control, with any outstanding Performance Objectives deemed achievedshareholders of the Company at the greater of targetCompany’s 2012 annual general meeting shall apply to all current and actual performance (as such Performance Objectives are determined by the Committee immediately prior to such Change in Control), (ii) Awardsfuture directors and executive officers. Such directors and executive officers shall be subject to the adjustment set forth inSection 11(a)hereof,provided with indemnification and (iii) the vesting, payment, purchase or distribution of an Award may not be accelerated by reason of a Change in Control for any Participant except in the case of a Double Trigger Termination.
(c) Corporate Events. The Committee may provide, in connection with a Corporate Event that is not a Change in Control for any one or more of the following, including, without limitation, that (i) all outstanding Awards will be assumed or substituted in connection with such Corporate Event and that (ii) such Awards assumed or substituted in connection with such Corporate Event shall be subject to the adjustment set forth inSection 11(a) hereof.
(d) Awards Not Assumed. With respect to any Award that is not assumed or substituted in connection with a Corporate Event, the Committee may provide for any one or more of the following:
(i) that the vesting of any Awards shall be accelerated, subject to the consummation of such Corporate Event;
(ii) that any or all vested and/or unvested Awards be cancelled as of the consummation of such Corporate Event, and that Participants holding Awards so cancelled will receive a payment in respect of cancellation of their Awards based on the amount of theper-Share consideration being paid for the Shares in connection with such Corporate Event, less, in the case of Options, Share Appreciation Rights, and other Awards subject to exercise, the applicable exercise price or base price;provided,however, that holders of Options, Share Appreciation Rights, and other Awards subject to exercise shall only be entitled to consideration in respect of cancellation of such Awards if theper-Share consideration less the applicable exercise price or base price is greater than zero (and to the extent theper-Share consideration is less than or equal to the applicable exercise price or base price, such Awards shall be cancelled for no consideration); and
(iii) to the extent permissible under applicable law, that Awards be replaced with a cash incentive program that preserves the value of the Awards so replaced (determined as of the consummation of the Corporate Event), with subsequent payment of cash incentives subject to the same vesting conditions as applicable to the Awards so replaced, and payment to be made within thirty days of the applicable vesting date.
(e) Payment Procedures. Payments to holders pursuant toSection 11(d)(ii) hereof shall be made in cash orrelease agreements substantially in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive uponapproved at the occurrence of the transaction if the Participant had been, immediately prior to such transaction, the holder of the number of Shares covered by the Award at such time (less any applicable exercise price or base price). In addition, in connection with any Corporate Event, prior to any payment or adjustment contemplated underSection 11(b) orSection 11(d) hereof, the Committee may require a Participant to (i) represent and warrant as to the unencumbered title to his Awards, (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Shares, and (iii) deliver customary transfer documentation as reasonably determined by the Committee. 2012 annual general meeting.
The Committee need not takeand the same action or actions with respect to all Awards or portions thereof or with respect to all Participants. The Committee may take different actions with respect to the vestedBoard shall review Teva’s indemnification and unvested portions of an Award.
(f) Assumption Requirements. For the purposes of this Plan, an Award shall be considered assumed or substituted for if following the applicable Corporate Event the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the applicable Corporate Event, on substantially the same vesting and other terms and conditions as were applicable to the Award immediately prior to the applicable Corporate Event, the consideration (whether stock, cash or other securities or property) received in the applicable Corporate Event by holders of Shares for each Share held on the effective date of such Corporate Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares);provided,however, that if such consideration received in the applicable Corporate Event is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of an Award, for each Share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in fair market value to theper-Share consideration received by holders of Shares in the applicable Corporate Event. The determination of such substantial equality of value of consideration shall be made by the Committeerelease agreements and its determination shall be conclusivedirectors’ and binding.
(g) Fractional Shares. Any adjustment provided under thisSection 11 may provide for the elimination of any fractional share that might otherwise become subject to an Award. No cash payments shall be made with respect to fractional shares so eliminated.
|
The proceeds received from the sale of Shares pursuant to the Plan shall be used for general corporate purposes.
|
Except as otherwise specifically provided in the Plan, no person shall be entitled to the rights and privileges of share ownership in respect of Shares that are subject to Awards hereunder until such Shares have been issued to that person.
|
(a) No individual shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award.
(b) Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or an Affiliate of the Company.
(c) Except as otherwise specifically stated in any other employee benefit plan, policy or program, neither any Award under the Plan nor any amount realized from any such Award shall be treated as compensation for the purpose of calculating an employee’s benefit under any benefit plan, policy or program.
|
The obligation of the Company to deliver Shares or other equivalents under the Plan upon vesting and/or exercise of any Award shall be subject to all applicable laws, rules and regulations, and to such approvals by governmental agencies (including, without limitation, tax authorities) as may be required. The Company shall be under no obligation to register for sale or resale under any applicable laws, rules and regulations any of the Shares to be offered or sold under the Plan or any Shares issued upon exercise or settlement of Awards. If the Shares offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such Shares and may legend the Share certificates representing such Shares in such manner as it deems advisable to ensure the availability of any such exemption.
|
As a condition to any transaction in an Award or in any rights associated therewith, including but not limited to the grant, vesting, exercise, sale and/or transfer of any Award and/or of Shares resulting from the vesting or the settlement of any Award and/or of any dividends or dividend equivalents accrued or paid on any Award and/or on any such Shares, the Committee may require that a Participant satisfy, through deduction or withholding from any payment of any kind otherwise due to the Participant, or through such other arrangements as are satisfactory to the Committee, the amount of all federal, state, and local income and other taxes or other mandatory payments of any kind required or permitted to be withheld in connection with such transaction, as well as amounts payable to any third party for escrow services and escrow fees, bank fees, exercise fees, account fees and other related fees and expenses. The Committee may permit Shares to be used to satisfy such withholding requirements and fee payments, and such Shares shall be valued at their Fair Market Value as of the date they are so used; provided, however, that depending on the withholding method, the Company may withhold by considering the applicable minimum statutorily required withholding rates or other applicable withholding rates in the applicable Participant’s jurisdiction, including maximum applicable rates that may be utilized without creating adverse accounting treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto).
|
Each Award granted under the Plan will not be transferable or assignable by the recipient, and may not be made subject to execution, attachment or similar procedures, other than by will or the laws of descent and distribution, in each case as determined by a probate court of competent jurisdiction, or as determined by the Committee pursuant to the terms of any Award Agreement in accordance with any other applicable law, rule or regulation.
|
(a) Amendment of Plan. The Board at any time, andofficers’ liability insurance policies from time to time, may amend the Plan;provided,however, that the Board shall not, without shareholder approval, make any amendment to the Plan that requires shareholder approval pursuant to applicable law or the applicable rules of the national securities exchange on which the Shares are principally listed.
(b) Amendment of Awards. The Committee, at any time, and from time to time, may amend the terms of any one or more Awards, prospectively or retroactively;provided,however, that the rights under any Award shall not be impaired by any such amendment unless the Participant consents in writing (it being understood that no action taken by the Board or by the Committee that is expressly permitted under the Plan, including, without limitation, any actions described inSection 11 hereof, shall constitute an amendment of an Award for such purpose). Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without an affected Participant’s consent, the Committee may amend the terms of any one or more Awards if necessary to bring the Award into compliance with any applicable tax legislation, rule, regulation or guidance (even if issued or amended after the Effective Date), including, without limitation, Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder.
(c) No Repricing of Awards without Shareholder Approval. NotwithstandingSection 18(a) or18(b) hereof, or any other provision of the Plan, repricing of Awards shall not be permitted without shareholder approval. For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms of an Award to lower its exercise price or base price (other than on account of capital adjustments resulting from share splits, etc., as described inSection 11(a) hereof); (ii) any other action that is treated as “repricing” under GAAP or for purposes of the shareholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the
Company are listed or quoted; and (iii) repurchasing for cash or canceling an Award in exchange for another Award at a time when its exercise price or base price is greater than the Fair Market Value of the underlying Shares, unless the cancellation and exchange occurs in connection with an event set forth inSection 11(b) hereof.
|
The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the Effective Date. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
|
The Plan is effective as of the Effective Date.
|
(a) Blue Pencil. If any provision of the Plan or Subplan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or Subplan, it shall be stricken and the remainder of the Plan or Subplan shall remain in full force and effect.
(b) Limitation on Awards to Office Holders. Notwithstanding anything herein to the contrary, any Award granted under the Plan to an Office Holder shall be subject to the Compensation Policy, unless otherwise determined by the Committee and approved in accordance with the Companies Law.
(c) Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to or other transaction by a Participant who is subject to Section 16(b) of the Exchange Act shall be exempt from Section 16 of the Exchange Act pursuant to an applicable exemption (except for transactions acknowledged in writing to benon-exempt by such Participant). In addition, the Company intends any transaction by which a Participant sells Shares issued in respect of the vesting or exercise of any Award granted hereunder for the purpose of settling any withholding tax liability of such Participant (commonly referred to as a “net settlement,” “net exercise,” “sell to cover” or “broker-assisted cashless exercise” transaction) that would otherwise be subject to Section 16(b) of the Exchange Act shall be exempt from Section 16 of the Exchange Act pursuant to an applicable exemption. Accordingly, if any provision of this Plan, Subplan or any Award Agreement does not comply with the requirements of Rule16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.
(d) Certificates. Shares acquired pursuant to Awards granted under the Plan may be evidenced in such a manner as the Committee shall determine. If certificates representing Shares are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Shares, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Shares. Notwithstanding the foregoing, the Committee may determine that the Shares shall be held in book entry form rather than delivered to the Participant pending the release of any applicable restrictions.
(e) Delay in Delivery.
(i) The Company is relieved from any liability for the nonissuance or nontransfer, or for any delay in the issuance or transfer of any Shares subject to Awards, resulting from the inability of the Company to obtain, or from any delay in obtaining, from any regulatory body having jurisdiction or authority, any requisite approval to issue or transfer any such Shares, if counsel for the Company deems such approval necessary for the lawful issuance or transfer thereof.
(ii) Without limiting the generality of the foregoing, the Company shall not have any obligation or liability as a result of any delay in issuing any certificate evidencing Shares or in the delivery thereof to Participants, or any act or omission of any Company-designated brokerage firm in relation to Shares.
(f) Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Committee, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Committee consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price or base price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement as a result of a clerical error in the papering of the Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement.
(g) Escrow Agreement. The Committee may require a Participant who receives an Award to enter into an escrow or trustee agreement providing that such Award, or Shares distributed in connection with the vesting, settlement or exercise thereof, will remain in the physical custody of an escrow holder or trustee, as necessary to satisfy applicable local law or otherwise determined to be in the best interests of the Company by the Committee.
(h) Clawback/Recoupment Policy. Notwithstanding anything herein to the contrary, all Awards granted under the Plan shall be and remain subject to any incentive compensation clawback or recoupment policy currently in effect or as may be adopted by the Committee or the Board, and in each case, as may be amended from time to time, including, but not limited to, any clawback provision in the Compensation Policy. Any such policy adoption or amendment shall in no event require the prior consent of any Participant. In the event that an Award is subject to more than one such policy, the policy with the most restrictive clawback or recoupment provisions shall govern such Award, subject to applicable law.
(i) Provision for Foreign Participants. Awards may be granted to Participants who are foreign nationals or employed outside Israel, or both, on such terms and conditions different from those applicable to Awards to Participants employed in Israel as may be necessary or desirable in order to recognize differences in local law or tax policy. The Committee may also impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Participants on assignments outside their home countries.
(j) Treatment of Awards Upon a Qualifying Retirement. Upon a Participant’s Qualifying Retirement, and as determined in a Subplan or otherwise by the Committee, Awards (or any part thereof) granted to such Participant may accelerate, continue to vest,ascertain whether they provide for an extended period of time in which to exercise an Award upon Termination or contain any other terms and conditions as the Committee deems appropriate.
(k) Data Privacy. As a condition of receipt of any Award, each Participant explicitly and unambiguously consents to the collection, use, and transfer, in electronic or other form, of personal data as described in thisSection 21(k) by and among, as applicable, the Company and its Affiliates for the exclusive
purpose of implementing, administering, and managing the Plan and Awards and the Participant’s participation in the Plan. In furtherance of such implementation, administration, and management, the Company and its Affiliates may hold certain personal information about a Participant, including, but not limited to, the Participant’s name, home address, telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), information regarding any securities of the Company or any of its Affiliates, and details of all Awards (the “Data”). In addition to transferring the Data amongst themselves as necessary for the purpose of implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan, the Company and its Affiliates may each transfer the Data to any third parties assisting the Company in the implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan. Recipients of the Data may be located in the Participant’s country or elsewhere, and the Participant’s country and any given recipient’s country may have different data privacy laws and protections. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the purposes of assisting the Company in the implementation, administration, and management of the Plan and Awards and the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage the Plan and Awards and the Participant’s participation in the Plan. A Participant may, at any time, view the Data held by the Company with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the Participant, or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his local human resources representative. The Company may cancel the Participant’s eligibility to participate in the Plan, and the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents described herein. For more information on the consequences of refusal to consent or withdrawal of consent, Participants may contact their local human resources representative.
(l) No Liability of Committee Members. Subject to applicable law, neither any member of the Committee nor any of the Committee’s permitted delegates shall be liable personally by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee or for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer, or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against all costs and expenses (including counsel fees) and liabilities (including sums paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan, unless arising out of such person’s own fraud or willful misconduct;provided,however, that approval of the Committee shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s articles of association, as may be amended from time to time, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
(m) Payments Following Accidents or Illness. Subject to applicable law, if the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability ofappropriate coverage. However, the Committee and the Company therefor.
(n) Governing Law. The Plan shallBoard will not be governed byobligated to recommend amendments to Teva’s Articles of Association or to its indemnification and construed in accordance with the internal laws of the State of Delaware without reference to the principles of conflicts of laws thereof.
(o) Compliance with Section 409A of the Code. To the extent that the Committee determines that any Award granted hereunder is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan, Subplan and/or Award Agreements shall be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in the Plan (and unless the Subplan and/or Award Agreement specifically provides otherwise), if the Shares are publicly traded and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be settled or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be settled or paid in a lump sum on the day after suchsix-month period elapses, with the balance settled or paid thereafter on the original schedule.
(p) Funding. No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets,release agreements, nor shall the Companythey be required to maintain separate bank accounts, books, records, or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to paymentrecommend procurement of additional compensation by performance of services, they shall have the same rights as other employeesinsurance for directors and service providers under general law.
(q) Restrictions. The Committee shall have the power to impose such other restrictions on Awards as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for favorable tax treatment under Section 102 of the Israeli Tax Ordinance or any other applicable tax law provision.
(r) Tax Treatment. The Company makes no representations that any Awards or payments or benefits provided under the Plan or any Subplan will qualify for any specific treatment under the applicable tax laws of any jurisdiction in which the Company or its Affiliates operate and in no event shall the Company, its Affiliates or any of their respective directors, officers, employees or advisers be held liable for all or any portion of any taxes, interest, penalties or other monetary amounts owed by a Participant (or any other individual claiming a benefit through a Participant) as a result of the Plan or Subplan.
(s) No Limitation on Compensation. Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, officers or directors in cash or property, in a manner that is not expressly authorized under the Plan.
(t) No Constraint on Corporate Action. Nothing in the Plan shall be construed (i) to limit, impair or otherwise affect the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets, or (ii) except as provided inSection 18 or19 hereof, to limit the right or power of the Company or its Affiliates to take any action that such entity deems to be necessary or appropriate.
(u) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted, or failed toexecutive officers.
| A-6 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
act in good faith, upon any report made by the independent public accountant of the Company and its Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than such member.
(v) Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
* * *
Appendix B
AmendmentTABLE OF CONTENTS”
| B-2 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| 1. | In these Articles of Association (“Articles”), the words which appear in the first column in the table set forth below shall be interpreted in accordance with the interpretation which is given to them on the same line in the second column thereof. This shall apply as long as the text or context of the matter does not include any statement which contradicts said meaning or which is not consistent therewith. |
Words | Interpretations | |
the “Company” | Teva Pharmaceutical Industries Ltd. | |
the “Companies Law” | The Israeli Companies Law, 5759-1999, and any other law which shall replace or amend it and which shall apply to the Company and be in force at the time in question and the regulations promulgated thereunder. | |
“Officer” | Office Holder as defined in the Companies Law. | |
the “Securities Law” | The Israeli Securities Law, 5728-1968, or any other law which shall replace or amend it and which shall apply to the Company and be in force at the time in question and the regulations promulgated thereunder. | |
“Authorized Person” | As defined in Article 47 below. |
The English version of these Articles shall be the sole binding version. Words which are in the singular form shall be deemed to include the Employment Agreement (asplural form, and vice versa. Words which apply to individual persons shall be deemed to include incorporated entities, unless specified otherwise.
The words and expressions in these Articles not otherwise defined below) is entered intoherein shall have the same meaning as that given to them in the Companies Law, unless they conflict with the content or the subject of [•], 2020, bythat set forth in writing.
Objectives and between Teva Pharmaceutical Industries, Ltd., (the “Purpose of the Company
| 2. | The purpose of the Company is to engage in any lawful endeavor. |
| 3. | The Company’s center of management shall be in Israel, unless the Board of Directors shall otherwise resolve, with a majority of three quarters of the participating votes. |
| 4. | The Company is entitled to contribute a reasonable amount to a worthy cause, even if the contribution does not fall within the framework of its business objectives. |
CompanyLimitation of Liability”) and Kåre Schultz
| 5. | The liability of the shareholders is limited to the payment of the par value of their shares. |
| 6. | The registered share capital of the Company is NIS 249,434,338 consisting of 2,494,343,376 shares of NIS 0.1 par value each, divided as follows: |
2,494,343,316 Ordinary Shares, nominal (par) value NIS 0.1 per share (“ExecutiveOrdinary Shares”).
WHEREAS, the Company and the Executive are parties to that certain Employment Agreement, dated September 7, 2017 (the “60 Deferred Shares, nominal (par) value NIS 0.1 per share (“Employment AgreementDeferred Shares”), which details the terms of the Executive’s employment with the Company; and.
WHEREAS, the Company and the Executive now wish to amend certain provisions of the Agreement and desire to memorialize such amendment to the Employment Agreement in this Amendment;
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-3 | |
NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:
Appendix B
1. Capitalized Terms. Capitalized terms that are not defined in this Amendment shall have the meanings ascribed thereto in the Employment Agreement.
2. Amendments to the Employment Agreement.
| 7. |
| (a) |
|
| (b) |
|
| 8. | The Deferred Shares shall not confer upon the holders thereof any rights, except for the right to be reimbursed in the amount of the |
| 9. | Should the share capital, at any time whatsoever, be divided into different types of shares, it shall be permissible to change the rights of any such type (unless otherwise set forth in the terms of issue of the shares of that type) after having obtained the consent, in writing, of all of the shareholders of the shares that have been issued of that type, or following the adoption of a resolution, by a majority of three-quarters of the participating votes at a meeting of the shareholders of that type. The provisions of these Articles with regard to General Meetings shall also apply, mutatis mutandis, with regard to such a meeting. |
| 10. | The Company is |
| 11. | The shares shall be under the supervision of the Board of Directors, which shall be entitled, subject to the provisions of the Companies Law and these Articles, to issue them, to grant option rights for the purchase thereof, or to confer them in any manner to such persons, subject to such reservations and at such times as the Board of Directors shall see fit—provided, however, that no share whatsoever shall be issued at less than its par value, other than pursuant to the provisions of the Companies Law. |
| 12. | The Company is entitled, at any time, to pay a commission to any person who shall underwrite, or shall agree to underwrite (whether absolutely or conditionally), shares or bonds of the Company, or who shall obtain the commitment of an underwriter, or shall agree to obtain the commitment of an underwriter (whether absolutely or conditionally), with regard to shares or bonds of the Company. |
However, should the commission with regard to the shares be paid, or be payable, out of capital, the legal conditions and requirements concerning such payment shall be preserved and upheld. The commission may be paid in cash, in shares or in bonds of the Company, or by way of any two or of all three of said means.
| 13. | Unless otherwise stipulated in these Articles, the Company shall be entitled to consider the registered holder of any share to be the absolute holder of said share, and accordingly, shall not be obligated to recognize any claim in equity or any claim on any other basis which may be filed by any other person with regard to such a share or with regard to any benefit related to such a share, unless it shall have been instructed to do so by a competent court of law or shall be required to do so by virtue of the provisions of the Companies Law or by virtue of the provisions of any other law. |
| B-4 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| 14. | The share certificates shall be issued by the Company and shall bear the properly affixed signature of two Directors, or of any two of the following: a Director, the Chief Executive Officer (“CEO”), the Chief Financial Officer, the Treasurer or the Company Secretary. Each shareholder shall be entitled to receive, free of charge, one certificate with respect to the shares which are registered in his or her name, or, with the approval of the Board of Directors (against payment of a price which shall be determined by the Board of Directors from time to time), a number of certificates, each of which shall be issued with respect to one or more of the shares which are held by him or her. The Company shall issue the certificates with respect to fully paid-up shares within one month of the date of the issue thereof, or within one month of the date of receipt of the total consideration with respect thereto, or within one month of the date on which the Company shall have been provided, pursuant to the provisions of the Companies Law and of these Articles, with the certificate of transfer of the fully paid-up shares with respect to which the share certificate is requested. Each share certificate shall designate the numbers of the shares with respect to which it was issued. |
| 15. | Should any share certificate become mutilated or defaced, then, following the submission of said certificate to the Company Secretary, the Board of Directors or the Company Secretary shall be entitled to instruct that said certificate shall be canceled and a new certificate shall be issued in its stead. Should a share certificate become lost or destroyed, then, following the submission of evidence to the satisfaction of the Board of Directors or the Company Secretary, and following the submission of such guarantee of indemnification and compensation for damages as the Board of Directors or the Company Secretary shall see fit to require, another certificate shall be delivered in its stead to the person who is entitled to the certificate which became lost or destroyed, against such payment as shall be determined by the Board of Directors or the Company Secretary from time to time. |
| 16. | A share certificate which is registered in the names of two or more persons shall be delivered to that person whose name is listed first in the Register or in an Additional Register. |
Transfer and Endorsement of Shares
| 17. | The Company shall maintain registers according to the Companies Law (“Register”), and in addition, it is entitled to maintain additional registers of shareholders outside Israel (“Additional Register”). |
| 18. | No transfer of any share shall be registered unless a certificate of transfer shall have been submitted to the Company, in the usual form or in a form which shall be set forth by the Board of Directors or the Company Secretary from time to time. A certificate of transfer of any share shall be signed by the transferor and the transferee, or by persons on their behalf. The Board of Directors or the Company Secretary, at their sole discretion, is entitled to decide that, in cases of transfer of fully paid-up shares, the certificate of transfer shall be signed by or on behalf of the transferor alone. In addition, the Board of Directors or the Company Secretary, at their sole discretion, are entitled to decide that there shall be no need for the signature of a witness in order to validate the signatures which appear on the certificate of transfer. |
The transferor shall be deemed to be the holder of a transferred share until the name of the transferee shall have been registered in the Register with regard to said share. With regard to shares which are registered in an Additional Register, a certificate of transfer may be drawn up in the form, and may be signed in the manner, which shall be permitted or customary, according to the Companies Law or prevailing procedure, in the country in which the Additional Register is maintained.
| 19. | Each certificate of transfer shall be handed in for registration at the Registered Office, or the office where an Additional Register of the Company is maintained (whichever is relevant), or in |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-5 | |
Appendix B
| any other place, as the Board of Directors or the Company Secretary shall set forth from time to time. The share certificates with respect to the transferred shares, and any other evidence which the Board of Directors or the Company Secretary shall require, in order to prove the transferor’s right of ownership or his or her right to transfer the shares, shall be attached to said certificate of transfer. |
| 20. | The Board of Directors is entitled to refuse to register or to confirm the transfer of shares, until the shares whose transfer is desired or any part thereof shall have been fully paid up. The fact of whether or not the refusal applies to a transferee who is the holder of a share in the Company shall have no relevance. |
| 21. | The executors of the will or of the estate of an individual shareholder who has died—or, in cases where there are no executors of a will or of the estate, the persons who have been declared by a competent court of law to hold a right of benefit, in the capacity of the heirs of said individual shareholder who has died—shall be the only persons who shall be recognized by the Company as the holders of a right in any share which is registered in the name of the deceased individual. Should a share be registered in the names of two or more shareholders, the Company shall recognize only the surviving partner or the surviving partners, or the executors of the will or of the estate of the last partner to have died, as the holders of a right in said share, and, should there be no executor of a will or of the estate (of the last deceased partner), the Company shall recognize, as the holders of a right in said share, only the persons who have been declared by a competent court of law to hold a right of benefit, in the capacity of the heirs of the last deceased partner. |
| 22. | Any person or entity that has become entitled to a share as the result of the death or bankruptcy of a shareholder shall be entitled—after having provided such evidence as the Board of Directors or the Company Secretary shall require of that person or entity from time to time—to be registered as a shareholder with respect to said share, or, instead of being personally registered as a shareholder, to perform any transfer which the deceased or bankrupt shareholder could have performed. However, in any such case, the Board of Directors shall be entitled to refuse or to delay registration, as it would have been entitled to do in the case of transfer of the share by the deceased shareholder prior to his or her death, or by the bankrupt shareholder prior to the occurrence of the bankruptcy. |
| 23. | Any person or entity that has become entitled to a share as the result of the death or bankruptcy of a shareholder shall also be entitled to the same dividends and other rights to which said person or entity would have been entitled, had said person or entity been the registered holder of said share. However, prior to being registered as a shareholder, said person or entity shall not be entitled, with respect to said share, to benefit from any right which is granted to shareholders with regard to General Meetings of shareholders in the Company. |
Increase and Issue of the Registered Capital
| 24. |
| (a) | The Company shall be entitled, from time to time, pursuant to a resolution to be passed by the General Meeting of shareholders, subject however to the provisions of these Articles, to increase the share capital of the Company, by means of such type and in such amount, which shall be divided into shares of such par value, as shall be determined in the resolution as stated above. |
| (b) | Without derogating from any special rights or privileges which are granted to any existing shares in the share capital of the Company, the new shares shall be issued pursuant to such terms, subject to such reservations, and in accordance with such advantages and rights as shall apply to those shares, all subject to the provisions of these Articles and as set forth in the resolution concerning the issue thereof. Subject to the provisions of these Articles, the Company shall be entitled to issue shares with preferred rights, deferred rights or limiting rights with regard to |
| B-6 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| dividends, the return of capital, or participation in surplus assets or otherwise with special rights or without special rights, including with or without voting rights. |
| 25. | The Company shall not be obligated to offer any new shares whatsoever to the holders of existing shares of any type and kind. |
| 26. | Unless otherwise set forth in the terms of issue of the shares, or in the provisions of these Articles, any capital which shall be obtained by means of the creation of new shares shall be deemed to constitute part of the original share capital, and shall be subject to the provisions of these Articles in all matters concerning calls for payment and installments in connection therewith, transfer, endorsement, forfeiture, encumbrance and the like. |
Change in the Registered Capital
| 27. | The Company shall be entitled, from time to time, pursuant to a resolution to be passed by the General Meeting of shareholders: |
| (a) | To consolidate its share capital or any part thereof, and to divide it into shares of par value per share which is higher than that of its existing shares; or |
| (b) | To subdivide its existing shares, in whole or in part, into shares of par value per share which is lower than that of its existing shares, subject to that set forth in the provisions of the Companies Law; or |
| (c) | To cancel shares with respect to which, as at the date of said resolution, no obligation including a contingent obligation on the part of the Company to issue such shares exists, and to reduce the share capital by the amount of the shares canceled as set forth above; or |
| (d) | To reduce the share capital of the Company and any capital fund, by any means which it shall see fit, subject to all of the conditions and approvals which shall be required by any law. |
| 28. | With respect to any consolidation of issued shares into shares of larger nominal value, and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto as it deems fit and in its sole discretion. |
| 29. | The Company shall hold two types of General Meetings of its shareholders: “Annual Meetings” and “Special Meetings”: An Annual Meeting shall be convened once a year, on a date which shall be set by the Chair of the Board of Directors or by the Company Secretary, but no later than 15 months after the last Annual Meeting, and in a place which shall be determined by the Chair of the Board of Directors or by the Company Secretary. All of the other General Meetings of the Company shall be referred to as “Special Meetings” (Annual Meetings and Special Meetings shall be collectively referred to herein as “General Meetings”). All of the in person General Meetings of the Company shall be convened in Israel, unless the Company’s center of management shall have been transferred to another country in accordance with the provisions of these Articles, provided however that General Meetings may be conducted in other formats (in lieu of or in addition to in person meetings), including a virtual format. |
| 30. | Whenever the Board of Directors shall see fit, it shall be entitled to convene a Special Meeting according to its resolution. In addition, the Board of Directors shall convene such a meeting as required under applicable law, provided however, that a demand by a shareholder to convene a Special Meeting shall comply with all of the requirements of a “Proposal Request” set forth in Article 33(b) (with the demanding shareholder being considered a “Proposing Shareholder” for this purpose); and, should the Board of Directors fail to do so, the demanding director(s) or shareholder(s) shall be entitled to convene the meeting themselves, pursuant to the provisions of the Companies Law. |
| 31. | The Company shall not be required to deliver personal notices (‘Hodaa’) of a General Meeting or of any adjournment thereof to any shareholder. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-7 | |
Appendix B
| 32. | Without derogating from the |
The accidental omission to give notice of a General Meeting to any shareholder, or the non-receipt of notice by any shareholder, or any flaw in the conduct of a General Meeting, shall not invalidate the proceedings, or any resolution passed, at any General Meeting. |
Deliberations at General Meetings
| 33. |
| (a) | The function of the |
| (b) | Each shareholder who is entitled pursuant to applicable law to submit a proposal for the agenda of a General Meeting (“Proposing Shareholder”) may request, subject to applicable law, that the Board of Directors include a proposal on the agenda of a General Meeting to be held in the future (a “Proposal Request”), provided that the Proposal Request complies with all the requirements of these Articles, including this Article 33(b) and any applicable law and stock exchange rules, in Israel or abroad. Any such Proposal Request shall be delivered, in person or by certified mail, to the Company’s Registered Office. |
The |
| B-8 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| named in the Company’s notices and proxy materials relating to the General Meeting, if provided or published, and, if elected, to serve on the Board of Directors, and (viii) any other information required at the time of submission of the Proposal Request by applicable law, regulations or stock exchange rules, in Israel and/or abroad. In addition, the Proposing Shareholder shall promptly provide any other information reasonably requested by the Company. The Company shall be entitled to publish any information provided by a Proposing Shareholder pursuant to this Article 33(b), and the Proposing Shareholder shall be responsible for the accuracy thereof. |
| 34. | Two shareholders who are present at a General Meeting, in person or by proxy or represented by their Authorized Persons, and who jointly hold twenty-five percent or more of the paid-up share capital of the Company, shall constitute a legal quorum. No matter shall be discussed at any General Meeting unless a legal quorum is present at said meeting at the time of commencement of the deliberations. |
| 35. | Should no legal quorum be present half an hour after the time set for the General Meeting whether said meeting is an Annual Meeting or a Special Meeting the meeting shall be adjourned to one week from that day, at the same time and at the same place, or at another date, time and place as shall be set forth by the Board of Directors in a notice to all of those persons who are entitled to receive notice of General Meetings. Should no legal quorum be present at the adjourned meeting as well, half an hour after the time set for said meeting, any two shareholders present, in person or by proxy, who jointly hold twenty percent or more of the paid-up share capital of the Company shall constitute a legal quorum and shall be entitled to deliberate all of the matters for the purpose of which the meeting was convened. |
| 36. | The Chair of the Board of Directors, or, in his or her absence, any other person who has been appointed for that purpose by the Board of Directors, shall serve as Chair at any General Meeting. Should there be no Chair as stated above, or should he or she not have arrived at the meeting thirty minutes after the time set for said meeting, or should he or she not desire to serve as Chair of the meeting, any director present, and if no directors are present, the CEO or any other office holder, shall be the Chair, and only if none of the above are present, the shareholders present shall elect another person from among themselves, and that person shall be the Chair. |
| 37. | The Chair shall be entitled, with the consent of a General Meeting which is attended by a legal quorum, to adjourn the meeting from time to time and from place to place. However, in the course of the adjourned meeting as stated above, there shall be no deliberation on matters other than those which could have been discussed at the meeting in the course of which it was decided to adjourn. No shareholder shall be entitled to receive any notice with regard to the adjournment or with regard to the matters which are on the agenda of the adjourned meeting. |
| 38. | At any General Meeting, resolutions shall be voted upon and adopted by a show of hands, unless a vote by ballot is demanded whether before or after the announcement of the results of the voting by a show of hands, by the Chair or by at least two shareholders who are present, or by one or more shareholders who are present, in person or by proxy, and who hold at least five percent of the paid-up share capital of the Company. Unless a vote by ballot has been demanded as stated above, the announcement by the Chair that the resolution has been adopted, or has been adopted unanimously or by a certain majority, or has been rejected, or has not been adopted by a certain majority, and a comment registered to that effect in the minutes kept by the Company, shall constitute prima facie evidence thereof, and there shall be no need to prove the number of votes or the relative quota of votes in favor or against said resolution. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-9 | |
Appendix B
| 39. | Without derogating from that set forth above, resolutions of the General Meeting, on any subject whatsoever, may also be adopted by way of a vote in writing, which shall be expressed in the following form or in any other form which shall be approved by the Board of Directors or which shall be set forth pursuant to the Companies Law: |
“ TEVA PHARMACEUTICAL INDUSTRIES LIMITED
I, the undersigned, of , in my capacity as a shareholder of Teva Pharmaceutical Industries Limited, do hereby vote in writing, with ordinary shares which are registered in my name, at the General Meeting of shareholders in the Company which shall take place on the day of the month of in the year and at any adjourned meeting, with regard to the proposed resolutions which are set forth below, as follows: |
“Sign-on PSU Award. Executive shall be granted two performance share unit (“PSU”) awards (each, a “Sign-on PSU Award”),
Signed this day, the target numberday of Shares subject to eachthe month of which shall be determined assuming eachSign-on PSU Award grant were made on the last day prior to the public announcement of Executive’s hire (using the per Share closing price on that date) and each grant had a grant date fair value of $7,500,000 (Seven Million Five Hundred Thousand United States Dollars) (or $15,000,000 (Fifteen Million United States Dollars) in the aggregate)year . EachSign-on PSU Award shall provide that the number of Shares earned thereunder shall be determined based on the percentage increase in the per Share price, beginning with the average per Share closing price on the Effective Date (or, if the Effective Date occurs on 1 February 2018 or earlier, the per Share closing price on the last day prior to the public announcement of Executive’s hire shall apply instead) (the “Beginning Price”) and ending with the average per Share closing price during the six (6) months ending on (a) in the case of the firstSign-on PSU Award (the “Three-Year PSU Award”), the third (3rd) anniversary of the Effective Date or (b) in the case of the secondSign-on PSU Award (the “Five-Year PSU Award”), the fifth (5th) anniversary of the Effective Date (such applicable average per Share closing price, the “End Price,”), as follows:”
| 40. | Should a vote by ballot have been duly demanded, the voting shall be held at such a time and in such a place as the Chair shall instruct, and it shall be permissible to hold the voting immediately, or after recess or an adjournment. The results of the vote by ballot shall be deemed as a resolution of the General Meeting with regard to which the vote by ballot was demanded. |
| 41. | The demand for a vote by ballot shall not impede the continuation of the meeting for the purpose of deliberation of any matter which is on the agenda, with the exception of the matter with regard to which the vote by ballot was demanded. |
| 42. | A vote by ballot for the purpose of electing the Chair of the meeting shall be neither demanded nor conducted. A vote by ballot with regard to the adjournment of the meeting, if demanded, shall be conducted immediately. A vote by ballot which has been demanded with regard to any other matter shall be held at such a time as the Chair of the meeting shall instruct. |
| 43. | Should the votes in favor and against be tied, whether the voting is by a show of hands or by ballot, the Chair of the meeting shall be entitled to an additional casting vote. |
| 44. | Any resolution of the Company which is adopted at a General Meeting shall be deemed a resolution duly adopted if it has been adopted by simple majority of the participating votes, as long as there is a legal quorum at said meeting, unless another majority is required pursuant to the Companies Law or to these Articles. |
| 45. | Subject to, and without derogating from, the existing rights or limitations with regard to any specific type of shares which constitute part of the Company’s capital, each shareholder irrespective of whether the voting is by a show of hands or by ballot shall be entitled to one vote with respect to each share held by him or her. |
| 46. | In the case of joint holders of a share, either of the registered shareholders who is present, in person or by proxy, at a General Meeting is entitled to vote at that meeting as if he or she were the sole holder of the shares jointly registered as stated above. However, should two or more joint shareholders be present, themselves or by proxy, at any General Meeting, the vote of the partner whose name is listed first in the Register shall be the sole allowable vote, and that partner alone shall be entitled to vote, whether in person or by proxy, with respect to the share jointly registered as stated above. |
| 47. | The shareholders who are eligible to vote may do so in person or by proxy or by way of a vote in writing, and if the shareholder is a corporation through an empowered person who shall have been duly appointed for the purpose (“Authorized Person”). The document of appointment of a |
| B-10 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| proxy shall be drawn up in writing and signed by the appointing person or by that person’s agent who shall have been duly appointed in writing for that purpose. If the shareholder is a corporation, the authorization of an Authorized Person shall be drawn up in writing and signed pursuant to the charter documents of the appointing corporation. |
| 48. | One person may be appointed as proxy for several shareholders. |
| 49. | A proxy or an Authorized Person may also be a person who is not a shareholder in the Company. |
| 50. | A document of appointment of a proxy, a power of attorney, a vote in writing, a certificate of ownership or any other document pursuant to which a document of appointment, a vote in writing, or a certificate of ownership is signed, or a copy of any such document, shall be delivered to the Company at the place and time as shall be determined by the Board of Directors or the Company Secretary from time to time. Should this not be done, the document as set forth above shall not be valid unless otherwise decided by the Chair of the meeting. |
| 51. | Should a proxy or an Authorized Person vote in accordance with the terms of his or her document of appointment, his or her vote shall be valid, even if, prior to the voting, the person who appointed the proxy or the Authorized Person dies or becomes legally incompetent, or the appointment is canceled, or the share by virtue of which the proxy or the Authorized Person voted is transferred to another person, unless notice in writing with regard to the death, legal incompetency, cancellation or transfer as set forth above, shall have been given, prior to the voting to the Company Secretary or to the Chair of the meeting at which the voting took place. |
| 52. | A shareholder who is incompetent, or with regard to whom a court of law which is competent to do so has issued a guardianship order, shall be entitled to vote, whether by a show of hands or by ballot, through his or her guardian or through another person, fulfilling the role of such a guardian, who has been appointed for this purpose by a court of law as stated above, and any such guardian or other person as stated above shall be entitled to vote whether personally or by proxy. |
| 53. | The document of appointment of a proxy or an Authorized Person shall be drawn up in the following form or in any other form which shall be approved by the Board of Directors or the Company Secretary. |
“TEVA PHARMACEUTICAL INDUSTRIES LIMITED
I, the undersigned, of , in my capacity as a shareholder of Teva Pharmaceutical Industries Limited, do hereby appoint of as my proxy, to vote in my name and in my stead, at the General Meeting of shareholders in the Company which shall take place on the day of the month of in the year and at any adjourned meeting. |
Signed this day, the day of the month of in the year ,
”
| 54. |
| (a) | The maximum number of Directors of the Company shall be 18 (eighteen) Directors. Such maximum number includes the two external Directors, to the extent appointed pursuant to the provisions of the Companies Law, and the CEO, as long as he or she serves as a Director in accordance with Article 56(a), and in the event the external directors and/or CEO are not appointed to the Board of Directors, such maximum number of Directors shall be reduced accordingly. The Board of Directors is entitled, at any time and from time to time, to change the maximum number of Directors as stated above, by a majority of three-quarters of the persons voting. Should the Board of Directors have changed the number of Directors as set forth above, the number of members of each of the groups set forth in Article 56(b) below shall be changed accordingly. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-11 | |
Appendix B
| (b) | The minimum number of Directors on the Board of Directors shall be 3 (three). |
| 55. | The Board shall consist of a meaningful representation of Israeli resident directors, which need not be a majority, unless the Company’s center of management shall have been transferred to another country in accordance with the provisions of these Articles. |
Appointment and Retirement from Office
| 56. |
| (a) | The CEO shall serve as a member of the Board of Directors, ex-officio, unless determined otherwise by the Board of Directors. |
| (b) | The Board of Directors shall be divided into 3 (three) classes, as nearly equal in number as possible, each serving for approximately a three-year-term. At each Annual Meeting, up to 5 (five) Directors, the exact number to be determined by the Board of Directors at its sole discretion, shall be elected to hold office until the third Annual Meeting which shall be held following the Annual Meeting at which they are elected. The provisions of this Article shall not apply to the CEO, who serves as a member of the Board of Directors by virtue of the provisions of subsection (a) above, in the event that he or she so serves, nor to the two external Directors to the extent appointed pursuant to the provisions of the Companies Law. |
| (c) | The nomination of candidates for election as Directors shall be made by the Board of Directors (in accordance with the recommendations of the Nominating Committee appointed by the Board of Directors). A shareholder interested in proposing the nomination of certain candidate(s) for consideration by the Nominating Committee as aforementioned shall submit his or her proposal in writing to the Company’s Registered Office in accordance with the requirements of applicable law. Any proposal by a shareholder as set forth above shall include all of the information required by Article 33(b). |
| (d) | Should the number of members of any class of such 3 (three) classes become less than the maximum number of members at such time, the Board of Directors shall be entitled, at any time and from time to time, to appoint, within the framework of the maximum number as stated, Directors who shall serve until the expiry of the term of office of the members of the class in question. |
| 57. | The Directors who are serving in office shall be entitled to act even if a vacancy occurs on the Board of Directors. However, should the number of Directors, at the time in question, become less than the minimum set forth in these Articles, the remaining Directors or the remaining Director shall be entitled to act for the purpose of filling the vacancies which shall have occurred on the Board of Directors or of convening a General Meeting, but not for any other purpose. |
| 58. | Any Director who shall have retired from his or her office shall be qualified to be re-appointed—unless a limitation affecting his or her appointment as a Director shall exist pursuant to the provisions of the Companies Law. |
| 59. |
| (a) | The office of a Director shall fall vacant, prior to the expiry of his or her term in office, only: |
| (1) | If he or she has been removed from office pursuant to Article 60 below; or |
| (2) | For any reason mandated by applicable law. |
| (b) | The Board of Directors shall be entitled to appoint, as a replacement for a Director whose office has fallen vacant pursuant to the mandatory provisions of the Companies Law, another Director, who shall serve in office until the date on which the term in office of his or her predecessor would have expired, had said office not fallen vacant as stated. |
| B-12 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| (c) |
|
| 60. |
| (a) | Should any Director violate a duty of care or a duty of loyalty to the Company, the General Meeting shall be entitled to remove that Director from office prior to the expiry of his or her term in office (a “Removed Director”), provided that the Removed Director shall be given a reasonable opportunity to state his or her case before the General Meeting. |
| (b) | Should a Director have been removed from office as set forth in subsection (a) above, the General Meeting shall be entitled, in the same session, to elect another Director in his or her stead. Should it fail to do so, the Board of Directors shall be entitled to do so, pursuant to the provisions of Article 56(d) above. |
| (c) | Any Director who shall have been appointed by way of a resolution as stated in subsection (b) above, shall serve in office for the period remaining of the |
| 61. |
| (a) | The remuneration of the Directors, including in connection with the performance of special duties or services over and above his or her regular duties as a Director, shall be determined in accordance with applicable law. |
| (b) | A Director shall be entitled to perform another duty or to hold another office in the Company (except for the office of Accountant, Internal Auditor or attorney for the Company) on a salaried basis, in addition to his or her duties as a Director, pursuant to such terms, with regard to salary and other matters, as shall be determined in accordance with applicable law. |
Powers and Duties of the Board of Directors
| 62. | The Board of Directors shall formulate Company policy and shall supervise the performance of the duties and operations of the CEO. Any power of the Company which has not been conferred upon another organ pursuant to the Companies Law or to these Articles may be exercised by the Board of Directors. However, this power of the Board of Directors shall be subject to the provisions of these Articles and the provisions of the Companies Law, provided that no provision which shall be enacted by the Company shall revoke the validity of any action which had previously been taken by the Board of Directors and which would have been legal, had it not been for that set forth in this Article. |
Operations of the Board of Directors
| 63. | The Board of Directors shall meet for the purpose of conducting its business, and shall be entitled to adjourn its sessions from time to time and to establish the procedure of said sessions as it shall see fit. |
| 64. | Any question which shall arise in any of the sessions of the Board of Directors shall be settled by simple majority of all of the Directors who are voting at that session, unless otherwise set forth by another provision of these Articles. Should the votes be tied, the Chair of the Board of Directors shall be entitled to an additional casting vote. |
| 65. | The legal quorum which shall be required for a session of the Board of Directors shall be a majority of the members of the Board of Directors then serving in office, but shall not be fewer than three Directors, unless otherwise determined in these Articles. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-13 | |
Appendix B
| 66. | At any session of the Board of Directors at which a legal quorum is |
| 67. | The Board of Directors shall be entitled to elect a Chair of the Board of Directors and to determine his or her term in office, provided that the CEO shall not serve as Chair of the Board of Directors other than pursuant to the provisions of the Companies Law, provided that the CEO serves as a Director at the same time and throughout the period he serves as Chairman of the Board. Should the Board of Directors not determine the term in office of the Chair of the Board of Directors and until otherwise resolved by |
| 68. | The Chair of the Board of Directors shall be entitled to convene a session of the Board of Directors at any time and pursuant to the provisions of the Companies Law, or according to a request by the CEO. |
Should the Chair of the Board of Directors fail to convene a session of the Board of Directors within 21 days of the date on which a demand was presented to him or her by any person entitled to present a demand as stated above (“Demanding Party”), or within 21 days of the date on which he or she shall have been demanded to do so pursuant to the provisions of the Companies Law, any one of the Demanding Parties shall be entitled to convene a session of the Board of Directors pursuant to the provisions of the Companies Law.
| 69. | Notice of sessions of the Board of Directors shall be sent by mail, or shall be delivered by hand or by fax or by telephone or by email or by any other medium of communications to all of the Directors, a reasonable time before the applicable session, unless otherwise provided by the Companies Law. Said notice shall include a reasonable level of detail with regard to the subjects on the agenda. |
| 70. | Failure to send notice to any Director with regard to a session of the Board of Directors, due to error, shall not adversely affect the validity of any resolution which shall have been adopted by the session in question. |
| 71. | A majority of the in-person sessions of the Board of Directors each year shall be convened in Israel, unless otherwise determined by the Chair of the Board of Directors at his sole discretion, or in the event the Company’s center of management shall have been transferred to another country in accordance with the provisions of these Articles. Notwithstanding the above, the Board of Directors shall be permitted: (i) to hold sessions through the use of any means of communication, provided that all the participating Directors can hear each other simultaneously; and (ii) to adopt resolutions without convening a session, provided that this method of adoption without convening a session for this purpose shall be approved by all of the Directors who are eligible to participate in the deliberations and to vote on the matter addressed by the resolutions and that the resolutions themselves shall be adopted by the applicable majority of Directors required by the Companies Law and these Articles. Should resolutions be adopted without convening a session as stated in subsection (ii) above, the Chair of the Board of Directors (or a designee of the Chair) shall sign the minutes pertaining to the resolutions, and there shall be no need to append the signatures of the remaining Directors to said minutes. |
| B-14 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
Committees of the Board of Directors
| 72. |
| (a) | Subject to the provisions of applicable law, the Committees of the Board of Directors shall be composed of such number of Directors as shall be determined by the Board of Directors. Subject to the provisions of the Companies Law, the Chair of the Board of Directors shall be entitled, from time to time, to join any Committee of the Board of Directors, as a member of said Committee. The Board of Directors shall be entitled, from time to time, to delegate any of its powers to the Committees of the Board of Directors. Notwithstanding, the Board of Directors shall not be entitled to delegate any of its powers to the Committees as stated above, other than for the purpose of recommendation only, with regard to those matters which may not be delegated by the Board of Directors under the Companies Law. |
| (b) | Subject to the provisions of the Companies Law, a transaction between the Company and an Officer or a transaction between the Company and another entity in which an Officer of the Company has a personal interest according to Section 270(1) of the Companies Law, which is not an extraordinary transaction (as such term is defined in the Companies Law), can be approved by the Board of Directors or by a Committee of the Board of Directors authorized by the Board of Directors for such purposes, or according to Company policy approved by the Board of Directors or such Committee of the Board of Directors. The approval may be for a particular transaction or more generally for certain types of transactions. |
| (c) | Any Committee which has been composed as stated above shall be obligated, when making use of the powers vested in it, to comply with all of the rules which shall be set forth by the Board of Directors. The office of a member of a Committee shall fall vacant upon the termination of the member’s office as a Director, upon his or her resignation from the Committee or upon his or her removal by the Board of Directors from the Committee for any reason. |
| 73. | The Board of Directors shall be entitled to appoint, for each Committee of the Board of Directors, a permanent Chair from among the members of that Committee. Should the Chair not be present within 30 minutes of the time set for a Committee session, or should there be no Chair of the Committee, those present at the session shall be entitled to elect a member from among themselves who shall serve as Chair of the session. |
| 74. | The provisions of these Articles with regard to the sessions and procedures of the Board of Directors shall also apply, mutatis mutandis, to sessions of any Committee of the Board of Directors, with the exception of the provisions of the closing passage of Article 64 and the opening passage of Article 71, unless otherwise determined in the Companies Law or in these Articles. |
| 75. | The Company shall appoint, from time to time, a person whose signature, or persons whose signatures, together with the stamp of the Company or the printed name of the Company, shall bind the Company. This shall apply, whether generally or to a specific matter or specific matters, as shall be determined by the Company. |
| 76. | The minutes of any session of the Board of Directors and any session of a Committee of the Board of Directors, provided that they shall appear to have been signed by the Chair of that session or by the Chair of the subsequent session of the same entity, shall be deemed to constitute prima facie evidence of the correctness of all of the matters set forth therein. |
| 77. | All of the operations which are performed in good faith by the Board of Directors or by a Committee of the Board of Directors, or by any person acting as a Director, shall be valid even if |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-15 | |
Appendix B
| it shall subsequently be found that there was a deficiency in the appointment of such |
| 78. |
| (a) | The Board of Directors shall appoint, from time to time, a person who shall serve as the |
| (b) | The |
“For each fiscal year of the Term, Executive shall be granted equity awards with a target grant date fair value of $6,000,000 (Six Million United States Dollars), subject to the terms of the 2015 Plan (or any successor thereto) and Exhibit B. The annual equity awards granted for each such fiscal year are collectively referred to as the “Annual Equity Awards”.
| (c) | The CEO will lead the management team and manage the Company from its headquarters in Israel, unless the Company’s center of management shall have been transferred to another country in accordance with the provisions of these Articles. |
| (d) |
|
“In addition, from the fiscal year 2020 and for each fiscal year of the Term thereafter, Executive shall be granted additional performance-based equity awards with a target grant date fair value equal to $4,000,000 (Four Million United States Dollars), subject to (i) the terms of the 2015 Plan (or any successor thereto), (ii) the terms of Exhibit
| 79. | The Board of Directors shall be entitled, from time to time, as it shall see fit, to delegate to the CEO any of the powers which have been vested in the Board of Directors, with the exception of those which have been exclusively conferred upon the Board of Directors and may not be delegated pursuant to the provisions of the Companies Law. Moreover, the Board of Directors shall be entitled, from time to time, to restrict the delegation of powers, both with regard to the duration thereof and with regard to the purposes for which they shall be used, and to limit them to specific areas and to make them contingent upon specific conditions, all as the Board of Directors shall see fit. At the time of delegation of powers, as stated above, to the CEO, the Board of Directors shall be entitled to determine that said delegation shall be parallel to, or shall supplant, the respective operation of the Board of Directors. The Board of Directors shall be entitled, from time to time, to rescind or to modify the delegation of any power which shall have been delegated pursuant to this Article. |
F. DIVIDEND, RESERVE FUND AND CAPITALIZATION
| 80. | The Company shall be entitled to distribute a dividend pursuant to the provisions of the Companies Law, and no dividend shall bear interest; each dividend shall be determined and settled in consideration of the rights of the shareholders, if any, whose shares shall bear special rights with regard to dividends. Unless the rights are attached to any shares or unless otherwise stated in the terms of issue thereof, shares which have been paid up, in whole or in part, shall entitle the holders thereof to a dividend in a manner proportional to the amount which has been paid up, or credited as having been paid up, on the par value of said shares and to the date of payment thereof (pro rata temporis). |
| 81. | The Board of Directors shall be entitled to declare, and cause the Company to pay, a dividend to the shareholders. The Board of Directors shall determine the time for payment of such dividend and the record date for determining the shareholders entitled thereto, subject to applicable law. |
| 82. | The Board of Directors shall be able to adopt a resolution stating that the dividend in question shall be paid, in whole or in part, by means of the distribution of cash or other assets of the Company, and in particular, by distribution of fully paid-up shares, bonds, or other securities of the Company or of any other company, or in any other manner. |
| B-16 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B as applicable to performance based awards, and (iii) the same performance goals and related vesting criteria as Annual Equity Awards that are performance based granted to Executive, unless other performance measures and/or vesting periods are determined by the Committee and the Board in agreement with Executive (“Additional Annual Award”). For the sake of clarity, the grant date of the Additional Annual Award for the year 2020 shall be the date of 2020 Annual General Meeting of Shareholders and the performance goals and related vesting criteria for such Additional Annual Award shall be identical to those applicable to the PSUs granted to Executive on February 28, 2020.
For the purpose of this Agreement, Performance Period shall be defined as the applicable performance period attached to each performance based award.”
| 83. | The right to a dividend with respect to nominative shares, which has been declared by the Company, shall be determined in accordance with that recorded in the Register or in an Additional Register as of the date of record, according to the declaration. |
| 84. | Unless otherwise specified, it shall be permissible to pay any dividend by check or bank transfer or payment order, which shall be sent according to the registered address of the shareholder or the person entitled to the dividend (and in the case of joint registered holders, to the shareholder whose name is first mentioned in the Register or in an Additional Register with regard to the joint ownership), or in any other manner. Any such check shall be drawn up to the order of the person to whom it is sent. The receipt of the dividend by the person who is registered in the Register or in an Additional Register as the holder of any share or, in the case of joint holders, by any of the joint shareholders shall constitute full, final and absolute release with regard to all payments which shall have been made with respect to said share. The Company shall be entitled to withhold tax or any other mandatory payment from any dividend payment pursuant to applicable law. The Company shall be entitled to invest all of the dividends which have not been claimed, or to use them in any other manner, for the benefit of the Company, until said amounts are claimed, and the Company shall not be deemed a trustee or fiduciary in respect thereof. |
| 85. | Any dividend unclaimed after a period of 7 (seven) years from the date of declaration of such dividend shall be forfeited to the benefit of the Company; provided, however, that the Company, at its sole discretion, shall be entitled to pay any such dividend, or any part thereof, to a person who would have been entitled thereto had the same not been forfeited. |
| 86. | The Board of Directors shall be entitled, from time to time, to allocate amounts out of the profits of the Company which may be distributed in the form of dividends, and to transfer such amounts, as it shall see fit, to an account of a fund or funds as it shall see fit. All of the amounts which shall be so transferred and so credited to the account of such a fund shall serve, at the discretion of the CEO, after having consulted with the Chief Financial Officer, and subject to the approval of the Board of Directors, for special purposes or for the gradual settlement of any debt or obligation of the Company or for the repair or maintenance of any of the Company’s assets or for the coverage of losses from the sale of assets or investments or the depreciation in value thereof (whether on a one-time basis or in a general manner), or, at the Board of Directors’ sole discretion, for the supplementing or payment of a dividend or for any other purpose which shall be appropriate for use of the Company’s profits. |
| 87. | All of the amounts which shall have been transferred and credited to the account of any fund or funds may be used, so long as they have not been used for any other purpose pursuant to Article 86 above, for the purpose of investment, together with any other monies of the Company, in the ordinary course of business of the Company, and there shall be no need to distinguish between these investments and the investments of other monies of the Company. |
| 88. |
|
“In addition, and subject to Executive’s execution andnon-revocation of the Release of Claims in accordance with Section 9.7 and Executive’s continuous compliance with Sections 11, 12, 13 and 14 of the Employment Agreement, in the event that Executive’s employment terminates in connection with thenon-renewal of this Agreement by the Company hereunder or by Executive upon his retirement, Executive shall be entitled to the Equity Benefits.
For purposes of this Section 9.6 the term “retirement” shall mean thenon-renewal by Executive of his employment term hereunder in accordance with Section 1.1 of this Agreement, following which Executive ceases to work as an employee in a full-time managerial capacity for anyfor-profit organization.
In addition, and for the purpose of this Section 9.6 only, the restrictions in Section 12 of this Agreement shall not apply to engagement with a company that isnot either of (x) any company on the list of peer group companies as disclosed in Proposal 4 of the Company’s 2020 Proxy Statement or (y) an entity that is engaged, directly or indirectly, including but not limited through an affiliate, in the development, manufacture of, sale of or trading in (i) generic products or (ii) specialty pharmaceutical products (including but not limited to biopharmaceutical products) that are competitive with a specialty product developed manufactured, sold or otherwise traded in by the Company as of the Date of Termination.”
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-17 | |
Appendix B
| (b) |
|
|
| ii) | In any case in which the Company shall issue new shares and/or, in lieu of such issue, shall cause its subsidiary to transfer existing shares in the Company which are held by said subsidiary, as a result of the exploitation of said Rights by the persons entitled thereto, in cases where the Board of Directors implemented a transfer to the Special Fund with respect to those Rights pursuant to subsection (i) above, the Company shall issue to any such holder, in addition to the shares to which he or she is entitled as a result of the exploitation of his or her Rights, a number of fully |
| iii) | Following any transfer to the Special Fund, should the Rights expire, or should the period set forth for exploitation of the Rights with regard to which the transfer was implemented come to an end, before said Rights have been exploited, any amount which was transferred to the Special Fund with regard to the aforementioned unexploited Rights shall be released from the Special Fund, and the Company shall be entitled to handle any amount which shall be so released in any manner in which it would have been entitled to handle said amount, had it not been transferred to the Special Fund. |
| 89. | For the purpose of implementation of any resolution which shall be adopted on the basis of Articles 82 or 88 of these Articles, the Board of Directors shall be entitled, at its sole discretion, to settle, as it shall see fit, any difficulty (if any) which shall arise with regard to the distribution. To this end, the Board of Directors shall be entitled to issue partial certificates, to determine the value of the distribution of certain assets, and to determine that shareholders shall receive payment on the basis of the value which shall have been determined as stated above, or that fractions at a value of less than 0.1 New Israeli Shekel shall not be taken into account, in order to adjust the rights of the parties. In addition, the Board of Directors shall be entitled to place all monies and specific assets in trust, in the hands of trustees, on behalf of those persons who are entitled to receive the dividend or the monies which have been capitalized, all as the Board of Directors shall see fit. |
| B-18 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix B
| 90. | The Annual Meeting shall be entitled to appoint the Accountant, who shall serve for a period which shall not extend beyond the next Annual Meeting. At least once a year, the Accountant shall audit the Company’s accounts and shall express his or her opinion as to the correctness of the Statement of Profit and Loss and the Balance Sheet. The Board of Directors shall fix the remuneration of the Accountant for auditing services. |
| 91. |
| (a) | The Board of Directors of the Company shall appoint an Internal Auditor, pursuant to the provisions of the Companies Law. |
| (b) | The Board of Directors is entitled to terminate the term of office of the Internal Auditor, pursuant to the provisions of the Companies Law. |
| (c) | The organizational superiors of the Internal Auditor shall be the CEO jointly with the Chair of the Board of Directors. |
| 92. | Without derogating from Articles 31and 32 above, the Company shall be entitled to deliver notices to its shareholders by any of the alternative means set forth hereinafter: delivery by hand; dispatch by mail to the address appearing in the Register or in an Additional Register; dispatch by facsimile to the fax number appearing in the Register or in an Additional Register, or to any number which shall have been given to the Company for this purpose by any shareholder; dispatch by e-mail to the e-mail address registered for that purpose in the Register or in an Additional Register; or in any other manner as shall be determined by the Company. |
| 93. | Any and all notices which are to be delivered to a shareholder shall be given, with regard to jointly held shares, to the person whose name is first mentioned in the Register, and any notice thus given shall be deemed sufficient notice to the holders of the share. |
| 94. | The Company shall be entitled to give notice to persons who are entitled to any share as a result of the death or bankruptcy of the shareholder, by sending said notice by any of the alternative ways set forth in Article 92 above according to the address, fax number or e-mail address (if any) given for that purpose by said persons, or by delivering the notice in the same way in which it would have been delivered (until such details shall have been given), had it not been for the death or bankruptcy as stated above. |
| 95. | Any notice or other document which has been sent in any manner which is permitted pursuant to these Articles shall be deemed to have been duly given to its destination on the first business day at the receiving end following delivery, if delivered personally, 72 (seventy two) hours after it has been posted (7 (seven) days if sent from Israel to a place outside Israel, or if sent to Israel from a place outside Israel), on the first business day at the receiving end after transmission by facsimile or e-mail, or when actually received by the addressee if sooner. If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served when received, notwithstanding that it was defectively addressed, or failed in some other respect, to comply with the provisions of this Article. A declaration in writing, signed by the person delivering the notice or the document, to the effect that a letter containing said notice or said document was addressed to the correct address and duly delivered to a post office, shall constitute absolute evidence to that effect. |
| 96. | Failure to send notice to any shareholder pursuant to any applicable law or these Articles or the failure of any shareholder to receive notice, due to an error or as a result of a mishap beyond the control of the Company, shall not adversely affect the validity of any action, transaction or resolution taken by the Company and/or adopted by the General Meeting in question. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-19 | |
Appendix B
H. EXEMPTION, INSURANCE AND INDEMNIFICATION OF OFFICERS
| 97. | Subject to the provisions of applicable law, the Company shall be entitled to engage in a contract for insurance of the liability of any Officer of the Company, in whole or in part, in respect of any liability or expense imposed on an Officer or expended by him or her as a result of any action which was performed by said Officer in his or her capacity as an Officer of the Company for which insurance may be provided under applicable law, including in respect of any liability imposed on any Officer with respect to any of the following: |
| (a) | Breach of a duty of care vis-à-vis the Company or vis-à-vis another person; |
| (b) | Breach of a duty of loyalty vis-à-vis the Company, provided that the Officer acted in good faith and had reasonable grounds to believe that the action in question would not adversely affect the Company; |
| (c) | Financial liability which shall be imposed upon said Officer in favor of another person as a result of any action which was performed by said Officer in his or her capacity as an Officer of the Company; including |
| (d) | A payment which said Officer is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law and expenses that said Officer incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees, or in connection with Article D of Chapter Four of Part Nine of the Companies Law. |
| 98. | Subject to the provisions of applicable law, the Company shall be entitled to indemnify post factum and/or undertake in advance to indemnify any Officer of the Company, as a result of any liability or an expense imposed on him or her or expended by him or her as a result of any action which was performed by said Officer in his or her capacity as an Officer of the Company, in respect of any liability or expense for which indemnification may be provided under applicable law, including in respect of any liability or an expense imposed on the Officer as follows: |
| (a) | Financial liability imposed upon said Officer in favor of another person by virtue of a decision by a court of law, including a decision by way of settlement or a decision in arbitration which has been confirmed by a court of law, provided that the undertaking to indemnify in advance shall be limited to events which, in the opinion of the Board of Directors of the Company, are foreseeable, in light of the Company’s activities at the time that the undertaking to indemnify was given, and shall further be limited to amounts or criteria that the Board of Directors has determined to be reasonable under the circumstances, and provided further that in the undertaking to indemnify in advance the events that the Board of Directors believes to be foreseeable in light of the Company’s activities at the time that the undertaking to indemnify was given are mentioned, as is the amount or criteria that the Board of Directors determined to be reasonable under the relevant circumstances, including |
| (b) | A payment which said Officer is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law and expenses that said Officer incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees, or in connection with Article D of Chapter Four of Part Nine of the Companies Law. |
| (c) | Reasonable litigation expenses, including attorney fees, expended by the Officer as a result of an inquiry or a proceeding conducted in respect of such Officer by an authority authorized to conduct same, which was concluded without the submission of an indictment against said Officer and without any financial penalty being imposed on said Officer instead of a criminal proceeding (as such term is defined in the Companies Law), or which was concluded without the submission of an indictment against said Officer with a financial penalty being imposed on |
| B-20 | ||
Appendix B
| said Officer instead of a criminal proceeding, in respect of a criminal charge which does not require proof of criminal intent or in connection with a financial sanction. |
| (d) | Reasonable litigation expenses, including attorney fees, which said Officer shall have expended or shall have been obligated to expend by a court of law, in any proceedings which shall have been filed against said Officer by or on behalf of the Company or by another person, or with regard to any criminal charge of which said Officer was acquitted, or with regard to any criminal charge of which said Officer was convicted which does not require proof of criminal intent. |
| 99. | Subject to the provisions of applicable law, the Company shall be entitled, in advance, to exempt any Officer of the Company from liability, in whole or in part, with regard to damage incurred as a result of the breach of duty of care vis-à-vis the Company. |
| 100. | Notwithstanding the foregoing, the Company shall be entitled to insure, indemnify and exempt from liability any Officer of the Company to the fullest extent permitted by applicable law. Accordingly, (i) any amendment to the Companies Law, the Securities Law or any other applicable law expanding the right of any Officer to be insured, indemnified or exempted from liability in comparison to the provisions of these Articles shall, to the extent permitted by applicable law, immediately apply to the fullest extent permitted by applicable law, and (ii) any amendment to the Companies Law, the Securities Law or any other applicable law adversely affecting the right of any Officer to be insured, indemnified or exempted from liability in comparison to the provision of these Articles shall not be in effect post factum and shall not affect the Company’s obligation or ability to insure, indemnify or exempt from liability an Officer for any act or omission occurring prior to such amendment, unless otherwise provided by applicable law. |
Amendment of the Articles of Association
| 101. |
| (a) | The Company shall be entitled to modify any of the provisions of this Article and any of the provisions of Articles 3, 29 (closing passage), 54, 55, 56, 64, 71 (opening passage) and 78 above, by way of a resolution to be adopted at a General Meeting by a majority of eighty-five percent of the votes at that session, unless a lower percentage shall have been established by the Board of Directors, by a majority of three-quarters of those persons voting, at a session of the Board of Directors which shall have taken place prior to that General Meeting. |
| (b) | The Company shall be entitled to modify the remaining provisions of these Articles (which are not included in the list set forth in subsection (a) above) by way of a resolution to be adopted at a General Meeting by a majority of three-quarters of the votes at that session, unless a lower percentage shall have been established by the Board of Directors, by a majority of three- fourths of the persons voting, at a session of the Board of Directors which shall have taken place prior to that General Meeting. |
| 102. | Notwithstanding that which has been set forth within the framework of the regulations that have been promulgated by virtue of the Companies Law, a special offer to purchase Company shares shall be governed by the provisions of Sections 328 to 334 of the Companies Law. |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | B-21 | |
Appendix C
Translated from the Hebrew
TABLE OFCONTENSCONTENTS
| C-2 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-3 | |
Appendix C
| 1. | In these Articles of Association (“Articles”), the words which appear in the first column in the table set forth below shall be interpreted in accordance with the interpretation which is given to them on the same line in the second column thereof. This shall apply as long as the text or context of the matter does not include any statement which contradicts said meaning or which is not consistent therewith. |
Words | Interpretations | |
| Teva Pharmaceutical Industries Ltd. | ||
| the “ | The Israeli Companies Law, 5759-1999, and any other law which shall replace or amend it and which shall apply to the Company and be in force at the time in question | |
| “Officer” | Office Holder as per its definition in the Companies Law. | |
| The Israeli Securities Law, 5728-1968, or any other law which shall replace or amend it and which shall apply to the Company and be in force at the time in question | ||
| “Authorized Person” | As defined in Article 47 | |
TheHebrewEnglish version of these Articles shall be the sole binding version.
| C-4 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
Writing shall be deemed to include printing and lithography and any other means of setting down words in a visible form.Words which are in the singular form shall be deemed to include the plural form, and vice versa. Words which are in the masculine gender shall be deemed to include the feminine gender, and vice versa. Words which apply to individual persons shall be deemed to include incorporated entities, unless specified otherwise.
With the exception of that set forth above, tThe words and expressions in these Articlesnot otherwise defined herein shall have the same meaning as that given to them in the Companies Law, unless they conflict with the content or the subject of that set forth in writing.
Objectives and Purpose of the Company
| 2. | The purpose of the Company is to engage in any lawful endeavor. |
| 3. | The Company’s center of management shall be in Israel, unless the Board of Directors shall otherwise resolve, with a majority of three quarters of the participating votes. |
| 4. | The Company is entitled to contribute a reasonable amount to a worthy cause, even if the contribution does not fall within the framework of its business objectives. |
| 5. | The liability of the shareholders is limited to the payment of the par value of their shares. |
| 6. | The registered share capital of the Company is NIS 249,434,338 consisting of 2,494,343,376 shares of NIS 0.1 par value each, divided as follows: |
2,494,343,316 Ordinary Shares, nominal (par) value NIS 0.1 per share (“Ordinary Shares”).
60 Deferred Shares, nominal (par) value NIS 0.1 per share (“Deferred Shares”).
| 7. |
| (a) | The Ordinary Shares shall confer upon the holders thereof equal rights with regard to the receipt of dividends, the receipt of bonus shares and the distribution of Company property during liquidation. |
| (b) | In addition, the Ordinary Shares shall confer upon the holders thereof equal rights with regard to voting and the right to appoint directors, including pursuant to the provisions of Articles |
| 8. | The Deferred Shares shall not confer upon the holders thereof any rights, except for the right to be reimbursed in the amount of the par value thereof upon liquidation. |
| 9. | Should the share capital, at any time whatsoever, be divided into different types of shares, it shall be permissible to change the rights of any such type (unless otherwise set forth in the terms of issue of the shares of that type) after having obtained the consent, in writing, of all of the shareholders of the shares that have been issued of that type, or following the adoption of a resolution, by a majority of three-quarters of the participating votes |
| 10. | The Company is entitled, subject to the provisions of the Companies Law and these Articles, to issue redeemable preferred shares or redeemable securities, pursuant to the terms and in the manner which shall be set forth by the Company at a General Meeting, and to redeem said shares or |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-5 | |
Appendix C
| securities. The Company shall be entitled to decide upon the establishment of a fund or funds for the purpose of redemption of redeemable preferred shares or of other redeemable securities, in whole or in part, and to decide upon the amounts which shall be allocated to said fund or funds and the sources from which said amounts shall be allocated. |
| 11. | The shares shall be under the supervision of the Board of Directors, which shall be entitled, subject to the provisions of the Companies Law and these Articles, to issue them, to grant option rights for the purchase thereof, or to confer them in any manner to such persons, subject to such reservations and at such times as the Board of Directors shall see fit—provided, however, that no share whatsoever shall be issued at less than its par value, other than pursuant to the provisions of the Companies Law. |
| 12. | The Company is entitled, at any time, to pay a commission to any person who shall underwrite, or shall agree to underwrite (whether absolutely or conditionally), shares or bonds of the Company, or who shall obtain the commitment of an underwriter, or shall agree to obtain the commitment of an underwriter (whether absolutely or conditionally), with regard to shares or bonds of the Company. |
However, should the commission with regard to the shares be paid, or be payable, out of capital, the legal conditions and requirements concerning such payment shall be preserved and upheld. The commission may be paid in cash, in shares or in bonds of the Company, or by way of any two or of all three of said means.
| 13. | Unless otherwise stipulated in these Articles, the Company shall be entitled to consider the registered holder of any share to be the absolute holder of said share, and accordingly, shall not be obligated to recognize any claim in equity or any claim on any other basis which may be filed by any other person with regard to such a share or with regard to any benefit related to such a share, unless it shall have been instructed to do so by a competent court of law or shall be required to do so by virtue of the provisions of the Companies Law or by virtue of the provisions of any other law. |
| 14. | The share certificates shall be issued by the Company and shall bear the properly affixed signature of two Directors, or of any two of the following: a |
| 15. | Should any share certificate become mutilated or defaced, then, following the submission of said certificate to the |
| C-6 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| 16. | A share certificate which is registered in the names of two or more persons shall be delivered to that person whose name is listed first in the Register or in an Additional Register. |
Transfer and Endorsement of Shares
| 17. | The Company shall maintain |
| 18. | No transfer of any share shall be registered unless a certificate of transfer shall have been submitted to the Company, in the usual form or in a form which shall be set forth by the Board of Directors or the Company Secretary |
The transferor shall be deemed to be the holder of a transferred share until the name of the transferee shall have been registered in the Register with regard to said share. With regard to shares which are registered in an Additional Register, a certificate of transfer may be drawn up in the form, and may be signed in the manner, which shall be permitted or customary, according to the Companies Law or prevailing procedure, in the country in which the Additional Register is maintained.
| 19. | Each certificate of transfer shall be handed in for registration at the Registered Office, or the office where an Additional Register of the Company is maintained (whichever is relevant), or in any other place, as the Board of Directors or the Company Secretary |
| 20. | The Board of Directors is entitled to refuse to register or to confirm the transfer of shares, until the shares whose transfer is desired or any part thereof shall have been fully paid up. The fact of whether or not the refusal applies to a transferee who is the holder of a share in the Company shall have no relevance. |
| 21. | The executors of the will or of the estate of an individual shareholder who has died—or, in cases where there are no executors of a will or of the estate, the persons who have been declared by a competent court of law to hold a right of benefit, in the capacity of the heirs of said individual shareholder who has died—shall be the only persons who shall be recognized by the Company as the holders of a right in any share which is registered in the name of the deceased individual. Should a share be registered in the names of two or more shareholders, the Company shall recognize only the surviving partner or the surviving partners, or the executors of the will or of the estate of the last partner to have died, as the holders of a right in said share, and, should there be no executor of a will or of the estate (of the last deceased partner), the Company shall recognize, as the holders of a right in said share, only the persons who have been declared by a competent court of law to hold a right of benefit, in the capacity of the heirs of the last deceased partner. |
| 22. | Any person or entity that has become entitled to a share as the result of the death or bankruptcy of a shareholder shall be entitled—after having provided such evidence as the Board of Directors or the Company Secretary |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-7 | |
Appendix C
| shareholder, to perform any transfer which the deceased or bankrupt shareholder could have performed. However, in any such case, the Board of Directors shall be entitled to refuse or to delay registration, as it would have been entitled to do in the case of transfer of the share by the deceased shareholder prior to his or her death, or by the bankrupt shareholder prior to the occurrence of the bankruptcy. |
| 23. | Any person or entity that has become entitled to a share as the result of the death or bankruptcy of a shareholder shall also be entitled to the same dividends and other rights to which said person or entity would have been entitled, had said person or entity been the registered holder of said share. However, prior to being registered as a shareholder, said person or entity shall not be entitled, with respect to said share, to benefit from any right which is granted to shareholders with regard to General Meetings of shareholders in the Company. |
Bearer Share Warrants
|
|
|
|
|
| C-8 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
Increase and Issue of the Registered Capital
| 24. |
|
| (a) | The Company shall be entitled, from time to time, pursuant to a resolution to be passed by the General Meeting of shareholders, subject however to the provisions of these Articles, to increase the share capital of the Company, by means of such type and in such amount, which shall be divided into shares of such par value, as shall be determined in the resolution as stated above. |
| (b) | Without derogating from any special rights or privileges which are granted to any existing shares in the share capital of the Company, the new shares shall be issued pursuant to such terms, subject to such reservations, and in accordance with such advantages and rights as shall apply to those shares, all subject to the provisions of these Articles and as set forth in the resolution concerning the issue thereof. Subject to the provisions of these Articles, the Company shall be entitled to issue shares with preferred rights, deferred rights or limiting rights with regard to dividends, the return of capital, or participation in surplus assets or otherwise with special rights or without special rights, including with or without voting rights. |
| 25. |
|
| 26. |
|
Change in the Registered Capital
| 27. |
|
| (a) | To consolidate its share capital or any part thereof, and to divide it into shares of par value per share which is higher than that of its existing shares; or |
| (b) | To subdivide its existing shares, in whole or in part, into shares of par value per share which is lower than that of its existing shares, subject to that set forth in the provisions of the Companies Law; or |
| (c) | To cancel shares with respect to which, as at the date of said resolution, no obligation including a contingent obligation on the part of the Company to issue such shares exists, and to reduce the share capital by the amount of the shares canceled as set forth above; or |
| (d) | To reduce the share capital of the Company and any capital fund, by any means which it shall see fit, subject to all of the conditions and approvals which shall be required by any law. |
| 28. | With respect to any consolidation of issued shares into shares of larger nominal value, and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto as it deems fit and in its sole discretion. |
| 29. |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-9 | |
Appendix C
| Meetings of the Company shall be referred to as “Special Meetings |
| 30. |
|
| 31. |
|
| 32. |
|
The accidental omission to give notice of a General Meeting to any shareholder, or the non-receipt of notice by any shareholder, or any flaw in the conduct of a General Meeting, shall not invalidate the proceedings, or any resolution passed, at any General Meeting.
Deliberations at General Meetings
| 33. |
|
| (a) | The function of the Annual |
| (b) |
|
| C-10 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
The Proposal Request shall set forth (i) the name, business address, telephone number and fax number or email address of the Proposing Shareholder (or each Proposing Shareholder, as the case may be) and, if an entity, the name(s) of the person(s) that controls or manages such entity, (ii) the number of Ordinary Shares held by the Proposing Shareholder, directly or indirectly, and, if any of such Ordinary Shares are held indirectly, an explanation of how they are held and by whom, and, if such Proposing Shareholder is not the holder of record of any such Ordinary Shares, a written statement from the holder of record or authorized bank, broker, depository or other nominee, as the case may be, indicating the number of Ordinary Shares the Proposing Shareholder is entitled to vote as of a date that is no more than |
The parenthetical regulation headings contained in this Article37 (b) are for convenience only and shall not be deemed a part hereof or used to limit the scope of disclosure required by this Article37 (b). References in this Article37 (b) to particular laws, regulations or rules shall be deemed to apply to such amended, successor or other similar laws, regulations or rules as shall apply to the Company and be in effect from time to time.
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-11 | |
Appendix C
| 34. |
|
| 35. |
|
| 36. |
|
| 37. |
|
| 38. |
|
| 39. |
|
| “ TEVA PHARMACEUTICAL INDUSTRIES LIMITED | ||
| I, the undersigned, of , in my capacity as a shareholder of Teva Pharmaceutical Industries Limited, do hereby vote in writing, with ordinary shares which are registered in my name, at the General Meeting of shareholders in the Company which shall take place on the day of the month of in the year and at any adjourned meeting, with regard to the proposed resolutions which are set forth below, as follows: | ||
| Signed this day, the day of the month of in the year .” | ||
| C-12 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| 40. |
|
| 41. |
|
| 42. |
|
| 43. |
|
| 44. |
|
| 45. |
|
| 46. |
|
| 47. |
|
| 48. |
|
| 49. |
|
| 50. |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-13 | |
Appendix C
| 51. |
|
| 52. |
|
| 53. |
|
“TEVA PHARMACEUTICAL INDUSTRIES LIMITED
I, the undersigned, of , in my capacity as a shareholder of Teva Pharmaceutical Industries Limited, do hereby appoint of as my proxy, to vote in my name and in my stead, at the General Meeting of shareholders in the Company which shall take place on the day of the month of in the year and at any adjourned meeting.
Signed this day, the day of the month of in the year , ”
| 54. |
|
| (a) | The maximum number of Directors of the Company shall be 18 (eighteen) Directors. Such maximum number includes the two external Directors |
| (b) | The minimum number of Directors on the Board of Directors shall be 3 (three). |
|
Subsection 9.9.5 (b)(i) of the Employment Agreement will hereafter read as follows:
| C-14 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
“If the Date of Termination is during a Performance Period, then the applicable Sign On PSU Award, Annual Equity Awards
Appendix C
| 55. |
|
Appointment and Additional Annual Awards shall be eligible for full vesting and settlement, at the end of the applicable Performance Period based on actual performance through the entire Performance Period”.Retirement from Office
Subsection 9.9.5 (b)(ii) of the Employment Agreement will hereafter read
| 56. |
|
| (a) | The |
| (b) | The |
|
|
|
|
|
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-15 | |
“If the Date of Termination occurs following the expiration of an applicable Performance Period, then the portion of the applicable Sign On PSU Award, Annual Equity Awards and Additional Annual Awards earned based on actual performance during the Performance Period shall immediately vest and be settled”;
Appendix C
|
| (d) |
|
c.
| 57. |
|
| 58. |
|
| 59. |
|
| (a) | The office of a Director shall fall vacant, prior to the expiry of his or her term in office, only: |
| (1) | If he or she has |
|
|
|
|
|
|
| ( | For any |
| (b) | The Board of Directors shall be entitled to appoint, as a replacement for a Director whose office has fallen vacant pursuant to |
| (c) | Any person or persons who are competent to appoint and/or to elect a Director pursuant to the provisions of these Articles shall be entitled to determine that the said appointment/election shall enter into force at some future date. |
| C-16 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| 60. |
|
| (a) | Should any Director violate a duty of care or a duty of loyalty to the Company, the General Meeting shall be entitled to remove that Director from office prior to the expiry of his or her term in office ( |
| (b) | Should a Director have been removed from office as set forth in subsection (a) above, the General Meeting shall be entitled, in the same session, to elect another Director in his or her stead. Should it fail to do so, the Board of Directors shall be entitled to do so, pursuant to the provisions of Article56(d) |
| (c) | Any Director who shall have been appointed by way of a resolution as stated in subsection (b) above, shall serve in office for the period remaining of the term in office of the Removed Director and shall be qualified to be re- |
Annual Time Based Equity AwardsRemuneration of Directors. Any portion
| 61. |
|
| (a)( |
|
|
| (b) |
Powers and Duties of the Annual Equity Award that vests solely based on the continued serviceBoard of Executive that is unvested asDirectors
| 62. |
|
Operations of the DateBoard of TerminationDirectors
| 63. |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-17 | |
Appendix C
| 64. |
|
| 65. |
|
| 66. |
|
| 67. |
|
| 68. |
|
Should the Chair of the Board of Directors fail to convene a session of the Board of Directors within 21 days of the date on which a demand was presented to him or her by any person entitled to present a demand as stated above (hereinafter: the“Demanding Party”), or within 21 days of the date on which he or she shall continuehave been demanded to vest, over the remainder of its original vesting period, on the same terms anddo so pursuant to the same extent as if Executive had remained employed by the Company in accordance with the terms and conditionsprovisions of the 2015 Plan (orCompanies Law, any successor thereto) during such period. In addition, the vested portion of any stock option asone of the conclusionDemanding Parties shall be entitled to convene a session of the stock option vesting term will be exercisable throughBoard of Directors pursuant to the original expiration dateprovisions of the term of such stock option, following which any portion of such stock option not exercised will automatically expire.Companies Law.
| 69. |
|
| 70. |
|
| 71. |
|
| C-18 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
|
Committees of the Board of Directors
| 72. |
|
| (a) | Subject to the provisions of applicable law, |
|
|
|
|
|
|
|
To preclude all doubt, the Board of Directors is entitled to transfer its power to authorize a transaction which is not an extraordinary transaction which complies with that set forth in Section 270 (1) of the Companies Law, to a Committee of the Board of Directors.
| (b) | Subject to the provisions of the Companies Law, a transaction between the Company and an Officer or a transaction between the Company and another entity in which an Officer of the Company has a personal interest according to Section 270(1) of the Companies Law, which is not an extraordinary transaction (as such term is defined in |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-19 | |
Appendix C
| (c) |
|
| 73. |
|
| 74. |
|
Audit Committee
|
3.
|
RatificationSignature and ConfirmationMinutes. Except as specifically amended by this Amendment, the Employment Agreement is hereby ratified and confirmed in all respects and remains valid and in full force and effect. Whenever the Employment Agreement is referred to in this Amendment or in any other agreement, document or instrument, such reference shall be deemed to be to the Employment Agreement, as amended by this Amendment, whether or not specific reference is made to this Amendment.
4. Entire Agreement. The Employment Agreement and this Amendment constitute the entire understanding and agreement of the parties hereto regarding the employment of the Executive and supersede all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter hereof.
| 75. |
|
| 76 |
|
|
|
|
|
| 77. |
|
Director-Emeritus
|
| C-20 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| 78. |
|
| (a) | The Board of Directors shall appoint, from time to time, a person who shall serve as the CEO of the Company, for such a duration and pursuant to such terms, including terms with regard to remuneration and/ |
| (b) | The Board of Directors is entitled to terminate the term in office of the CEO, at any time and for any reason whatsoever. |
| (c) | The CEO |
| (d) | The CEO shall be responsible for the day to day management of the affairs of the Company, within the framework of the policy that has been set forth by the Board of Directors, subject to its guidelines, and all in accordance with the provisions of the Companies Law. |
| 79. |
|
F. DIVIDEND, RESERVE FUND AND CAPITALIZATION
| 80. |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-21 | |
Appendix C
| 81. |
|
| 82. |
|
| 83. |
|
| 84. |
|
| 85. |
|
| 86. |
|
| 87. |
|
| C-22 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
5. Governing LawCapitalization. This Amendment shall be governed by and construed and enforced in accordance with the laws of Israel without giving effect to the choice of law or conflict of laws provisions thereof.
6. Controlling Document. In case of conflict between any of the terms and condition of this Amendment and the Employment Agreement, the terms and conditions of this Amendment shall prevail.
7. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. The execution of this Amendment may be by actual signature or by signature delivered.
* * * * *
| 88. |
|
| (a) | The Board of Directors shall be entitled, at any time and from time to time, to adopt a resolution stating that any part of the amounts which are credited at that time to any capital fund or held by the Company as profits which may be distributed, shall be capitalized and shall be released for distribution among the shareholders who would have been entitled to receive them, had they been distributed as a dividend, and in the same proportion, provided that said amounts shall not be paid in cash, but shall be used to fully pay up whether according to their par value or with the addition of any premium which shall be determined by the Board of Directors shares which have not yet been issued or bonds of the Company, which shall be issued and distributed among said shareholders and in such a proportion, as shares or bonds which have been fully paid up. |
| (b) |
| i) |
|
| ii) |
|
| iii) |
|
| ||
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-23 | |
Appendix C
| 89. |
|
| 90. |
|
| 91. |
|
| (a) | The Board of Directors of the Company shall appoint an Internal Auditor, pursuant to the provisions of the Companies Law. |
| (b) | The Board of Directors is entitled to terminate the term of office of the Internal Auditor, pursuant to the provisions of the Companies Law. |
| (c) | The organizational superiors of the Internal Auditor shall be the CEO jointly with the Chair of the Board of Directors. |
| 92. |
|
| 93. |
|
| 94. |
|
| 95. |
|
| C-24 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| 96. |
|
H. EXEMPTION, INSURANCE AND INDEMNIFICATION OF OFFICERS
| 97. |
|
| (a) | Breach of a duty of care vis-à-vis the Company or vis-à-vis another person; |
| (b) | Breach of a duty of loyalty vis-à-vis the Company, provided that the Officer acted in good faith and had reasonable grounds to believe that the action in question would not adversely affect the Company; |
| (c) | Financial liability which shall be imposed upon said Officer in favor of another person as a result of any action which was performed by said Officer in his or her capacity as an Officer of the Company; including |
| (d) |
|
| 98. |
|
| (a) | Financial liability imposed upon said Officer in favor of another person by virtue of a decision by a court of law, including a decision by way of settlement or a decision in arbitration which has been confirmed by a court of law, provided that the undertaking to indemnify in advance shall be limited to events which, in the opinion of the Board of Directors of the Company, are foreseeable, in light of the Company’s activities at the time that the undertaking to indemnify was given, and shall further be limited to amounts or criteria that the Board of Directors has determined to be reasonable under the circumstances, and provided further that in the undertaking to indemnify in advance the events that the Board of Directors believes to be |
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | C-25 | |
Appendix C
| foreseeable in light of the Company’s activities at the time that the undertaking to indemnify was given are mentioned, as is the amount or criteria that the Board of Directors determined to be reasonable under the relevant circumstances, including |
| (b) |
|
| (c) |
|
| (d) |
|
| 99. |
|
| 100. |
|
Amendment of the Articles of Association
| 101. |
|
| (a) | The Company shall be entitled to modify any of the provisions of this Article and any of the provisions of Articles 3, |
| ||
| C-26 | Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Appendix C
| (b) | The Company shall be entitled to modify the remaining provisions of these Articles (which are not included in the list set forth in subsection (a) above) by way of a resolution to be adopted at a General Meeting by a majority of three-quarters of the votes at that session, unless a lower percentage shall have been established by the Board of Directors, by a majority of three- fourths of the persons voting, at a session of the Board of Directors which shall have taken place prior to that General Meeting. |
| 102. |
|
| Teva Pharmaceutical Industries Ltd. 2022 Proxy Statement | |
Thursday, June 23, 20224:00 p.m., Israel time9:00 a.m., Eastern timeThe 2022 Annual Meeting will be conducted in virtual format only. See inside for further details.If you need assistance or have questions regarding the 2022 Annual Meeting, please contact our Investor Relations department: TevaIR@tevapharm.comTeva Pharmaceutical Industries Ltd.124 Dvora HaNevi'a Street, Tel Aviv, 6944020 Israel
TEVA PHARMACEUTICAL INDUSTRIES LIMITED (“TEVA”)
20202022 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 9, 202023, 2022
PROXY CARD
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF TEVA
Teva’s Board of Directors recommends that you vote FOR all proposals. If you execute and return this proxy card without indicating any directions with respect to any matter, this proxy card will be voted FOR all proposals.
Information in respect of the undersigned:
Shareholder name: | ||
Number of identity card or passport (country) or corporation number (country): | ||
| ||
| ||
Number of Teva ordinary shares being voted: | ||
The undersigned hereby constitutes and appoints each of Messrs. DOV BERGWERK, CHEN YEHUDAI, DIKLA TADMOR and NETANEL DEROVAN,SHIRA ARAN-PORAT, acting individually, the true and lawful attorney, agent and proxy of the undersigned, with full power of substitution, to vote with respect to the number of shares set forth above, standing in the name of the undersigned at the close of trading on the Record Date, at the 20202022 Annual General Meeting of Shareholders, and at any and all adjournments thereof, with all the power that the undersigned would possess if personally present and especially (but without limiting the general authorization and power hereby given) to vote as instructed on the reverse side.
In order to be counted, a duly executed proxy must be received by Teva by 4:3000 p.m., Israel time, on June 5, 202019, 2022 (if not revoked prior to such time), unless determined otherwise by the chairman of the meeting, by submitting this proxy card to Teva’s executive offices at 5 Basel124 Dvora HaNevi’a Street, Petach Tikva, 4951033Tel Aviv, 6944020, Israel to the attention of the Corporate Secretary.Company Secretary or by email to TevaAGM2022@tevapharm.com.
In order to be counted, in addition to this proxy card: (i) shareholders registered in Teva’s shareholder register (Registered Holders) must also provide Teva with a copy of such Registered Holder’s identity card, passport or certificate of incorporation, as the case may be; and (ii) a shareholder registered pursuant to Section 177(1) of the Israeli Companies Law, 5759-1999, through a nominee company(Non-Registered Holders) must also provide Teva with an ownership certificate confirming suchNon-Registered Holder’s ownership of Teva’s ordinary shares on the Record Date, which certificate must be approved by a member of the Tel Aviv Stock Exchange, as required by the Israeli Companies Regulations (Proof of Share Ownership for Voting at a General Meeting), 5760-2000.Non-Registered Holders may alternatively submit their votes through the electronic voting system of the Israeli Securities Authority athttps//:votes.isa.gov.il.
This proxy card, when properly executed, will be voted in the manner directed herein by the undersigned. Any and all proxies heretofore given are hereby revoked.
(Continued and to be signed on the reverse side)
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY
Matter on the Agenda: | Please vote by marking “X” in the | ||||||||||||||||||
For | Against | Abstain | |||||||||||||||||
1. | ELECTION OF DIRECTORS:
| ||||||||||||||||||
(a)
| |||||||||||||||||||
(b)
| |||||||||||||||||||
(c)
| |||||||||||||||||||
(d) Dr. Tal Zaks | |||||||||||||||||||
2. | TO APPROVE, ON ANON-BINDING ADVISORY BASIS, THE COMPENSATION FOR TEVA’S NAMED EXECUTIVE OFFICERS
| ||||||||||||||||||
3. | TO APPROVE TEVA’S
| ||||||||||||||||||
Yes | No | ||||||||||||||||||
Regarding Proposal 3, please indicate whether or not you are a “controlling shareholder” of Teva and whether or not you have a personal benefit or other interest in this Proposal 3. IMPORTANT NOTE: If you do not complete this section, or if you indicate YES (i.e., that you are a controlling shareholder or that you have a personal benefit or other interest in this Proposal 3), your vote on Proposal 3 will not be counted for purposes of the Disinterested Majority. See the Proxy Statement for more information, including the definitions of these terms under the Israeli Companies Law. Teva is not currently aware of any “controlling shareholder,” as defined under the Israeli Companies Law, and believes that the vast majority of its shareholders should not have a personal benefit or other interest in Proposal 3. | |||||||||||||||||||
For | Against | Abstain | |||||||||||||||||
4. | TO APPROVE
| ||||||||||||||||||
5. | TO APPOINT KESSELMAN & KESSELMAN, A MEMBER OF PRICEWATERHOUSECOOPERS INTERNATIONAL LTD., AS TEVA’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNTIL TEVA’S
| ||||||||||||||||||
| Signature | Date |
