CFXA Colfax Corporation

We are asking our stockholders to ratify the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of our independent auditors. Ernst & Young LLP has served as our independent auditor since its appointment in 2002. Although stockholder ratification is not required, the appointment of Ernst & Young LLP is being submitted for ratification as a matter of good corporate practice with a view towards soliciting stockholders’ opinions which the Audit Committee will take into consideration in future deliberations. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders. The Board of Directors and the Audit Committee believe that the retention of Ernst & Young LLP as the Company’s independent auditor is in the best interests of the Company and its stockholders.

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

Audit Fees

This category of the table above includes fees for the fiscal years ended December 31, 2019 and 2018 that were for professional services rendered (including reimbursement for out-of-pocket expenses) for the integrated audits of our annual consolidated financial statements, for reviews of the financial statements included in our Quarterly Reports on Form 10-Q, and for statutory audits.

Audit-Related Fees

This category of the table above includes the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” For 2019, Audit-Related Fees included fees related to services rendered in connection with audited carve-out financial statements of our Air & Gas Handling business in connection with the disposition of that business in September 2019 and services rendered in connection with the acquisition of DJO. There were no Audit-Related Fees incurred for 2018.

Tax Fees

This category of the table above includes fees billed for tax compliance, tax preparation, tax planning and other tax services. For 2019, Tax Fees included approximately $1,004,038 for tax compliance and tax preparation and approximately $19,000 for tax planning and other tax services. For 2018, Tax Fees included approximately $910,555 for tax compliance and tax preparation and approximately $234,920 for tax planning and other tax services.

All Other Fees

This category of the table above includes fees billed for products and services other than those described above under Audit Fees, Audit-Related Fees and Tax Fees. For 2019 and 2018, these included fees incurred for Ernst & Young LLP’s online accounting information tool.

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

Audit Committee’s Pre-Approval Policies and Procedures

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

Vote Required

The affirmative vote of the holders of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote is required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2020.

Board Recommendation

AUDIT COMMITTEE REPORT

The Audit Committee consists of A. Clayton Perfall, Patrick Allender, Thomas Gayner, and Didier Teirlinck, who are all non-management directors. The members of the Audit Committee meet the independence and financial literacy requirements of the NYSE and the additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. In 2019, the Audit Committee held 13 meetings. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors, which it annually reviews. The charter, which complies with all current regulatory requirements, is available on the Company’s website at www.colfaxcorp.com on the Investors page under the Corporate Governance tab. During 2019, at each of its regularly scheduled meetings, the Audit Committee met with senior members of the Company’s finance team. Additionally, the Audit Committee has separate private sessions, during its regularly scheduled meetings, with the Company’s independent registered public accounting firm and head of internal audit, respectively. The Audit Committee is updated periodically on management’s process to assess the adequacy of the Company’s system of internal control over financial reporting, the framework used to make the assessment, and management’s conclusions on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee has also discussed with the independent registered public accounting firm, their evaluation of the Company’s system of internal control over financial reporting.

The Audit Committee evaluates the performance of the Company’s independent registered public accounting firm each year and determines whether to reengage the current independent registered accounting firm or consider other independent registered accounting firms. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered accounting firm, the firm’s global capabilities, and the firm’s technical expertise, tenure as the Company’s independent registered accounting firm and knowledge of the Company’s global operations and businesses. In connection with the applicable audit partner rotation requirements, the Audit Committee also is involved in considering the selection of the auditors’ lead engagement partner when rotation is required. Based on this evaluation, the Audit Committee decided to engage Ernst & Young LLP as our independent registered accounting firm for the year ended December 31, 2020. The Audit Committee reviews with the independent registered accounting firm and management the overall audit scope and plans, as well as the results of internal and external audit examinations and evaluations by management and the independent registered accounting firm of the Company’s internal controls over financial reporting and the quality of the Company’s financial reporting. Although the Audit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee recommends that the Board ask stockholders, at the Company’s annual meeting, to ratify the appointment of the independent registered accounting firm (see Proposal 2 beginning on page 23).

The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2019 with management and with the Company’s independent registered public accounting firm, including a discussion of the quality and suitability of the accounting principles, the reasonableness of significant accounting judgments and estimates, and the clarity of disclosures in the financial statements. In addressing the quality of management’s accounting judgments, members of the Audit Committee are apprised of certifications prepared by the Chief Executive Officer and the Chief Financial Officer that the unaudited quarterly and audited annual consolidated financial statements of the Company fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company.

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

The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC. The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence. On the basis of the reviews and discussions referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2019 be included in the Company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

Audit Committee of the Board of Directors

A. Clayton Perfall, Audit Committee Chair

Patrick Allender

Thomas Gayner

Didier Teirlinck

COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis of compensation arrangements of our named executive officers for 2019 should be read together with the compensation tables and related disclosures set forth under the section heading “Executive Compensation.”

Executive Summary

Named Executive Officers

The following discussion provides details regarding our executive compensation program and the compensation of our named executive officers in 2019. Our named executive officers (“NEOs”) for 2019 are:

Our Compensation Philosophy and Guiding Principles

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

Fiscal 2019 Pay for Performance Alignment and Compensation Overview

Fiscal 2019 was a transformational year for Colfax, as we completed significant transactions that marked a strategic shift to diversify end-market exposure, reduce cyclicality, and increase profitability and cash flow, positioning us for continued growth. In February 2019, we completed the acquisition of DJO Global, Inc. (“DJO”) and related financing. DJO is a global leader in orthopedic solutions, providing orthopedic devices, reconstructive implants, software and services spanning the full continuum of patient care, from injury prevention to rehabilitation. DJO has approximately 5,000 employees across 18 locations around the world. The acquisition is expected to evolve the Company to higher margins, faster growth, and lower cyclicality, while providing opportunities for significant bolt-on and adjacent acquisitions over time.

In May 2019, we signed a purchase agreement to sell our Air & Gas Handling business for an attractive valuation. We completed the divestiture in September 2019 and used the proceeds to pay-down our debt and position us to pursue strategic bolt-on acquisitions for our remaining businesses. The divestiture reduced our exposure to cyclical end markets and improved our profit margin and cash generation profile.

Our strong operational performance in 2019 reflected improvements in our Fabrication Technology business that enabled it to increase its market share while sharply improving margins. DJO rapidly returned to healthy growth levels following investments and improvements in its operating and innovation capabilities. Consolidated net sales of over $3.3 billion reflected only 10 months of DJO results, and Colfax delivered full year organic growth despite dynamic industrial markets. Excluding costs associated with portfolio changes, exiting certain pension obligations, and restructuring charges primarily related to DJO, our core operating metric, adjusted EBITA, and adjusted earnings per share (“EPS”) showed strong growth.

We achieved and exceeded many of our internal corporate financial and operational goals, leading to an overall corporate bonus achievement under our Annual Incentive Plan (“AIP”) of 100% for Messrs. Trerotola, Hix, and Pryor.

In 2019, Fabrication Technology net sales increased 2.5%, including the successful integration of businesses acquired in 2018. Fabrication Technology achieved organic growth in 2019 at rates higher than the growth rates of competitors, increasing its market share. Overall, the business improved its cost position and achieved its commercial objectives, but the business was below threshold achievement on its working capital metric. These results were reflected in a company-wide/business specific achievement under our AIP with an 88% blended company factor (weighted 30% Colfax corporate and 70% ESAB) for Mr. Kambeyanda.

For the 10-month period in 2019 since being acquired by Colfax in February 2019, DJO achieved net sales of $1.1 billion, with $333.7 million in the fourth quarter of 2019. Since we acquired DJO, we have made significant investments to support operating improvements throughout the business and completed many of the transformational projects that had been started in 2017, enabling the business to better serve its customers. Organic growth improved throughout the year, delivering strong year-on-year organic growth in the fourth quarter of fiscal 2019, and revenue for 2019 came in above target while EBITDA was below threshold. These results were reflected in a company-wide/business specific achievement under our AIP with an 83% blended company factor (weighted 30% Colfax corporate and 70% DJO) for Mr. Shirley.

Further, the Compensation Committee took the following actions during 2019:

	The Compensation Committee redesigned our performance-based restricted stock units (“PRSUs”) in 2019 and transitioned from using an operational improvement metric (adjusted operating margin) and an investor return benchmark (relative total stockholder return (“TSR”) vs. the S&P MidCap 400 Industrials Index), each of which was equally weighted and measured over a three-year period, to solely using relative TSR vs. the S&P MidCap 400 Industrials Index, measured over a three-year period. The Compensation Committee believes that using a single investor return benchmark is more appropriate for the Company at this time due to the highly acquisitive nature of our business, which makes it difficult to set meaningful three-year operational improvement metrics.
	Each of Messrs. Trerotola’s and Pryor’s annual equity awards consisted of approximately equal parts of (i) stock options that vest in equal installments over a three-year period following their grant date, and (ii) PRSUs that cliff vest in three years based on relative TSR performance over a three-year performance period. Mr. Trerotola did not receive annual equity grants in 2018 and 2017 due to his new hire grant in 2015 and his special equity grant that was made in January 2016.
	Due to outstanding performance related to the portfolio changes in fiscal 2019, the Compensation Committee approved a promotional increase to Mr. Hix’s base salary and to Mr. Kambeyanda’s base salary and long-term incentive awards. For their performance throughout the transactions noted above, the Committee also approved in December 2019 a one-time grant of RSUs for Messrs. Hix and Kambeyanda that vest ratably over a three-year period. Both gentlemen also received their annual equity award, which consisted of (i) stock options that vest in equal installments over a three-year period following their grant date and (ii) PRSUs that cliff vest in three years based on relative TSR performance over a three-year performance period.
	Mr. Shirley’s annual equity award consisted of (i) stock options that vest in equal installments over a three-year period following their grant date, (ii) PRSUs that become earned subject to achieving adjusted EBITDA targets at DJO (the “DJO PRSUs”) over a two-year performance period, with potential 50% vesting on the second anniversary of the grant date and 50% vesting on the third anniversary of the grant date, and (iii) RSUs that cliff vest two years following the grant. With respect to the DJO PRSUs, the Compensation Committee awarded a larger grant of PRSUs than normally provided annually to incentivize Mr. Shirley to achieve deal related targets that would represent significant progress toward the achievement of the Company’s long-term growth objectives with respect to DJO. Additionally, the Compensation Committee believes Mr. Shirley’s award will help align the new DJO platform with Colfax’s long-term growth objectives.
	In light of the strategic review undertaken with respect to the Air & Gas Handling business, and its ultimate sale completed in September 2019, the Compensation Committee determined it was appropriate that Mr. Brander receive a deal related bonus of $3,152,585 for his performance during the transaction. Mr. Brander’s annual equity award consisted solely of stock options that were scheduled to vest in equal installments over a three-year period following their grant date; however, these options were forfeited in connection with the sale of the Air & Gas Handling business.

2019 Say-On-Pay Vote

At our 2019 Annual Meeting, approximately 99% of the stockholder votes cast on our advisory proposal to approve the compensation of our NEOs were voted in favor of our executive compensation proposal. Our Compensation Committee considered the outcome of this vote in the context of our prior and on-going engagement with stockholders and accordingly did not make any additional changes to our executive compensation policies and program elements (other than the redesign of our PRSUs described above). The Compensation Committee has determined to provide for an annual “say-on-pay” proposal and will continue to carefully evaluate the feedback received from our stockholders in connection with the voting on that proposal.

Our Executive Compensation Program

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

For 2019, the Compensation Committee established the following target compensation program for our CEO:

2019 CEO Incentive Compensation Structure

With respect to our other NEOs, for 2019, the Compensation Committee established the following target compensation program:

2019 Incentive Compensation Structure for Other NEOs (Average)^*

Our 2019 executive compensation structure consists of three core compensation elements–base salary, an annual cash bonus, and long-term incentives. The Compensation Committee reviewed each element individually while also considering the total compensation package provided to create an appropriate mix designed to attract, incentivize, and retain our executives. The following table summarizes the core elements of our 2019 executive compensation program:

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

What we do			What we don’t do
	Pay for performance focus – Our AIP compensation is linked to pre-established financial and operational goals that are intended to drive performance over the annual performance plan period. Options and PRSUs are linked with longer-term performance, our stock price, and, for PRSUs, relative TSR performance, which we believe incentivizes long-term Company success and stockholder value creation.			No gross-up payments to cover excise taxes or perquisites – We do not provide tax gross-ups to our executives in connection with severance benefits or executive perquisites other than relocation.
	Varying performance metrics under short-term and longer-term incentive plans – In balancing compensation objectives linked to short-term and long-term time horizons, the Company seeks to align compensation with several performance metrics that are critical to achievement of sustained growth and stockholder value creation.			No pledging or hedging of Company stock – We prohibit our executives and directors from hedging Colfax stock and from entering into new pledge arrangements or derivative agreements using Colfax stock.
	Caps on Annual Incentive Plan payouts – Executive bonus payments are capped under our AIP, as approved by our stockholders, in part to discourage excessive risk taking. The Compensation Committee is prohibited from increasing the results with respect to each financial and operational performance metric once established, but retains the discretion to reduce or eliminate compensation under our AIP even if performance goals are attained.			No repricing or buyout of underwater stock options – We do not permit the repricing of underwater stock options without the express approval of our stockholders.
	Double trigger provisions for change in control – Severance payable upon a change in control is only received upon executive’s employment termination without cause or resignation for good reason within two years following the change in control. This approach is commonly referred to as “double trigger.”			No excessive change in control payments – No severance upon a change in control in excess of two times salary and target bonus.
	Clawback Policy and Insider Trading Policy – We have a comprehensive compensation clawback policy that is triggered by a material restatement of the Company’s financial statements and applies to all of our executive officers, and enforce a strict insider trading policy and blackout periods for executives and directors.			No short-term vesting – We do not award any long-term incentives with a vesting period shorter than one year.
	Stock Ownership Policy – We have a robust stock ownership policy to further align the long-term financial interests of Company executives with those of our stockholders.			No compensation programs or policies that reward for material or excessive risk taking – We annually review the Company’s compensation policies and practices in relation to our risk management practice and any potential risk-taking incentives. Our most recent assessment concluded that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
	Independent Compensation Committee and Consultant – Our Compensation Committee is comprised solely of independent directors. The compensation consultant to the Compensation Committee during 2019, FW Cook (i) is, based on the Compensation Committee’s assessment, independent and without any conflicts of interest with the Company and (ii) has never provided any services to the Company other than the compensation-related services provided to the Compensation Committee. See page 37 for further details.			No pension plan – We do not maintain a defined benefit pension plan for any senior executives, other than a frozen foreign plan that we acquired via acquisition which is limited to a small number of historical participants.

Determination of Executive Compensation and Performance Criteria

Our executive compensation program is based on the philosophy and design outlined above with a focus on exceptional performance and continuous improvement from our management team. Within this framework, the Compensation Committee exercises its reasoned business judgment in making executive compensation decisions and takes into account recommendations by our Chief Executive Officer with respect to the compensation of each executive officer, other than himself (see “CEO Recommendations” on page 36). Some of the factors that generally are referenced when making executive compensation decisions, none of which is assigned a particular weight, are as follows:

	The nature of the executive’s position
	The Compensation Committee’s assessment of pay levels and practices for executives with the skills and experience our executives possess (see “Role of Compensation Consultants and Peer Data Review” on page 36)
	The performance record of the executive
	The Company’s operational and financial performance
	The executive’s leadership potential
	The retention value of our compensation program over time

Further, a substantial percentage of compensation under our Annual Incentive Plan is determined solely by the achievement of annual performance criteria based on Board-approved financial and operational goals for the fiscal year. These goals are then incorporated into the metrics set for our Annual Incentive Plan and approved by the Compensation Committee, as further discussed under “Bonus Calculation and Payment - Financial and Operational Metrics and 2019 Performance Results” on page 32. We believe that this link to our Board-established corporate and business goals reinforces alignment and incents breakthrough results both at the business-unit level and Company-wide.

Elements of Our 2019 Executive Compensation Program

Base Salary

Base salaries are designed to provide compensation that is market competitive so that we can attract the best qualified individuals and retain our senior management. Base salaries are established at an executive’s hire and generally reviewed annually for potential increases. In February 2019, the Compensation Committee set the salary levels for each of our NEOs based on the Compensation Committee’s assessment of the relative roles and responsibilities of management and the results of their individual performance assessments, combined with perspective from competitive compensation data prepared by FW Cook and the Compensation Committee’s reasoned business judgment. Mr. Shirley’s base salary was approved by the Compensation Committee in connection with the DJO acquisition and based upon his historical compensation and a review of competitive compensation data prepared by FW Cook. In December 2019 the Compensation Committee approved promotional increases for Messrs. Hix and Kambeyanda in light of their continuing strong performance, in particular their performance related to the transition of the portfolio, and to maintain market competitiveness. As a result, Mr. Hix’s salary was increased from the base salary of $595,000 set in February 2019 to $650,000, and Mr. Kambeyanda’s salary was increased from the base salary of $550,000 set in February 2019 to $625,000, in each case effective as of December 9, 2019. Messrs. Trerotola and Pryor received modest base salary increases in 2019 primarily reflecting our continued operational improvements and the Compensation Committee’s competitive marketplace review. Mr. Brander’s base salary increase was, in part, based on his engaged and focused leadership while the Company undertook a strategic review of the Air & Gas Handling business, which was first publicly announced in November 2018. A comparison of base salary levels as of December 31, 2019 (or September 30, 2019 for Mr. Brander) and 2018 is set forth below:

Annual Incentive Plan

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

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

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

The total amount earned is subject to adjustment based on individual achievement as measured by an IPF. The IPF is a multiplier that ranges from 0 to 1.5 (subject to an overall payout cap of 250% of the target bonus). For 2019, IPFs for our NEOs ranged from 1.0 to 1.35. The IPF rating is based on individual performance against pre-established objectives and the embodiment of our Company’s core values and behaviors. The IPF and key performance indicators include both financial and non-financial Company objectives over which the executive has primary control.

2019 Annual Incentive Plan Payout to Performance

Detail regarding the individual components of these formulas for fiscal year 2019, including a calculation of the payout percentages and description of the IPF component, follows the NEO bonus payout tables below.

Key Executive Team Achievements

	Successful completion of the DJO acquisition and sale of the Air & Gas Handling business, furthering the strategic shift of our portfolio to diversify end-market exposure, reduce cyclicality, and increase profitability
	Integration of DJO into existing operations, with certain members of the executive team undertaking oversight responsibilities with respect to our new medical device platform
	Successful integration of two fiscal 2018 acquisitions completed in our Fabrication Technology segment
	Very strong margin improvement in our Fabrication Technology segment
	Acceleration of quarter over quarter growth in our Medical Technology segment and strong growth in the Reconstructive and Prevention and Rehabilitiation product lines
	Introduction of 84 new products into the market, outpacing competitors and contributing to market share gains in our Fabrication Technology segment

Bonus Calculation and Payment – Financial and Operational Metrics and 2019 Performance Results

For corporate executives, the Company performance factors (CPF) consisted of financial targets based on net sales (as adjusted), adjusted EBITA, working capital turns (as adjusted), and adjusted EPS. In 2019, we transitioned from using a financial target based on operating profit (as adjusted) to the financial target based on adjusted EBITA. This was intended to better align with how Colfax management evaluates the business and the Company’s financial reporting practices. The pre-established targets were based upon Board-approved operational and financial goals for 2019. These targets represented significant progress in each category toward the achievement of the Company’s long-term growth objectives and aligned with the Board-approved corporate budget.

For Mr. Shirley, the “target goals” included adjusted EBITDA for the DJO segment, which was pre-established by the Compensation Committee in connection with the acquisition of DJO. His goals were set at levels that would represent significant progress in each category toward the achievement of the Company’s long-term growth objectives with respect to DJO and align with the Board-approved corporate budget.

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

The financial and operational performance measures and corresponding weightings of these metrics for 2019 were as follows:

Bonuses were calculated using the aforementioned formula as shown in the following table. These bonuses are also reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below on page 40.

In light of Mr. Brander’s execution and effort with respect to the sale of our Air & Gas Handling business, which strengthened our balance sheet and provides more flexibility for our growth strategy, Mr. Brander received a bonus for 2019 of $3,152,585, which is reflected in the “Bonus” column of the Summary Compensation Table below on page 40. The bonus was based upon the performance of the Air & Gas Handling business and his performance through the closing of the transaction.

Bonus Calculation – Target Bonus

The Compensation Committee annually reviews and approves AIP target bonus percentages for each executive officer in alignment with our compensation philosophy and taking into consideration the Compensation Committee’s competitive marketplace review. Targets as a percentage of base salary did not change from prior-year targets, except for Mr. Kambeyanda, whose AIP target increased from 75% to 80% to better align with the Compensation Committee’s evaluation of the competitive market.

In connection with the DJO acquisition, the Compensation Committee set Mr. Shirley’s target bonus at 100% based upon his historical compensation and the Compensation Committee’s competitive marketplace review.

The 2019 corporate performance goals and achievement for each are set forth below. As shown in the table, the weighted average performance result for 2019 corporate metrics was 100% of plan, compared to 121% of plan for 2018 and 83% of plan for 2017.

The table below summarizes the 2019 achievement of business goals for Messrs. Kambeyanda and Shirley, which when aggregated with the corporate goal results as shown above, determine their AIP financial and operational performance factor:

We do not disclose the specific target goals or achievement applicable to our business segments as they are highly confidential to our businesses. We believe that disclosure of this information would be competitively harmful to us, as it would provide our competitors with strategic information specific to certain businesses, thus providing our competitors insight into our plans and projections for such businesses. As evidenced by our performance this year, these target levels are designed to be difficult to accomplish and are not certain to be met.

Bonus Calculation – Individual Performance Factor

In addition to the target bonus percentages and financial and operational metrics discussed above, the third and final factor under our AIP is the IPF, as described above. The individual performance factors for each executive were determined after evaluating each NEO’s performance, including the collective achievements detailed on page 32 above. For 2019, IPFs for our NEOs ranged from 1.0 to 1.35, as shown above.

Long-Term Incentives

The goal of our long-term incentive plan is to align the compensation of executives with the interests of stockholders by encouraging sustained long-term improvement in operational and financial performance and long-term increase in stockholder value. Long-term incentives also serve as retention instruments and provide equity-building opportunities for executives. In recent years, we have granted stock options and PRSUs as our primary forms of equity awards, with service-based RSUs being granted principally as recruitment or promotion awards at the time of hire or promotion. The Compensation Committee redesigned our PRSUs in 2019 and transitioned from using an operational improvement metric (adjusted operating margin) and an investor return benchmark (relative TSR vs. the S&P MidCap 400 Industrials Index), each of which was equally weighted and measured over a three-year period, to solely using relative TSR vs. the S&P MidCap 400 Industrials Index, measured over a three-year period. The Compensation Committee believes that using a single investor return benchmark is more appropriate for the Company at this time due to the highly acquisitive nature of our business, which makes it difficult to set meaningful three-year operational improvement metrics. Once vested, at least 50% of the shares delivered pursuant to the PRSUs (net of shares withheld or sold for taxes) must be held for an additional one-year period.

In connection with the acquisition of DJO, Mr. Shirley received an annual equity award consisting of (i) DJO PRSUs, (ii) RSUs that cliff vest after two years and (iii) stock options. The DJO PRSUs are subject to achieving certain adjusted EBITDA targets at DJO, measured over a two-year period, with 50% vesting on the second anniversary of the grant date and 50% vesting on the third anniversary of the grant date. The DJO PRSUs further provided that 50% of the PRSUs may be earned (but not vest) if a specified adjusted EBITDA target was achieved during 2019. However, this target was not achieved during 2019 and such DJO PRSUs remain eligible to vest following completion of the two-year performance period. The award is intended to align Mr. Shirley’s compensation with the interests of stockholders and incentivize the achievement of certain strategic objectives relating to the acquisition and integration of DJO.

2019 Performance Vesting of Outstanding PRSUs

None of the outstanding PRSUs held by the NEOs were earned in 2019. In 2017, we transitioned to using a full three-year performance period for measuring PRSUs. Prior to that, PRSUs were subject to achieving certain performance targets over any four consecutive quarters during a three-year period.

Annual Grants under Omnibus Incentive Plan

On February 25, 2019, the Compensation Committee granted annual awards under the 2016 Omnibus Incentive Plan with a target aggregate value as set forth in the table below. Messrs. Trerotola, Hix, Pryor and Kambeyanda received 50% of their annual grant in the form of PRSUs and 50% in the form of stock options. As discussed further above, on December 13, 2019, the Compensation Committee also granted Messrs. Hix and Kambeyanda RSUs with a grant date fair value of approximately $1,000,000 and $500,000, respectively, in recognition for their contributions to the portfolio changes that occurred in 2019. Mr. Shirley received DJO PRSUs with a target grant date fair value of $2,000,000, stock options with a grant date fair value of approximately $500,000, and RSUs with a grant date fair value of $500,000. Mr. Brander’s award consisted solely of stock options with a grant date fair value of approximately $400,000.

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

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

The DJO PRSUs vest in two equal installments beginning on the second anniversary of the grant date, to the extent of achievement of the DJO adjusted EBITDA target based on the payout scale below.

Additional Compensation Information

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

The Company does not maintain an active pension plan and instead makes matching contributions to a tax-qualified 401(k) plan and Non-Qualified Deferred Compensation Plan. We established the Non-Qualified Deferred Compensation Plan, which provides participants the opportunity to defer a percentage of their compensation without regard to the compensation limits imposed by the Internal Revenue Code under our 401(k) plan, to allow our senior-level executives to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Colfax employees who are not limited by the Internal Revenue Code limits. For additional details concerning the Non-Qualified Deferred Compensation Plan, please see the Non-Qualified Deferred Compensation Table and the accompanying narrative disclosure. With respect to Mr. Brander, who is based in the U.K., as discussed below in the footnotes to the Summary Compensation Table, for 2019 Howden made contributions to the Howden Retirement Plan, a defined contribution plan, on his behalf. In addition, as discussed following the Pension Benefits table below, Mr. Brander maintains a balance in the Howden Group Pension Plan, a frozen defined benefit pension plan. Mr. Brander’s benefits under the Howden Group Pension Plan were frozen in 2006 and he did not accrue any additional benefits after this date. We retained liability with respect to the Howden Group Pension Plan in connection with the sale of our Air & Gas Handling business. Additionally, the Company also maintains the DJO Global Executive Deferred Compensation Plan (the “DJO Nonqualified Plan”), which was acquired in connection with the acquisition of DJO. The DJO Nonqualified Plan was frozen to new participants and future deferrals on December 31, 2019. Mr. Shirley holds an account balance in this plan.

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

Employment & Service Agreements

Messrs. Trerotola and Pryor are party to the same form of employment agreement. These agreements provide for a two-year initial term, or in the case of Mr. Trerotola, a three-year initial term, with automatic one-year term extensions thereafter, unless our Board or the executive provides written notice in advance to terminate the automatic extension provision. Each executive’s base salary may not be reduced below the amount previously in effect without the written agreement of the executive. In addition, as set forth in their current employment agreements, each of Messrs. Trerotola and Pryor is entitled to participate in our Annual Incentive Plan with a target bonus amount no less than 120% and 50%, respectively, of his base salary then in effect. The employment agreements provide severance benefits and provide change in control benefits only if a termination for “good reason” or other than for “cause” occurs within two years following the change in control (i.e., “double trigger” provisions).

Mr. Hix’s letter agreement entered into upon his hire provides for severance and change in control benefits primarily commensurate with those provided in our employment agreements. Mr. Kambeyanda is party to a letter agreement with the Company that specifies his starting annual salary and a target bonus of at least 70% under the AIP. This agreement also provides for a transition bonus made in connection with his hire that is to be paid in installments over his first five years of employment (with $330,000 payable in each of 2017 and 2018, and $130,000 payable in each of 2019 and 2020). This letter agreement also provides that Mr. Kambeyanda is subject to our Executive Officer Severance Plan.

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

Mr. Brander’s employment with Colfax was terminated in connection with the completion of the sale of the Air & Gas Handling business. Prior to this, Mr. Brander’s employment agreement was amended on May 7, 2019, in contemplation of such sale. The amended agreement provided that Mr. Brander was eligible to receive a retention bonus upon closing of such sale, subject to his continued employment through closing. The agreement also provided that, in its discretion, the Company could increase the retention bonus based on its assessment of the performance of the Air & Gas Handling business and Mr. Brander through closing. Mr. Brander was awarded a $3,152,585 payment consistent with these arrangements.

Additional details regarding the material terms of these agreements are summarized under “Employment Agreements and Executive Officer Severance Plan” on page 44 and “Potential Payments Upon Termination or Change in Control” on page 47 and a summary of the material terms and eligibility requirements for the Executive Officer Severance Plan is provided under “Potential Payments Upon Termination or Change in Control.”

Stock Ownership Policy and Stock Holding Requirements

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

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

CEO Recommendations

During 2019, Mr. Trerotola provided recommendations to the Compensation Committee with respect to the compensation levels for our executive officers, other than for himself. These recommendations were based on his assessment of the executive officer’s relative experience, overall performance, and impact on the achievement of our financial and operational goals and strategic objectives, combined with perspective from the competitive review data. While the Compensation Committee took these recommendations under advisement, it independently evaluated the pay recommendations for each executive officer and made all final compensation decisions in accordance with its responsibilities as set forth in the Compensation Committee Charter.

Role of Compensation Consultants and Peer Data Review

Our Compensation Committee also obtains perspective from competitive data reviewed by FW Cook, the independent advisor to the Compensation Committee on matters of executive compensation. The Compensation Committee annually reviews the list of peer companies previously recommended by FW Cook to confirm that such continues to reflect the peers used by financial analysts and governance advisors covering Colfax and to represent our growth trajectory, revenue, market capitalization and overall scope and nature of operations. In light of the DJO acquisition, the peer group was revised to include certain companies in the medical device industry to reflect our current business portfolio. The peer group referenced in 2019 was as follows:

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

Independence of Compensation Consultant

In April 2020, the Compensation Committee considered the independence of FW Cook in light of the SEC rules regarding conflicts of interest involving compensation consultants and NYSE listing standards regarding compensation consultant independence. The Compensation Committee requested and received a letter from FW Cook addressing conflicts of interest and independence, including specific factors enumerated in both relevant SEC rules and NYSE listing standards. The Compensation Committee discussed and considered these factors, and other factors it deemed relevant, and concluded that FW Cook is independent and that its work during 2019 did not raise any conflict of interest.

Compensation Program and Risk

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

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

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

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

Hedging Ban

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

Pledging Policy

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

Clawback Policy

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

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

Equity Grant Practice

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

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

Rule 10b5-1 Trading Plans by Executive Officers

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

Changes to Compensation Program for 2020

As noted above, in recent years, we have granted stock options and PRSUs as our primary forms of annual equity awards, with service-based RSUs being granted principally as recruitment or promotion awards at the time of hire or promotion. Beginning in 2020, annual equity awards will generally consist of 50% PRSUs, 25% stock options, and 25% time vesting RSUs. The Compensation Committee believes this will further align the long-term interests of management and stockholders and promote increased equity ownership among our executive officers.

In April 2020, the Compensation Committee and Board adopted amendments to our Annual Incentive Plan to (i) eliminate language that was no longer necessary due to the repeal of Section 162(m) of the Internal Revenue Code’s exemption from the deduction limit for certain “performance-based” compensation and (ii) add provisions that provide for certain payments of annual awards in the event of death, disability or retirement, as defined in the Annual Incentive Plan.

COMPENSATION COMMITTEE REPORT

The Compensation Committee participated in the preparation of the Compensation Discussion and Analysis, reviewing successive drafts and discussing the drafts with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2020 Proxy Statement and in the Company’s Annual Report on Form 10-K for 2019 by reference to the Proxy Statement.

Compensation Committee of the Board of Directors

Rhonda Jordan, Compensation Committee Chair
Rajiv Vinnakota
Sharon Wienbar

EXECUTIVE COMPENSATION