3.7 Executive Compensation and Other Proxy Disclosures

We note that . . . you disclose your company-wide net income targets and named executive officer base salary target percentages associated with threshold, target and high-end levels for net income. However, . . . you cite net sales and return on average assets as additional formula-based factors used to determine payment amounts under the management incentive plan. In these cases, you have not disclosed any target or formula relating to these factors. You also have not disclosed the actual amount of net income, net sales or return on assets used to determine the amount of the payments. [I]n future filings, please disclose all of the company-wide targets and formulas that form the basis of incentive compensation payments, as well as the actual amount of each related measure of company performance, so that it is clear how the Compensation Committee determined the specific amounts of incentive compensation paid to each named executive officer. In your response, please show us what your disclosure would have looked like for [the fiscal year]. In addition to your narrative explanation, please consider providing an illustrative example.

[W]e note your disclosure . . . that the . . . award of performance units to Mr. [A] “represent[s] the right to receive a cash payment equal to $[X] multiplied by certain performance factors.” Please expand your disclosure to identify the performance factors upon which the award of performance units is to be based. We note the related disclosure you include in the Form 8-K that you filed . . . . Also discuss how difficult it will be for Mr. [A] or how likely it will be for the company to achieve the target levels or other factors.

In future filings, please revise your disclosure to provide additional information around how your compensation committee makes determinations regarding cash bonuses. In this regard, we note your disclosure [stating] that the committee determines bonus amounts based upon a “quantitative review of [Company A’s] performance against the board-approved operating plan and its qualitative review of individual performance and other factors deemed relevant.” Clarify whether the committee gives particular weight to the quantitative or qualitative factors and describe in more detail the precise factors taken into account for each named executive officer.

You disclose that you did not increase base salaries in [the fiscal year] due to the Company’s financial performance, but your Summary Compensation Table shows salary increases for all named executive officers. Please tell us the reason for this discrepancy, and in future filings, please explain any changes in your base salaries.

It appears that the amounts which you have disclosed in the “Bonus” column of this [summary compensation] table should have been disclosed under the “Non-Equity Incentive Compensation Plan” column because the amounts reflect the performance of your executives under your non-equity incentive plan, as defined in Item 402(a)(6)(iii) of Regulation S-K. If, in the exercise of discretion, an amount is paid over and above the amounts earned by meeting the performance measure in the non-equity incentive plan, that amount should be reported in the “Bonus” column. It appears that Mr. [B]’s discretionary bonus increase in the amount of $[X] should have been disclosed in the Bonus column. Please explain to us why the payments under the annual incentive bonus awards are being disclosed in the “Bonus” column. For guidance refer to Question 119.02 of Regulation S-K Compliance and Disclosure Interpretations. Please ensure that in future filings you disclose payments under your annual incentive bonus as earned under a non-equity incentive plan and provide appropriate disclosure in your Grant of Plan-Based Awards Table.

In [a footnote] to your summary compensation table . . . , you state that the amounts for [the CEO] for [year 1] and [year 2] reflect “the aggregate grant date fair value for certain performance units granted in December [year 1] and [year 2] that are valued based on a performance factor that is tied to certain operational performance metrics.“ Given that the non-equity plan compensation represented [A]% and [B]% of [the CEO]’s [year 1] and [year 2] total compensation, respectively, please expand [the footnote] to quantify the grant date fair values for both [year 1] and [year 2].

Please update your executive compensation table for . . . your most recently completed fiscal year. We note that your executive compensation table still references it is dated as of [the end of that fiscal year’s third quarter].

We note your disclosure in this section that you amended and restated the letter agreements with each of your executive officers. Please file such amended and restated agreements as exhibits or tell us why you believe that you are not required to file such agreements pursuant to Item 601(b)(10) of Regulation S-K.

Please file the employment agreements for the individuals who will serve as the executive officers of [Company X].

To the extent any of your executive compensation plans or agreements are completed prior to the closing of your spin-off, please file them as exhibits pursuant to Item 601(b)(10) of Regulation S-K.

Please revise to describe the material terms of each letter separately as it appears the terms of the letters were not the same for each officer. For instance, we note that Dr. [A] received a stock bonus of [B]% of [Company X’s] ordinary shares in connection with his appointment letter.

Please identify the principal executive officer, as well as each named executive officer included in the calculation of average non-PEO NEO compensation, and the fiscal years in which such persons are included. You may provide this information in a footnote to the pay versus performance table. See Regulation S-K Item 402(v)(3).

We note that you have included Revenue as your Company-Selected Measure pursuant to Regulation S-K Item 402(v)(2)(vi). Please include your Company-Selected Measure in the Tabular List provided pursuant to Regulation S-K Item 402(v)(6).

We note that you have included Income (Loss) from Continuing Operations in column (h) of your pay versus performance table in lieu of net income (loss) as required by Regulation S-K Item 402(v)(2)(v). Please include net income (loss), as reported in your audited GAAP financial statements, in column (h) for all years covered by the table. Refer to Regulation S-K Compliance and Disclosure Interpretations Questions 128D.08 and 128D.09. Please note that you may voluntarily provide supplemental measures of compensation or financial performance, so long as any additional disclosure is clearly identified as supplemental, not misleading, and not presented with greater prominence than the required disclosure.

We note that you included Adjusted Earnings Per Share, a non-GAAP measure, as your Company-Selected Measure pursuant to Regulation S-K Item 402(v)(2)(vi). Please ensure that you provide disclosure showing how this number is calculated from your audited financial statements, as required by Regulation S-K Item 402(v)(2)(vi).

Please confirm that, in future filings, you will provide a comparison of your cumulative total shareholder return and the cumulative total shareholder return of your peer group over the same period. See Item 402(v)(5)(iv) of Regulation S-K.

Please provide a clear description of the relationship between compensation actually paid and net income, as required by Regulation S-K Item 402(v)(5)(ii). Please note that it is not sufficient to state that no relationship exists, even if a particular measure is not used in setting compensation.

In your “Relation of Pay to Performance” section, it does not appear that you provide all of the relationship disclosures required by Regulation S-K Item 402(v)(5). Please ensure that you provide this required disclosure in its entirety. Although you may provide the required information graphically, narratively, or a combination of the two, this disclosure must be separate from the pay versus performance table required by Regulation S-K Item 402(v)(1) and must provide a clear description of each separate relationship indicated in Regulation S-K Item 402(v)(5)(i)-(iv). Please note that it is not sufficient to state that no relationship exists, even if a particular measure is not used in setting compensation. You may voluntarily provide supplemental measures of compensation or financial performance, so long as any additional disclosure is clearly identified as supplemental, not misleading, and not presented with greater prominence than the required disclosure.

If your Regulation S-K Item 402(v)(2)(iv) peer group is an index, it should be the published industry or line-of-business index used under Regulation S-K Item 201(e)(1)(ii), and not a broad market index. In future filings, please ensure that your peer group is either a published industry or line-of-business index or, if applicable, the companies used in the compensation discussion and analysis under Regulation S-K Item 402(b).

[It] is unclear what amounts are reflected in the columns titled “Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year.” Specifically, equity awards granted in prior years that vest during the relevant year should be valued as the difference between the fair value as of the end of the prior fiscal year and the vesting date, and not a “year over year” change in value. Please ensure that your table headings reflect accurately the amounts used to calculate compensation actually paid. Refer to Item 402(v)(2)(iii)(C)(1)(iv) of Regulation S-K.

Refer to the reconciliation table in footnote [X] to your pay versus performance table. It is unclear what amounts are reflected in the row titled “Change in Value of Prior Equity Awards.” Specifically, there are two separate subsections of Item 402(v)(2)(iii)(C)(1) that require change in fair value calculations, each with different measurement end dates, and these amounts must be separately disclosed. Please ensure that your disclosure shows each of the numerical amounts deducted and added to calculate compensation actually paid, as required by Regulation S-K Item 402(v)(3), and to make clear the dates from and to which changes in fair value are measured.

Please expand your discussion of the reasons you believe that your leadership structure is appropriate, addressing your specific characteristics or circumstances. In your discussion, please also address the circumstances under which you would consider having the Chair and CEO roles filled by a single individual, when shareholders would be notified of any such change, and whether you will seek prior input from shareholders. Please also discuss how the experience of your Lead Independent Director is brought to bear in connection with your board’s role in risk oversight.

Please expand upon the role that your Lead Independent Director plays in the leadership of the board. For example, please enhance your disclosure to address whether or not your Lead Independent Director may:

• represent the board in communications with shareholders and other stakeholders;
• require board consideration of, and/or override your CEO on, any risk matters; or
• provide input on the design of the board itself.

Please expand upon how your board administers its risk oversight function. For example, please disclose: