Avanos Medical CEO David Pacitti's Equity Positions Converted to Cash in $25 Per Share Merger Completion

Merger Agreement Terms and Equity Conversion Structure

The merger agreement between Avanos Medical and A-AV Holdco I, Inc., dated April 13, 2026, established a comprehensive framework for converting all equity interests held by company executives and shareholders. Under the agreement's provisions, each outstanding share of Avanos Medical common stock was converted into and exchanged for $25.00 per share in cash, without interest, payable in accordance with the merger terms and conditions. The effective time of the merger occurred on July 27, 2026, triggering the automatic conversion of all equity positions held by reporting persons subject to Section 16 disclosure obligations.

David Pacitti, serving as Chief Executive Officer, held multiple classes of equity awards at the time of the merger. The conversion structure applied uniformly across all equity types, with each category of award receiving treatment designed to account for the specific characteristics of time-based vesting, performance conditions, and in-the-money derivative securities. This systematic approach ensured that all equity compensation arrangements were settled through cash payments calculated by reference to the fixed $25 per share merger consideration.

Common Stock and Time-Based Restricted Unit Treatment

Pacitti directly owned 322,194 shares of common stock at the time of the merger's effectiveness. These shares were canceled and converted into the right to receive $25.00 per share in cash. In addition to vested common stock, the CEO held 270,774 restricted stock units that were subject exclusively to time-based vesting conditions. Under the merger agreement's treatment of these time-based units, they were canceled immediately prior to the effective time and converted into cash payments calculated by multiplying the $25.00 merger consideration by the number of shares the reporting person would have received upon full vesting, less applicable tax withholdings.

The treatment of time-based awards reflected a straightforward approach: units scheduled to vest over future periods were paid out immediately at the merger consideration price, accelerating the delivery of value to the executive. No further vesting conditions or performance assessments were required beyond what had already been satisfied by the passage of time prior to the merger date. This ensured that Pacitti received the economic equivalent of holding common shares for the entire vesting duration of these units.

Performance-Based Equity Award Conversion and True-Up Provisions

Pacitti held 444,730 performance-based restricted stock units at the time of the merger. Under the merger agreement's provisions for performance-based awards, these units received differentiated treatment based on the status of their underlying performance periods. For performance periods that had been completed prior to the effective time, units vested based on actual achievement against the pre-established performance metrics. For performance periods in progress as of the merger date, units were converted at the greater of actual achievement or target level performance. For performance periods that had not yet commenced, units were deemed to vest at target level.

The filing discloses that the amount of 444,730 represents the aggregate number of performance-based units paid to Pacitti at or within 15 business days following the effective time based on target performance for fiscal year 2026. Importantly, the merger agreement includes a true-up provision allowing Pacitti to receive an additional cash payment if actual performance for fiscal year 2026 exceeds the target level. The maximum aggregate number of performance-based units the CEO could earn based on actual fiscal 2026 performance is stated as 754,331 units. This structure preserved the incentive value of performance-based compensation while accelerating settlement through the merger consideration.

Stock Option Conversion and Spread-Based Calculation

Pacitti's outstanding employee stock options were subject to specific conversion mechanics under the merger agreement. The filing identifies 239,354 options with an exercise price of $13.69 per share, originally scheduled to vest 30 percent on March 13, 2027, 30 percent on March 13, 2028, and 40 percent on March 13, 2029. These in-the-money options were canceled immediately prior to the effective time and converted into the right to receive a cash payment determined by multiplying the spread between the $25.00 merger consideration and the $13.69 exercise price by the number of shares underlying the option, assuming full vesting, less applicable tax withholdings.

The spread-based conversion methodology means that Pacitti received cash equal to the intrinsic value of his options at the merger price, with the calculation accounting for the full number of shares he would have held if the options had vested in their entirety. Options with exercise prices exceeding the $25.00 merger consideration would have been canceled for no consideration, as they contained no intrinsic value. The filing notes that such cancellations are exempt from Section 16 disclosure requirements pursuant to Rules 16a-4(d) and 16b-6(d). No such underwater options are identified in Pacitti's holdings, indicating all his options possessed value at the merger price.

Avanos Medical's Business and Market Position

Avanos Medical, Inc. is a medical device company that operated prior to its acquisition by A-AV Holdco I, Inc. The company was listed on the New York Stock Exchange under the ticker AVNS. While the filing does not provide detailed disclosure of Avanos Medical's specific product lines, revenue streams, or market segments, the company's status as a publicly traded medical device manufacturer indicates its operation in a regulated healthcare industry subject to FDA oversight, clinical validation requirements, and competitive product development cycles.

The acquisition of Avanos Medical at $25 per share reflects the determination by the acquiring parent company regarding the value of the medical device company's assets, intellectual property, product portfolio, and market position. The fixed cash consideration and completion of the transaction on the stated effective date indicate that the acquisition process proceeded without identified obstacles or regulatory impediments that would have delayed or prevented the merger from closing.

Reporting Person Status and Section 16 Obligations

David Pacitti is identified in the filing as Chief Executive Officer of Avanos Medical, Inc., a position that triggers mandatory beneficial ownership reporting obligations under Section 16(a) of the Securities Exchange Act of 1934. The filing was executed on July 28, 2026, one business day after the merger's effective date, representing timely disclosure of the changes in beneficial ownership resulting from the merger transaction. The reporting was filed by Pacitti individually, as indicated by the Form 4 designation as filed by one reporting person.

The filing signature appears as "/s/ John Fischer, as attorney-in-fact for David Pacitti," indicating that Pacitti's legal representative executed the disclosure on his behalf. This arrangement is common in executive compensation matters where company legal counsel or external representatives file required SEC disclosures. The attestation reflects the formal nature of Section 16 obligations and the requirement that such filings contain accurate representations regarding beneficial ownership transactions.

Merger Agreement Execution and Timeline

The merger agreement governing these equity conversions was dated April 13, 2026, providing approximately 3.5 months between initial execution and the effective time of the merger on July 27, 2026. This timeline is consistent with standard acquisition processes for public companies, including regulatory review periods, shareholder approval processes, and closing condition satisfaction. The agreement established the fixed merger consideration of $25.00 per share and comprehensive equity conversion formulas that applied uniformly to all equity holders regardless of their equity award classifications.

The filing documents the final settlement mechanics under the merger agreement, showing how all categories of Pacitti's equity interests were converted into cash payments by the effective date. The disclosure of deemed execution dates and specific transaction codes in the filing structure reflects the systematic treatment of multiple equity awards that technically converted at the same moment—the effective time—but are reported separately to provide clarity regarding the different equity award types and their respective conversion calculations.

Tax Withholding and Net Cash Settlement

The filing consistently references that merger consideration payments were subject to "applicable tax withholdings" for each category of converted equity. This notation indicates that the cash amounts received by Pacitti were reduced by taxes required to be withheld under federal, state, and potentially local tax law governing the settlement of equity compensation upon a change of control. The specific tax amounts are not disclosed in the filing, as those calculations are generally handled through separate payroll or equity settlement processes rather than SEC disclosure.

The treatment of tax withholding is standard in acquisition scenarios where equity awards are cash-settled, as the acquiring company typically assumes responsibility for withholding and remitting applicable employment and income taxes on behalf of the executive. The notation in the merger agreement responses indicates that the conversion calculations yielded gross cash amounts, with net proceeds to the reporting person reflecting tax adjustments applied at or near the settlement date.

Future Performance Measurement and True-Up Mechanics

The performance-based unit conversion included a conditional true-up provision allowing Pacitti to receive additional consideration if actual fiscal 2026 performance exceeds the target level at which the initial grant was settled. The filing states that the maximum aggregate number of performance-based units the CEO could earn based on actual fiscal 2026 performance totals 754,331, compared to the 444,730 units initially converted at target. This indicates a potential upside of approximately 310,000 additional units depending on final performance measurement against the established metrics.

The true-up mechanics preserve incentive alignment even after the merger's completion, as Pacitti's final compensation for fiscal 2026 performance will be determined by actual results rather than target assumptions. The acquiring company becomes responsible for measuring performance against the pre-established metrics and calculating any additional payments due. This structure maintains performance accountability through the transition period while providing certainty regarding minimum cash consideration at the $25.00 per share merger price.