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NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT

2014 ANNUAL MEETING

 

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100 Campus Drive Florham Park, NJ 07932

NOTICE OF 2014 ANNUAL MEETING
OF SHAREHOLDERS

MAY 13, 2014 AT 10:00 A.M.
HILTON SHORT HILLS
41 JOHN F. KENNEDY PARKWAY
SHORT HILLS, NEW JERSEY 07078

ITEMS OF BUSINESS

To consider and vote upon the following matters:

	1.		Election of the three director nominees named in the attached proxy statement to hold office as Class I Directors until the 2017 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified;
	2.		An advisory vote to approve the company’s executive compensation;
	3.		An advisory vote on the frequency of advisory votes on executive compensation;
	4.		Approval of the company’s 2013 Equity and Incentive Plan;
	5.		Ratification of the selection of KPMG LLP as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2014; and
	6.		Transaction of such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

RECORD DATE

Close of business on March 19, 2014.

Only shareholders of record as of the record date are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

PROXY VOTING

• By mail
• By telephone
• By Internet

It is important that your shares be represented and voted at the Annual Meeting.

Heidi C. Chen
Executive Vice President,
General Counsel and Corporate Secretary
April 3, 2014

	IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 13, 2014
	Zoetis Inc.’s Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2013 are available online at www.edocumentview.com/ZTS.

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TABLE OF CONTENTS

ZOETIS 2014 PROXY STATEMENT

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PROXY SUMMARY

This summary highlights certain information in this proxy statement. As it is only a summary, please review the complete Proxy Statement and 2013 Annual Report before you vote.

2013 PERFORMANCE HIGHLIGHTS

2013 was a year of tremendous change for our company. At the start of the year, we were a wholly-owned subsidiary of Pfizer Inc. (Pfizer). In February, we began the process of separating from Pfizer with an initial public offering (IPO) of approximately 19.8% of our total shares outstanding. In late June, Pfizer disposed of its remaining ownership interest in our stock, completing our transition to an independent public company with a market capitalization of over $15 billion.

Our leadership team has worked hard over the course of 2013 to build on the commercial performance, innovative R&D and reliable supply chain that have been critical to our success, while simultaneously developing the infrastructure required to function effectively as a stand-alone entity. Listed below are some highlights of our 2013 operating performance:

• Revenues. During 2013, total revenue grew 5% to $4.561 billion, representing an operational increase of 7%, excluding the impact of foreign exchange. We saw revenue growth across all four of our regional operating segments, in both companion animal and livestock products.

• Adjusted Net Income. Reported net income for 2013 was $504 million, a 16% increase over 2012. Our adjusted net income¹ for 2013 was $709 million, reflecting an increase of 32% over 2012.

• Earnings per share (EPS). Reported diluted EPS for 2013 was $1.01 per share, an increase of 16% over 2012. Adjusted diluted EPS¹, which excludes purchase accounting adjustments, acquisition-related costs and certain significant items such as costs associated with becoming a stand-alone public company, was $1.42 per share, an increase of 31% over 2012.

• Dividends. In March of 2013, our Board of Directors declared a quarterly common stock dividend of $0.065 per share, for a total dividend of $0.195 per share paid in 2013. In December of 2013, our Board of Directors increased the quarterly dividend to $0.072 per share.

EXECUTIVE COMPENSATION HIGHLIGHTS

Our financial results for 2013 led to above-target payouts under our Annual Incentive Plan (AIP). Our revenue of $4.628 billion exceeded our target of $4.550 billion and our adjusted net income of $745 million exceeded our target of $726 million. As a result of this strong performance, and recognizing the significant work done to effectively separate from Pfizer and stand up the company while achieving these results, payments under our AIP were 115% of target. The revenue and adjusted net income target levels and results reflected here and used to determine the funding level of our AIP pool exclude the impact of foreign exchange during 2013, and are, therefore, different from our reported revenue and adjusted net income results of $4.561 billion and $709 million, respectively.

1	Adjusted net income and adjusted diluted EPS are non-GAAP financial measures. Our 2013 Annual Report on Form 10-K, filed with the SEC on March 26, 2014, contains a reconciliation of these non-GAAP financial measures to reported results for 2013.

ZOETIS 2014 PROXY STATEMENT   1

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PROXY SUMMARY

The threshold, target, and maximum performance levels for AIP pool funding, as well as the actual results for 2013, are shown in the table below.

In February, at the time of our IPO, we made long-term incentive grants to certain Zoetis employees, including our NEOs and other members of our executive team, consisting of 50% stock options and 50% restricted stock units. These awards are subject to three-year cliff vesting, remaining unvested until the third anniversary of the date of grant.

In August, after our separation from Pfizer was complete, we granted our named executive officers (NEOs) and other members of our executive team additional restricted stock units to replace unvested Pfizer long-term incentive awards that were forfeited upon the separation. These replacement grants will vest in installments through 2016, reflecting the vesting schedule of the forfeited Pfizer long-term incentive awards. All other Zoetis employees who forfeited Pfizer long-term incentive awards received a cash payment from Zoetis to recognize the forfeiture.

For 2013, 85% of our CEO’s target total direct compensation is variable – either performance-based or directly tied to the price of our common stock – and 68% of his target total direct compensation consists of long-term equity awards. For our NEOs, an average of 70% of their target total direct compensation is variable.

During 2013 we established several important corporate governance policies, including:

• stock ownership guidelines for executives and directors;

• an anti-hedging policy;

• a “double-trigger” requirement for payment of severance and vesting of long-term incentives in the event of a change in control; and

• a claw-back policy which permits our Compensation Committee to recover amounts paid to employees, including our NEOs, under cash or equity-based incentive programs, where payments were based on the achievement of financial results that are subsequently restated.

Compensation decisions made during the period from January 2013 until our separation from Pfizer in June 2013 were made by a Compensation Committee consisting of one independent director and three directors who were executives of Pfizer. After the separation, the Compensation Committee was comprised entirely of independent directors.

2   ZOETIS 2014 PROXY STATEMENT

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PROXY SUMMARY

ANNUAL MEETING

ZOETIS 2014 PROXY STATEMENT   3

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PROXY SUMMARY

MEETING AGENDA ITEMS

ITEM 1—ELECTION OF DIRECTORS

You are being asked to elect 3 directors to hold office until the 2017 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified: Gregory Norden, Louise M. Parent and Robert W. Scully.

All directors attended each of the meetings of the Board and Board committees on which they served in 2013.

SUMMARY INFORMATION ABOUT OUR DIRECTOR NOMINEES AND CONTINUING DIRECTORS

Directors whose terms expire at the 2014 Annual Meeting and who are nominees for terms expiring at the 2017 Annual Meeting:

					Board Committees
		Director					Corp
Name	Age	Since	Occupation and Experience	Independent	Audit	Comp	Gov
Gregory Norden	56	2013	Managing Director, G9 Capital Group LLC	Yes
Louise M. Parent	63	2013	Former EVP and General Counsel, American Express Company	Yes
Robert W. Scully	64	2013	Former member of Office of Chairman, Morgan Stanley	Yes

Directors whose terms expire at the 2015 Annual Meeting:

					Board Committees
		Director					Corp
Name	Age	Since	Occupation and Experience	Independent	Audit	Comp	Gov
Sanjay Khosla	62	2013	Former EVP, Mondelẽz International	Yes
William C. Steere, Jr.	77	2013	Former Chairman Emeritus and CEO, Pfizer Inc.	Yes
Willie M. Reed	59	2014	Dean of the College of Veterinary Medicine, Purdue University	Yes

Directors whose terms expire at the 2016 Annual Meeting:

					Board Committees
		Director					Corp
Name	Age	Since	Occupation and Experience	Independent	Audit	Comp	Gov
Juan Ramón Alaix	62	2012	CEO, Zoetis Inc.	No
Frank A. D’Amelio	56	2012	EVP of Business Operations and CFO, Pfizer Inc.	No
Michael B. McCallister        (Board Chair)	61	2013	Former Chairman of the Board and CEO, Humana Inc.	Yes

Chair

Member

4   ZOETIS 2014 PROXY STATEMENT

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PROXY SUMMARY

ITEM 2—ADVISORY APPROVAL OF OUR EXECUTIVE COMPENSATION (SAY ON PAY)

We are asking shareholders to approve, on an advisory basis, our executive officer compensation program as described in this proxy statement. We believe that our program is well designed, that it appropriately aligns executive pay with company performance, and that it incentivizes desirable executive performance.

ITEM 3—ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION

We are asking shareholders to vote, on an advisory basis, on whether we should hold an advisory “say on pay” vote every one, two, or three years. We believe that an annual advisory vote is the best approach for our company because it would allow our shareholders to provide timely, direct input on our executive compensation policies and practices.

ITEM 4—APPROVAL OF OUR 2013 EQUITY AND INCENTIVE PLAN

We are asking shareholders to approve our 2013 Equity and Incentive Plan. We adopted the Plan while we were wholly owned by Pfizer and are seeking approval of the Plan because such approval is one of the requirements which must be satisfied in order for awards under the Plan to qualify as “performance-based” compensation under Section 162(m) of the Internal Revenue Code and thus be tax deductible by us. The Plan authorizes 25 million shares and a variety of cash and equity awards. The key terms of the Plan are summarized on page 52.

ITEM 5—RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR AUDITORS FOR 2014

We are asking shareholders to ratify our Audit Committee’s appointment of KPMG LLP (KPMG) as our independent registered public accounting firm for 2014. KPMG was our auditor in 2013.

The fees paid to KPMG are detailed on page 59.

One or more representatives of KPMG will be present at the Annual Meeting. They will be given the opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions.

ZOETIS 2014 PROXY STATEMENT   5

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

ANNUAL MEETING INFORMATION

HOW TO VIEW PROXY MATERIALS ONLINE

6   ZOETIS 2014 PROXY STATEMENT

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

HOW TO VOTE

By telephone	By calling 1 (800) 652-8683 (toll free) in the United States or Canada	24 hours a day until 8:00 a.m., Eastern Daylight Time, on May 13, 2014
By Internet	Online at www.envisionreports.com/ZTS	24 hours a day until 8:00 a.m., Eastern Daylight Time, on May 13, 2014
By mail	By returning a properly completed, signed and dated proxy card	Allow sufficient time for us to receive your proxy card before the date of the meeting

REVOCATION OF PROXIES

VOTING AT THE MEETING

ZOETIS 2014 PROXY STATEMENT   7

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

ITEMS TO BE VOTED ON AND BOARD RECOMMENDATION

QUORUM AND REQUIRED VOTE

Item	Vote Required	Effect of Abstentions and Broker Non-Votes*
Election of Directors	Majority of the votes cast (i.e., more votes “For” than “Against”)	Not considered as votes cast and have no effect on the outcome
Advisory Vote to Approve Executive Compensation (Say on Pay)	Majority of the votes cast	Not considered as votes cast and have no effect on the outcome
Advisory Vote on Frequency of Advisory Votes on Executive Compensation (every 1 year, 2 years, or 3 years)	We will consider shareholders to have expressed a preference for the frequency that receives the highest number of favorable votes	Not considered as votes cast and have no effect on the outcome
Approval of 2013 Equity and Incentive Plan	Majority of the votes cast	Not considered as votes cast and have no effect on the outcome
Ratification of KPMG as Auditor for 2014	Majority of the votes cast	Not considered as votes cast and have no effect on the outcome

*

A broker non-vote occurs when a broker submits a proxy but does not vote on an Item because it is not a “routine” item under New York Stock Exchange rules and the broker has not received voting instructions from the beneficial owner of the shares. Your broker may vote without your instructions only on Item 5 – Ratification of KPMG as Auditor for 2014.

8   ZOETIS 2014 PROXY STATEMENT

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

EFFECT OF NOT CASTING YOUR VOTE

COST OF PROXY SOLICITATION

AVAILABILITY OF VOTING RESULTS

ZOETIS 2014 PROXY STATEMENT   9

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CORPORATE GOVERNANCE AT ZOETIS

INTRODUCTION

KEY CORPORATE GOVERNANCE FEATURES

Board Independence	7 out of 9 of our directors are independent under NYSE listing standards Our CEO is the only member of management who serves as a director Our other non-independent director is an executive officer of Pfizer, who is not independent under NYSE listing standards because of our prior relationship with Pfizer
Independent Board Chair	Our Board Chair, who is elected by the Board annually, is currently an independent director
Board Committees	We have three Board committees: Audit, Compensation, and Corporate Governance Our Audit and Compensation Committees are composed entirely of independent directors; 3 of the 4 members of our Corporate Governance Committee are independent
Executive Sessions	Our directors hold regularly scheduled executive sessions, at which directors can discuss matters without management present
Board Oversight of Risk	Risk management is overseen by our Audit Committee, which reports regularly to the Board Our Compensation Committee reviews compensation practices so that they do not encourage imprudent risk-taking
Accountability	In uncontested director elections, our directors are elected by a majority of the votes cast Each share of common stock is entitled to one vote
Director Stock Ownership	Each non-employee director is required to hold Zoetis stock worth at least $300,000 (including share equivalent units), to be acquired within five years of joining our Board
Open Lines of Communication	Our Board promotes open and frank discussions with senior management Our directors have access to all members of management and other employees and are authorized to hire outside consultants or experts at the company’s expense
Self-Evaluation	Our Board and each of its committees conducts an annual self-evaluation

10  ZOETIS 2014 PROXY STATEMENT

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CORPORATE GOVERNANCE AT ZOETIS

CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES

DIRECTOR INDEPENDENCE

BOARD LEADERSHIP STRUCTURE

BOARD MEETINGS AND COMMITTEES

ZOETIS 2014 PROXY STATEMENT  11

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CORPORATE GOVERNANCE AT ZOETIS

The following table lists the Chair and current member of each committee.

Independence of Committee Members

12  ZOETIS 2014 PROXY STATEMENT

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CORPORATE GOVERNANCE AT ZOETIS

BOARD’S ROLE IN RISK OVERSIGHT

MAJORITY VOTING STANDARD FOR DIRECTOR ELECTIONS

ZOETIS 2014 PROXY STATEMENT  13

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CORPORATE GOVERNANCE AT ZOETIS

DIRECTOR NOMINATIONS

SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

14  ZOETIS 2014 PROXY STATEMENT

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CORPORATE GOVERNANCE AT ZOETIS

CODE OF ETHICS

COMPENSATION OF DIRECTORS

ZOETIS 2014 PROXY STATEMENT  15

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CORPORATE GOVERNANCE AT ZOETIS

The following table summarizes the total compensation earned in 2013 by each of our directors who served as non-employee directors during 2013.

								Non-
					Non-			employee
	Non-				employee			Director			Non-
	employee				Director			Committee			Employee
	Director				Board Chair			Chair			Director
	Cash				Cash			Cash			Equity
Director	Retainer				Retainer			Retainer			Retainer	Total
Frank A. D’Amelio (1)		$	50,000			–			–		$140,000	$190,000
Sanjay Khosla (2)		$	50,000			–			–		$140,000	$190,000
Michael B. McCallister (3)		$	100,000			$75,000			$12,500		$140,000	$327,500
Gregory Norden (4)		$	100,000			–			$25,000		$140,000	$265,000
Louise M. Parent (5)		$	50,000			–			–		$140,000	$190,000
Robert W. Scully (6)		$	50,000			–			$12,500		$140,000	$202,500
William C. Steere, Jr. (7)		$	100,000			–			–		$140,000	$240,000

(1)	Represents (a) a cash retainer of $50,000 for service to the Board as a non-employee director during the third and fourth quarters of 2013 and (b) an equity retainer of 4,663 deferred stock units granted on August 15, 2013.
(2)	Represents (a) a cash retainer of $50,000 for service to the Board during the third and fourth quarters of 2013 and (b) an equity retainer of 4,663 deferred stock units granted on August 15, 2013.
(3)	Represents (a) an annual cash retainer of $100,000 for service to the Board, (b) a cash retainer of $75,000 for service as Chair of the Board during the third and fourth quarters of 2013, (c) a cash retainer of $12,500 for service as Chair of the Corporate Governance Committee during the third and fourth quarter of 2013 and (d) an equity retainer of 5,384 deferred stock units granted on January 31, 2013.
(4)	Represents (a) an annual cash retainer of $100,000 for service to the Board during 2013, (b) an annual cash retainer of $25,000 for service as Chair of the Audit Committee during 2013 and (c) an equity retainer of 5,384 deferred stock units granted on January 31, 2013.
(5)	Represents (a) a cash retainer of $50,000 for service to the Board during the third and fourth quarters of 2013 and (b) an equity retainer granted upon election to the Board of 4,663 deferred stock units.
(6)	Represents (a) a cash retainer of $50,000 for service to the Board during the third and fourth quarters of 2013, (b) a cash retainer of $12,500 for service as Chair of the Compensation Committee during the fourth quarter of 2013 and (c) an equity retainer of 4,663 deferred stock units granted on August 15, 2013.
(7)	Represents (a) a cash retainer of $100,000 for service to the Board during 2013 and (b) an equity retainer granted of 5,384 deferred stock units granted on January 31, 2013.

16  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY - INTRODUCTION

This Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and programs, and the decisions made by the Zoetis Compensation Committee during 2013.

Zoetis’ executive compensation program is intended to reward our leadership for delivering results and align the interests of our leadership with those of our shareholders on an annual and long-term basis.

Our executive officers whose compensation is discussed in this CD&A and whose compensation is shown in the compensation tables below are referred to as our named executive officers (NEOs). They are:

Executive	Title
Juan Ramón Alaix	Chief Executive Officer (CEO)
Richard A. Passov	Executive Vice President and Chief Financial Officer (CFO)
Kristin C. Peck	Executive Vice President and Group President
Clinton A. Lewis, Jr.	Executive Vice President and President of U.S. Operations
Catherine A. Knupp	Executive Vice President and President of Research and Development

2013 PERFORMANCE

2013 was a year of tremendous change for our company. At the start of the year, we were a wholly-owned subsidiary of Pfizer. In February, we began the process of separating from Pfizer with an initial public offering (IPO) of approximately 19.8% of our total shares outstanding. In late June, Pfizer disposed of its remaining ownership interest in our stock, completing our transition to an independent public company with a market capitalization of more than $15 billion.

Our leadership team has worked hard over the course of 2013 to build on the commercial performance, innovative R&D and reliable supply chain that have been critical to our success, while simultaneously developing the infrastructure required to function effectively as a stand-alone entity. Listed below are some highlights of our 2013 operating performance:

• Revenues. During 2013, total revenue grew 5% to $4.561 billion, representing an operational increase of 7%, excluding the impact of foreign exchange. We saw revenue growth across all four of our regional operating segments, in both companion animal and livestock products.
   
• Adjusted Net Income. Reported net income for 2013 was $504 million, a 16% increase over 2012. Our adjusted net income¹ for 2013 was $709 million, reflecting an increase of 32% over 2012.
   
• Earnings per share (EPS). Reported diluted EPS for 2013 was $1.01 per share, an increase of 16% over 2012. Adjusted diluted EPS¹, which excludes purchase accounting adjustments, acquisition-related costs and certain significant items such as costs associated with becoming a stand-alone public company, was $1.42 per share, an increase of 31% over 2012.
   
• Dividends. In March of 2013, our Board of Directors declared a quarterly common stock dividend of $0.065 per share, for a total dividend of $0.195 per share paid in 2013. In December of 2013, our Board of Directors increased the quarterly dividend to $0.072 per share.

1	Adjusted net income and adjusted diluted EPS are non-GAAP financial measures. Our 2013 Annual Report on Form 10-K, filed with the SEC on March 26, 2014, contains a reconciliation of these non-GAAP financial measures to reported results for 2013.

ZOETIS 2014 PROXY STATEMENT  17

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EXECUTIVE COMPENSATION

2013 COMPENSATION HIGHLIGHTS

• Our financial results for 2013 led to above-target payouts under our Annual Incentive Plan (AIP). Our revenue of $4.628 billion exceeded our target of $4.550 billion and our adjusted net income of $745 million exceeded our target of $726 million. As a result of this strong performance, and recognizing the significant work done to effectively separate from Pfizer and stand up the company while achieving these results, payments under our AIP were 115% of target. The revenue and adjusted net income target levels and results reflected here and used to determine the funding level of our AIP pool exclude the impact of foreign exchange during 2013, and are, therefore, different from our reported revenue and adjusted net income results of $4.561 billion and $709 million, respectively.

The threshold, target, and maximum performance levels for AIP pool funding, as well as the actual results for 2013, are shown in the table below.

2013 Annual Incentive Plan - Threshold, Target, and Maximum Performance Levels

• In February, at the time of our IPO, we made long-term incentive grants to certain Zoetis employees, including our NEOs and other members of our executive team, consisting of 50% stock options and 50% restricted stock units. These awards are subject to three-year cliff vesting, remaining unvested until the third anniversary of the date of grant.

• In August, after our separation from Pfizer was complete, we granted our NEOs and other members of our executive team additional restricted stock units to replace unvested Pfizer long-term incentive awards that were forfeited upon the separation. These replacement grants will vest in installments through 2016, reflecting the vesting schedule of the forfeited Pfizer long-term incentive awards. All other Zoetis employees who forfeited Pfizer long-term incentive awards received a cash payment from Zoetis to recognize the forfeiture.

• For 2013, 85% of our CEO’s target total direct compensation is variable – either performance-based or directly tied to the price of our common stock – and 68% of his target total direct compensation consists of long-term equity awards. For our other NEOs, an average of 70% of their target total direct compensation is variable.

• During 2013 we established several important corporate governance policies, including:

• stock ownership guidelines for executives and directors;

• an anti-hedging policy;

• a “double-trigger” requirement for payment of severance and vesting of long-term incentives in the event of a change in control; and

• a claw-back policy which permits our Compensation Committee to recover amounts paid to employees, including our NEOs, under cash or equity-based incentive programs, where payments were based on the achievement of financial results that are subsequently restated.

• Compensation decisions made during the period from January 2013 until our separation from Pfizer in June 2013 were made by a Compensation Committee consisting of one independent director and three directors who were executives of Pfizer. After the separation, the Compensation Committee was comprised entirely of independent directors.

18  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

CEO COMPENSATION: AT A GLANCE

Components of CEO Total Direct Compensation

Total Direct Compensation (TDC) is comprised of base salary, annual incentive and long-term incentives.

Base Salary and Annual Incentive

Mr. Alaix’ annual base salary for the first half of 2013 was $750,000, and his target annual incentive opportunity for this period was 100% of his base salary. These amounts were set by Pfizer in 2012 and reflected Mr. Alaix’ role as the head of a business unit within Pfizer. On June 5, 2013, the Compensation Committee approved increases to these amounts effective July 1, 2013, to recognize that Mr. Alaix was operating as the CEO of a stand-alone public company. Additionally, with this increase, Mr. Alaix’ compensation was brought closer to the median CEO compensation of our compensation peer group. As a result, effective July 1, 2013, Mr. Alaix’ annual base salary was increased to $900,000 and his annualized target incentive opportunity was increased to 110% of base salary, providing for annualized target total cash compensation of $1,890,000. Because these increases were not applied retroactively and applied only to the second half of the year, Mr. Alaix’ full-year target total cash compensation for 2013 was $1,695,000, including an annual incentive plan target of $870,000. In March 2014, the Compensation Committee recommended, and the Board of Directors approved, an annual incentive payment for 2013 of $1,218,000 (140% of the full-year annual incentive target) for Mr. Alaix based on our 2013 financial results and his individual performance.

Long-Term Incentives

In February 2013, Mr. Alaix received a long-term incentive grant with a total grant date fair value of $4.0 million, consisting of 50% stock options and 50% restricted stock units (RSUs). These awards (285,306 stock options and 76,923 RSUs) are subject to three-year cliff vesting and vest 100% on the third anniversary of the date of grant.

In August 2013, following completion of our separation from Pfizer, Mr. Alaix received a grant of 15,471 RSUs with a grant date value of $464,439 to replace Pfizer long-term incentive awards that were forfeited as a result of Zoetis’ separation from Pfizer (replacement grants). These replacement grants will vest in installments replicating the vesting schedule of the forfeited Pfizer long-term incentive awards. Similar replacement grants were made to our other NEOs and other members of our executive team who forfeited Pfizer long-term incentive awards as a result of the separation, while all other employees received cash payments for their forfeited Pfizer long-term incentive awards.

Target Total Direct Compensation

The chart below shows the target total direct compensation (TTDC) for Mr. Alaix for the first six months of 2013, the second six months of 2013, which includes the July 1, 2013 increase to Mr. Alaix’ base salary and target annual incentive opportunity described above, and the full year 2013 TTDC, which reflects the pro-rata combination of Mr. Alaix’ pre-July 1, 2013 and post-July 1, 2013 TTDC. The chart does not include the replacement grants described above because we do not view these grants as part of Mr. Alaix’ TTDC, as they were intended to make him “whole” for prior-year grants related to his service with Pfizer that were forfeited as a result of the separation.

ZOETIS 2014 PROXY STATEMENT  19

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EXECUTIVE COMPENSATION

OUR COMPENSATION PROGRAM

Compensation Philosophy

Our compensation philosophy, which is set by our Compensation Committee, is intended to achieve the following objectives:

• Foster a performance-driven culture by tying a large portion of our executives’ pay to our company’s performance, as well as their own individual performance, against established performance goals for the year;
   
• Align the interests of management and our shareholders by rewarding total shareholder returns through equity-based long-term incentive awards;
   
• Deliver competitive compensation opportunities that effectively retain our experienced management team and enable us to attract new executives when needed; and
   
• Provide compensation in a transparent fashion that reflects sound governance principles.

20  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

Basic Principles of Our Executive Compensation Program

We do:

We do not:

Emphasize pay for performance – our executive compensation program emphasizes variable pay over fixed pay, with two-thirds or more of our executives’ target compensation tied to our financial results and stock performance. Maintain a three-year cliff vesting schedule for long-term incentive grants. Require executives to comply with market-competitive stock ownership guidelines. Require executives to hold net shares upon the exercise of stock options or vesting of stock until they achieve the relevant stock ownership guideline. Maintain an anti-hedging policy prohibiting our directors and employees, including our NEOs, from hedging their ownership positions in our stock. Maintain a claw-back policy that allows us to recover incentive payments based on financial results that are subsequently restated. Require a “double trigger” for the acceleration of vesting of long-term incentives and payment of severance benefits following a change in control. Provide severance benefits through an Executive Severance Plan. Use an independent compensation consulting firm when establishing our executive compensation policies and programs.

Maintain employment agreements for any of our executive officers. Allow repricing of stock options without shareholder approval. Make stock option grants below fair market value. Provide tax “gross ups” to our executive officers (except for certain relocation expenses, consistent with our relocation policy for all U.S.-based employees).

Elements of Compensation: At a Glance

Element	Description and Purpose	Comments
Cash Compensation
Base Salary	Fixed cash compensation that reflects fulfillment of day-to-day responsibilities, skills and experience. Addresses employee cash-flow needs and competitive compensation requirements.	Reviewed annually in light of changes in market practice, performance, changes in responsibility and internal equity.
Annual Incentive Plan (AIP)	Annual cash incentive that rewards achievement of our financial and strategic goals, as well as the individual performance of the executive. For 2013, the AIP pool was funded based on our annual performance against revenue and adjusted net income goals. Provides competitive annual cash compensation opportunity based on performance.	Amount of payout is based on the extent of achievement of company and individual goals set and approved by the Compensation Committee in the first quarter. The Compensation Committee may exercise discretion in considering qualitative performance.
Long-Term Incentives
Stock Options	Equity awards whose value is based on growth in our stock price. Intended to focus executives on results which would contribute to increasing the price of the stock. Generally rewards recipient for increases in the stock price over a 3-10 year period.	Represent 50% of the executive’s long-term incentive opportunity based on the grant date fair value of the awards. Exercise price equals 100% of the stock price on the date of grant. Ten-year term. Three-year cliff vesting: generally vests 100% on the third anniversary of grant.
Restricted Stock Units (RSUs)	Equity awards that give the recipient the right to receive shares of Zoetis stock on a specified future date, subject to vesting. Intended to focus executives on results which would contribute to maintaining or increasing the current stock price.	Represents 50% of the executives’ long-term incentive opportunity based on the grant date fair value of the awards. Three-year cliff vesting: generally vests 100% on the third anniversary of grant. Paid out in shares of our stock upon vesting. Dividend equivalents are accrued over the vesting period and paid when RSUs vest.

ZOETIS 2014 PROXY STATEMENT  21

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EXECUTIVE COMPENSATION

Element	Description and Purpose	Comments
Retirement
U.S. Savings Plan (Savings Plan)	A tax-qualified 401(k)/profit sharing plan that allows U.S. participants to defer a portion of their compensation, up to Internal Revenue Code limitations, and receive a company matching contribution. We may also make a profit sharing contribution of up to 8% of an eligible employee’s total cash pay, based on company performance.	We provide a matching contribution in the form of company stock on the first 5% of an employee’s total cash pay contributed to the Savings Plan. For 2013, we made a profit sharing contribution of 4% of total cash pay to all eligible Savings Plan participants in the form of company stock.
Supplemental Savings Plan	A non-qualified deferred compensation plan that makes up for amounts that would otherwise have been contributed to the Savings Plan (by the employee or as matching or profit sharing contributions by the company) but could not be contributed due to Internal Revenue Code limitations. Also allows NEOs and certain other executives to defer up to an additional 60% of the amount of their AIP payment.	Matching and profit sharing contributions are notionally credited as company stock. Deferrals of AIP payments under the Supplemental Savings Plan are not matched by the company.
Severance
Executive Severance Plan	Severance benefits provided to key executives upon involuntary termination of employment without cause, or upon an involuntary termination without cause or a “good reason” termination after a change in control.	Facilitates recruitment and retention of executives by providing income security in the event of involuntary job loss.

THE COMPENSATION PROCESS

Compensation Consultants

In 2012, Compensation Advisory Partners, LLC (CAP) was engaged by Pfizer to assist in developing a compensation program for Zoetis as a stand-alone company. CAP assisted Pfizer in 2012 and early 2013 in the following work for Zoetis:

• Developing a compensation philosophy;
   
• Developing a peer group for use in benchmarking executive pay levels and practices;
   
• Benchmarking our executive compensation levels relative to market;
   
• Developing an annual incentive and long-term incentive plan design;
   
• Developing a director compensation program;
   
• Determining the appropriate treatment of unvested Pfizer long-term incentive awards upon our separation from Pfizer; and
   
• Developing recommendations for stock ownership guidelines for our executives.

CAP continues to serve as an adviser to our management on executive compensation and to assist the company in:

• Revising our annual incentive and long-term incentive design;
   
• Benchmarking executive compensation levels; and
   
• Drafting this Compensation Discussion & Analysis.

Following our IPO in February 2013, with the establishment of our own Compensation Committee, the Compensation Committee engaged Towers Watson to serve as its advisor. Since that time, Towers Watson has reviewed materials presented by management to our Compensation Committee (including this Compensation Discussion & Analysis), attended the May, June, August and December 2013 meetings of the Compensation Committee, and provided the Compensation Committee with advice and recommendations on compensation of the CEO and the other NEOs.

22  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

Peer Group and Compensation Benchmarking

In 2012, Pfizer worked with CAP to identify a peer group of publicly-traded companies to be used for purposes of benchmarking pay levels and pay practices for our senior executives. Because there are currently no other stand-alone, publicly-traded animal health companies of comparable size and complexity, CAP looked beyond our direct competitors in the animal health industry to a broader list of companies in the pharmaceutical, biopharmaceutical, agriculture and nutrition industries. Based on the sales and market capitalization of the peer companies, as well as the nature of their businesses, histories, industries and the availability of relevant comparative compensation data, we believe the following core group of peer companies is appropriate given the unique nature of our business:

In addition to these eleven core peer companies, we identified six additional companies (Bio-Rad Laboratories, Inc., Celgene Corporation, Hospira, Inc., Mettler-Toledo International Inc., PerkinElmer, Inc. and Perrigo Company plc) as our “supplemental” peer companies. These six additional companies do not have readily available comparative compensation data, but have similar sales and market capitalization. We will utilize the proxy data for these supplemental peer companies for purposes of determining comparative compensation for certain of our executives.

We used the proxy data for the combined group of peer companies to assist in determining elements of 2013 compensation for our NEOs. In addition to the peer group data, we have considered survey data from similarly-sized companies in life sciences and general industry for benchmarking purposes to ensure robust data. In particular, in certain cases, we have used data from the Aon/Radford Global Life Sciences Survey and the Aon/Hewitt TCM database for this purpose.

Our Compensation Committee will review our peer group annually and will make any adjustments that are determined to be appropriate.

Target total direct compensation for our NEOs for 2013 was at or below the median of the compensation of similar positions across our peer companies.

Role of Management in Compensation Decisions

Our CEO, CFO and Chief Human Resources Officer (CHRO) participated in designing the annual incentive and long-term incentive compensation programs approved by the Pfizer Compensation Committee before our IPO which were in effect during 2013. The CEO, with the assistance of the CHRO, provides the Compensation Committee with preliminary recommendations for compensation of the NEOs other than himself. The Compensation Committee, with the advice of its own compensation consultant, approves the compensation for the NEOs other than the CEO, and recommends the compensation of the CEO to our full Board of Directors for approval.

2013 COMPENSATION PROGRAM AND DECISIONS

Compensation Structure

The compensation structure for our executives is designed to emphasize variable compensation over fixed compensation, and equity compensation over cash compensation. For all of our NEOs, long-term incentives, which are entirely equity based, make up the largest portion of their pay mix. For 2013, 85% of the target total direct compensation of our CEO is variable pay – either performance-based or directly connected to the price of our stock. For our other NEOs, on average 70% of target total direct compensation is variable. The heavy performance orientation in our program helps to ensure a pay-for-performance approach to compensation, as well as an alignment between our management and our shareholders.

ZOETIS 2014 PROXY STATEMENT  23

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EXECUTIVE COMPENSATION

The table and chart below show the mix of target total direct compensation for our NEOs for 2013. They do not include retirement benefits or the August 2013 replacement grants made to make up for Pfizer long-term incentive awards that were forfeited upon our separation from Pfizer. The target total direct compensation for Mr. Alaix reflects the second six months of 2013, which includes the July 1, 2013 increase to Mr. Alaix’ base salary and target annual incentive opportunity described above in the section “CEO Compensation: At A Glance.”

			Total				Pay Mix
		Target	Long-term	Target			Target
	Base	Annual	Incentive	Total Direct		Base	Annual	Long-Term
Executive	Salary	Incentive	Value	Compensation		Salary	Incentive	Incentive
Juan Ramón Alaix	$900,000	$990,000	$4,000,000	$5,890,000		15%	17%	68%
Richard A. Passov	$615,000	$385,000	$1,400,000	$2,400,000		26%	16%	58%
Kristin C. Peck	$605,000	$385,000	$1,120,000	$2,110,000		29%	18%	53%
Clinton A. Lewis, Jr.	$400,000	$180,000	$600,000	$1,180,000		34%	15%	51%
Catherine A. Knupp	$400,000	$240,000	$600,000	$1,240,000		32%	19%	48%

Base Salary Decisions

Mr. Alaix’ annual base salary for 2013 was set by Pfizer in 2012 at $750,000, and reflected his role as the head of the animal health business unit of Pfizer. On June 5, 2013, Mr. Alaix’ salary was increased to $900,000 effective July 1, 2013 to recognize that after our separation from Pfizer, he would be the CEO of a stand-alone public company. The increase also was intended to move him closer to the median CEO compensation of our peer group companies.

The base salaries of our other NEOs were approved by the Pfizer Compensation Committee in September 2012, and remained in effect during all of 2013.

Annual Incentive Plan

Our Annual Incentive Plan (AIP) is our annual cash incentive program – our annual bonus plan – that is intended to reward all AIP-eligible employees, including our NEOs, for the achievement of the company’s financial and strategic goals, as well as the achievement of their own individual performance goals.

Our AIP utilizes a funded pool approach. An overall target AIP pool for the year was determined by adding together the target AIP payouts for each eligible employee, including the NEOs. The actual amount of the AIP bonus pool for 2013 was determined by the Compensation Committee based on the company’s attainment of the revenue and adjusted net income goals (each weighted equally) approved by the Compensation Committee in the first quarter of the year.

These measures were selected because:

• they reflect the successful execution of our business strategy and support the achievement of the company’s annual operating plan;
   
• they are two measures that shareholders closely track in their analysis of our performance; and
   
• we were a company in transition during 2013, and wanted to use measures that are clearly understood, are measurable and can be impacted by the performance of our executives and our employees.

24  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

The threshold, target and maximum performance levels for AIP pool funding for 2013 were established by our Compensation Committee in early 2013. The target performance levels established by our Compensation Committee, which exclude the impact of foreign exchange, are shown in the table below.

2013 Annual Incentive Plan – Threshold, Target, and Maximum Value

Our results for 2013 were revenue of $4.628 billion and adjusted net income of $745 million, excluding the impact of foreign exchange. The Compensation Committee approved an overall funding level of 115% of target across all employees eligible under the AIP. The Committee believes this funding level reflects Zoetis’ 2013 financial performance and also recognizes Zoetis’ achievement of its 2013 objectives as it was undergoing significant change related to the separation from Pfizer and becoming a stand-alone public company.

The target payout levels for our NEOs were set by the Pfizer Compensation Committee in September 2012. Payouts under the AIP program can range from 0%-200% of the target level based on actual performance.

In March 2014, the Compensation Committee (and, in the case of the CEO, the Board of Directors) determined the amount of annual incentive earned by each of our NEOs and approved the final payouts to each executive for 2013. Zoetis’ NEOs’ 2013 annual incentive awards were based on:

• the financial performance of Zoetis (measured by revenue and adjusted net income, as described above);
   
• the financial performance of their respective region/business unit/function measured by annual budgets for revenue and income before adjustments (as applicable);
   
• the achievement of selected strategic and operational goals for their respective region/business unit/function; and
   
• an assessment of each executive’s individual performance relative to each executive’s performance objectives (described below under the heading “Other NEO Compensation Decisions”).

The annual incentive target for Mr. Alaix was initially set at $750,000 (100% of his January 1, 2013 salary) and was increased to $990,000 (110% of his July 1, 2013 salary) by our Compensation Committee effective July 1, 2013. The Compensation Committee felt that this increase was appropriate to move his target annual cash compensation closer to the market median. This increase was applied on a prospective basis in determining his payout under the Annual Incentive Plan.

The Board of Directors and the Compensation Committee also considered the results of an anonymous 360 degree feedback survey, conducted among the members of our executive team, in evaluating Mr. Alaix’ 2013 performance.

Other NEO Compensation Decisions

What follows are highlights of individual and regional/business unit/function performance considered in the CEO’s evaluation of the performance of the other NEOs and his recommendations with respect to their AIP payouts for 2013. In approving the compensation recommendations for the other NEOs, the Compensation Committee considered the overall performance of the company, as well as the CEO’s assessment of each NEO’s individual performance and accomplishments relative to each NEO’s individual performance objectives that were approved by the Compensation Committee at the start of 2013.

Richard A. Passov, Executive Vice President and Chief Financial Officer. As CFO, Mr. Passov was instrumental in the success of our IPO and our separation from Pfizer. Under his leadership, we established the financial infrastructure required for a stand-alone company, with particular progress in establishing financial shared services and the implementation of a new Enterprise Resource Planning system.

ZOETIS 2014 PROXY STATEMENT  25

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EXECUTIVE COMPENSATION

Kristin C. Peck, Executive Vice President and Group President. Ms. Peck leads our Global Manufacturing and Supply (GMS), Global Poultry, Diagnostics, Business Development and Strategy, and New Products Marketing functions. Under her leadership, the Global Poultry business exceeded both revenue and net income targets. In addition, under Ms. Peck’s leadership GMS achieved a reduction in cost of goods sold, improved forecast accuracy, and implemented our new supply operating model with no supply disruptions. Ms. Peck led our strategic planning process and developed specific action plans that were endorsed by our Board of Directors, and led our Business Development group in completing a number of important business transactions that contributed to operational targets and strategic objectives.

Clinton A. Lewis, Jr., Executive Vice President and President, U.S. Operations. Under Mr. Lewis’ leadership, our U.S. business surpassed its 2013 revenue and net income targets. Mr. Lewis was instrumental in the passage of Animal Drug Use Fee Agreement legislation, which is anticipated to save the animal health industry approximately $40 million over five years. He also led the successful launch of our e-Commerce platform, with enrollment of over 3,700 customers, and continued the deployment of new service offerings for our customers. Mr. Lewis also leads our Global Genetics business. Under Mr. Lewis’ leadership, our Global Genetics business experienced significant growth in 2013.

Catherine A. Knupp, Executive Vice President and President, Research and Development. Dr. Knupp leads our global Research and Development function. In 2013, under her leadership, we received a number of high priority approvals, in some instances months ahead of schedule. She led initiatives relating to consolidation of research activities which resulted in cost savings for us and led to increased efficiencies in the utilization of capital.

The 2013 AIP payouts for our NEOs are shown in the table below.

Long-Term Incentives

2013 Equity and Incentive Plan. Our 2013 Equity and Incentive Plan (the Equity Plan) is a comprehensive long-term incentive compensation plan that permits us to grant both equity-based and non-equity based long-term compensation awards to employees and directors. The Equity Plan became effective January 28, 2013.

At the time of our IPO in February 2013, we made the first grant of long-term incentives under the Equity Plan to our NEOs and other eligible employees. In September of 2012, the Pfizer Compensation Committee established a long-term incentive target for each of our NEOs for 2013 based on external benchmarks for similar positions in our peer companies, as well as in commercially available compensation surveys. Long-term incentive values were delivered to the NEOs, other members of our executive team and other eligible employees of Zoetis through a mix of 50% stock options and 50% restricted stock units (RSUs). The long-term incentive values delivered to our NEOs in 2013 are as follows:

		Total
		Long-term												# of Stock
		Incentive				Stock Option				RSU				Options			# of RSUs
	Executive	Value				Value				Value				Granted			Granted
	Juan Ramón Alaix		$	4,000,000			$	2,000,000			$	2,000,000			285,306		76,923
	Richard A. Passov		$	1,400,000			$	700,000			$	700,000			99,857		26,923
	Kristin C. Peck		$	1,120,000			$	560,000			$	560,000			79,885		21,538
	Clinton A. Lewis, Jr.		$	600,000			$	300,000			$	300,000			42,796		11,538
	Catherine A. Knupp		$	600,000			$	300,000			$	300,000			42,796		11,538

26  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

Stock Options. The stock options granted in February 2013 had an exercise price equal to the IPO offer price of $26.00 and have a ten-year term. Stock options are subject to a three-year cliff-vesting requirement and do not vest until the third anniversary of the grant date, with earlier vesting in the event of certain terminations of employment (e.g., retirement).

We view stock options as a form of long-term incentive that will focus and reward executives for increasing our stock price. If the stock price does not increase from the level at the date of the grant, the stock options will have no value to the executives. We believe that stock options encourage our executives to focus on decisions that will lead to increases in the stock price for the long-term and are an effective retention tool, since executives must remain with the company for three years before they can exercise the stock options and the options have a ten-year term from the date of grant.

Restricted Stock Units (RSUs). The RSUs granted in February 2013 provide executives with the right to receive shares of our stock upon the conclusion of a three-year cliff-vesting requirement and do not vest until the third anniversary of the grant date, with earlier vesting in the event of certain terminations of employment (e.g., retirement). Dividend equivalents are earned over the vesting period and will be paid out in shares of our stock at the same time the RSUs are paid out.

We view RSUs as being effective in achieving several objectives:

• aligning the interests of executives with those of shareholders over the vesting period;
   
• retaining executive talent; and
   
• encouraging stock ownership by delivering shares upon settlement.

RSUs complement stock options by encouraging executives to guard against downside risk to the stock price as well as focus on increasing the stock price.

Treatment of Pfizer Long-Term Incentives upon Our Separation from Pfizer

Upon our separation from Pfizer, certain unvested Pfizer long-term incentive awards were forfeited because the separation was treated as a termination of employment under Pfizer’s long-term incentive plan. In order to ensure that our employees did not lose the value of long-term incentives earned during their service at Pfizer, our Compensation Committee approved the replacement of all Pfizer long-term incentive awards that were forfeited by our NEOs and other members of our executive team with grants of Zoetis RSUs under our Equity Plan on August 15, 2013, having an equivalent value for our NEOs and other members of our executive team, and with cash payments for our other employees who held Pfizer long-term incentive awards. The replacement grants will vest in installments replicating the vesting schedule of the forfeited Pfizer long-term incentive awards. We do not view these replacement grants as compensation for 2013, as they were intended to make our executive officers “whole” for prior year grants related to their service with Pfizer which were forfeited as a result of the separation. The table below shows the number of replacement grants to our NEOs and their value based on the August 15, 2013 closing price of our stock of $30.02.

The number of replacement RSUs, and, therefore, the total value of the replacement grants that were made to Messrs. Alaix and Passov is lower than those of the replacement grants made to other NEOs because Messrs. Alaix and Passov were deemed retirement-eligible under Pfizer’s long-term incentive plan. Because they were deemed retirement eligible, fewer of the unvested Pfizer long-term incentive awards granted to Messrs. Alaix and Passov were cancelled upon our separation from Pfizer.

ZOETIS 2014 PROXY STATEMENT  27

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EXECUTIVE COMPENSATION

Retirement Benefits

Our NEOs receive retirement benefits through our Savings Plan and our Supplemental Savings Plan. The Savings Plan is a tax-qualified 401(k) savings plan available to all eligible U.S. employees. Participants may elect to contribute up to 60% of their salary and annual incentive payment to the plan, subject to Internal Revenue Code limitations. We match 100% of the employee contribution in company stock, up to 5% of each eligible employee’s pay. We may also contribute a discretionary profit sharing amount of up to 8% of each eligible employee’s pay (subject to Internal Revenue Code limitations). For 2013, we contributed 4% of each eligible employee’s pay as a profit sharing contribution; this contribution was made in company stock.

Our Supplemental Savings Plan is a non-qualified deferred compensation plan that makes up for amounts that would otherwise have been contributed to the Savings Plan but could not be contributed due to Internal Revenue Code limitations on the amount of compensation that may be taken into account under a tax-qualified plan ($255,000 for 2013). Eligible employees, including all of our NEOs, may elect to defer up to 30% of the amount by which their salary and annual incentive payment exceeds this compensation limit. We match these deferrals at the same rate as under the Savings Plan, 100% match up to 5% of pay. In addition, our NEOs and certain other executives may elect to defer up to an additional 60% of the amount of their annual incentive payment. We do not match these additional deferrals. If an employee’s profit sharing contribution to the Savings Plan is limited by the compensation limit, the portion that the employee was not able to receive in the Savings Plan is credited to the employee’s account in the Supplemental Savings Plan.

Severance

In June 2013 our Compensation Committee adopted an Executive Severance Plan covering our NEOs and other members of our executive team, and certain other executives. The plan provides for payment of severance benefits in the event of an involuntary termination of employment (other than for “cause”) that is not in connection with a change in control, and a higher level of benefits in the event of an involuntary termination of employment (other than for “cause”) or a termination for “good reason” that is in connection with or within 24 months after a change in control. The amounts payable under the plan are as follows:

			Continued Health and
		Severance	Life Insurance (at active
		(Base Salary)	employee cost)		Bonus
	Non-Change in Control
	CEO	18 months	12 months		1.5x target
	Other Participants	12 months	12 months		1x target
	Change in Control
	CEO	30 months	18 months		2.5x target
	Other Participants	24 months	18 months		2x target

The salary payments are made as salary continuation in the case of a non-change in control severance, and in a lump sum in the case of a change in control severance. In addition to the benefits reflected in the table, we will provide outplacement services to plan participants. All benefits under the plan are subject to the participant’s execution of a general release of all claims against us.

28  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

CORPORATE GOVERNANCE POLICIES

Stock Ownership and Holding Requirements

We have adopted share ownership guidelines for our NEOs. Our guidelines are established as a multiple of each executive’s base salary. In assessing compliance with the guidelines, we count shares held outright, unvested restricted stock or RSUs, and shares held in benefit plans. Our guidelines by executive level are as follows:

• Mr. Alaix: 5 times base salary
   
• Mr. Passov and Ms. Peck: 3 times base salary
   
• Remaining NEOs: 2 times base salary

The executives must achieve the guideline before they can sell any shares acquired upon the exercise of options or the vesting of other awards, other than shares sold to satisfy the exercise price of stock options or taxes due upon the exercise of options or the vesting of shares. Our NEOs will have five years from the establishment of the guidelines to achieve the share ownership requirement.

Hedging Policy

We adopted a policy prohibiting any of our directors or employees, including the NEOs, from “hedging” their ownership in shares of our common stock or other equity-based interests in our company, including by engaging in short sales or trading in derivative securities relating to our common stock.

2014 COMPENSATION DECISIONS

For 2014, the Compensation Committee has approved the following changes to our compensation program:

• Elimination of the financial planning executive perquisite that had previously been available to our NEOs;
   
• Adoption of a claw-back policy that will allow us to recover incentive payments paid to employees, including our NEOs (see below);
   
• Elimination of a provision under our Equity Plan that would accelerate the vesting of stock options and RSUs upon an involuntary termination of employment that was not the result of a reorganization or business transaction (e.g., sale of a business);
   
• Use of adjusted diluted EPS instead of adjusted net income as a metric for determining the AIP pool funding; and
   
• Addition of a cash flow metric to the revenue and adjusted diluted EPS metrics used in determining the AIP pool funding. This new measure will help focus management on effective management of working capital and cash.

In addition, we intend to consider adding a performance-based component to our long-term incentive program for our NEOs for 2015. Over the course of 2014, the Compensation Committee will consider the appropriate structure and financial measures for this new performance-based component of our long-term incentive program, and expects to make this determination after the company has experienced a full year of operations as a stand-alone company.

CLAW-BACK POLICY

As indicated above, for 2014 we have adopted a claw-back policy under which our Compensation Committee may, to the extent permitted by law, make retroactive adjustments to any cash-based or equity-based incentive compensation paid to employees, including our NEOs, where the payment was predicated upon the achievement of specified financial results that are the subject of a subsequent restatement. The intent of the policy is to enable the company to recover any amount determined by the Compensation Committee to have been inappropriately received by the employee. The incentive awards that we grant in 2014 will contain such compensation recovery provisions.

ZOETIS 2014 PROXY STATEMENT  29

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EXECUTIVE COMPENSATION

TAX DEDUCTIBILITY OF NEO COMPENSATION

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation greater than $1 million paid in any fiscal year to specified executive officers unless the compensation qualifies as “performance-based” under that section.

We generally intend to structure our equity-based and cash-based incentive awards to qualify as “performance-based” compensation. However, to maintain flexibility in providing compensation to our executives, we do not have a policy requiring compensation to be deductible.

REPORT OF THE COMPENSATION COMMITTEE

The Zoetis Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis contained in this proxy statement. Based on its review and discussions with management, the Zoetis Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s proxy statement on Schedule 14A filed with the SEC.

THE COMPENSATION COMMITTEE

Robert W. Scully, Chair (committee member beginning June 27, 2013)
Sanjay Khosla (committee member beginning June 27, 2013)
Gregory Norden
Louse M. Parent (committee member beginning August 1, 2013)

EXECUTIVE COMPENSATION TABLES

The following tables summarize our NEO compensation:

	1.	Summary Compensation Table. The Summary Compensation Table summarizes the compensation earned by or paid to our NEOs for the fiscal years ended December 31, 2013, 2012, and 2011, including salary earned, annual incentive plan payments, the aggregate grant date fair value of stock awards and option awards granted to our NEOs, and all other compensation paid to our NEOs.
	2.	2013 Grants of Plan-Based Awards Table. The 2013 Grants of Plan-Based Awards Table summarizes all grants of plan-based awards made to our NEOs for the fiscal year ended December 31, 2013.
	3.	2013 Outstanding Equity Awards at Fiscal Year-End Table. The 2013 Outstanding Equity Awards at Fiscal Year-End Table summarizes the unvested stock awards and all stock options held by our NEOs as of December 31, 2013.
	4.	2013 Option Exercises and Stock Vested Table. The 2013 Option Exercises and Stock Vested Table summarizes our NEOs’ option exercises and stock award vesting during the fiscal year ended December 31, 2013.
	5.	2013 Non-Qualified Deferred Compensation Table. The 2013 Non-Qualified Deferred Compensation Table summarizes the activity during 2013 and account balances under our Supplemental Savings Plan as of December 31, 2013.
	6.	Potential Payments upon Employment Termination Table. The Potential Payments upon Employment Termination Table summarizes payments and benefits that would be made to our NEOs in the event of certain employment terminations.

30  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

																							Change in
																							Pension
																							Value And
																							Nonqualified
																				Non-Equity			Deferred
														Stock			Option			Incentive Plan			Compensation			All Other
						Salary				Bonus				Awards(4)			Awards(5)			Compensation(6)			Earnings(7)			Compensation(8)			Total
	Named Executive Officer		Year(1)			($)				($)				($)			($)			($)			($)			($)			($)
	Juan Ramón Alaix		2013			825,000								2,464,437			1,999,995			1,218,000			0			99,679			6,607,112
	Chief Executive Officer		2012			613,533								438,013			441,787			500,000			458,739			49,559			2,501,631
			2011			566,075								412,106			368,983			400,000			687,446			57,658			2,492,268
	Richard A. Passov		2013			615,000								1,031,599			699,998			443,000			0			75,762			2,865,358
	Executive Vice President and		2012			587,875								297,322			299,889			309,300			264,300			42,729			1,801,415
	Chief Financial Officer		2011			591,700	(2)							332,519			297,732			335,000			589,014			44,148			2,190,113
	Kristin C. Peck		2013			605,000								1,601,562			559,994			443,000			0			83,903			3,293,458
	Executive Vice President and		2012			526,250				250,000	(3)			421,189			424,843			396,000			208,815			51,316			2,278,413
	Group President
	Clinton A. Lewis, Jr.		2013			400,000								919,000			300,000			300,000			0			46,904			1,965,904
	Executive Vice President and		2012			373,800								428,837			129,951			174,900			261,964			13,946			1,383,398
	President, US Operations
	Catherine A. Knupp		2013			400,000								909,844			300,000			280,000			0			44,931			1,934,775
	Executive Vice President and		2012			362,733								423,874			124,954			174,900			196,166			25,375			1,308,002
	President, R&D

(1)	Although Zoetis was a separate company for only 11 months in 2013, the amounts shown in the “Salary” column in 2013 represent the full year 2013 earnings. The amounts shown for 2012 and 2011 were earned while Zoetis was wholly owned by Pfizer. Ms. Peck, Mr. Lewis and Dr. Knupp were not Named Executive Officers (NEOs) in 2012; as a result, their 2011 compensation is not included in this table.
(2)	The amount shown in the “Salary” column for Mr. Passov in 2011 includes a one-time lump sum merit increase of $18,000.
(3)	The amount shown in the “Bonus” column for Ms. Peck in 2012 represents a one-time bonus paid by Pfizer in recognition of her leadership and efforts related to the sale of the Pfizer Nutrition business.
(4)	The amounts shown in the “Stock Awards” column represent the aggregate grant date fair values for the RSUs granted by Zoetis in 2013, including replacement RSU grants provided to make up for Pfizer equity awards that were forfeited upon Zoetis’ separation from Pfizer, as well as RSUs and Performance Share Awards (PSAs) granted by Pfizer in 2012 and 2011. The table below shows the Pfizer equity awards that were forfeited by the NEOs in 2013 and replaced by RSU grants in August 2013, some of which are reflected in the “Stock Awards” and “Option Awards” columns for 2012 and 2011. Further information regarding the 2013 awards is included in the 2013 Grants of Plan-Based Awards Table and the 2013 Outstanding Equity Awards at Fiscal Year-End Table. The aggregate grant date fair values have been determined based on the assumptions and methodologies set forth in Note 15 to Zoetis’ 2013 Annual Report on Form 10-K, filed with the SEC on March 26, 2014.

													Number of			Grant Date Value
			Number of Units Forfeited										Replacement			of Replacement
	Named Executive Officer		RSUs			PSAs			TSRUs				RSUs			RSUs ($)
	Juan Ramón Alaix			8,389			7,931			—			15,471			464,439
	Richard A. Passov			5,993			5,658			—			11,046			331,601
	Kristin C. Peck			7,705			7,295			66,918			34,696			1,041,574
	Clinton A. Lewis, Jr.			12,647			2,294			20,971			20,620			619,012
	Catherine A. Knupp			12,579			2,229			20,348			20,315			609,856

ZOETIS 2014 PROXY STATEMENT  31

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EXECUTIVE COMPENSATION

(5)	The amounts shown in this column represent the aggregate grant date fair values of the non-qualified stock options awarded by Zoetis in 2013, and the Total Shareholder Return Units (TSRUs) awarded by Pfizer in 2012 and 2011. The Pfizer TSRU awards were forfeited by some of the NEOs and replaced by Zoetis RSU awards in 2013 as shown in the table to Note 4. A Black-Scholes value of $7.01 per share was used for the 2013 Zoetis stock option awards. Further information regarding the 2013 awards is included in the 2013 Grants of Plan-Based Awards Table and the 2013 Outstanding Equity Awards at Fiscal Year-End Table. The aggregate grant date fair values have been determined based on the assumptions and methodologies set forth in Note 15 to Zoetis’ 2013 Annual Report on Form 10-K, filed with the SEC on March 26, 2014.
(6)	The amounts shown in this column represent annual cash incentive awards made to the NEOs under the Zoetis Annual Incentive Plan for 2013, and under Pfizer’s Global Performance Plan for 2012 and 2011.
(7)	Zoetis does not maintain a defined benefit pension plan for which any of our NEOs are eligible and does not pay “above market” interest on non-qualified deferred compensation to employees. For 2012 and 2011, this column reflects pension accruals under Pfizer pension plans. The 2012 pension accrual amounts represent the difference between the December 31, 2012 and December 31, 2011 present values of age 65 accrued pensions under the Pfizer Retirement Annuity Plan and Pfizer Retirement Supplemental Plan, based on the pension plan assumptions for each year. The 2011 pension accrual amounts represent the difference between the December 31, 2011 and December 31, 2010 present values of age 65 accrued pensions under the Pfizer Retirement Annuity Plan and Pfizer Retirement Supplemental Plan, based on the pension plan assumptions for each year. Pfizer did not pay “above market” interest on non-qualified deferred compensation to employees.
(8)	The amounts shown in this column represent the sum of profit sharing and matching contributions under the Zoetis Savings Plan (ZSP) and Zoetis Supplemental Savings Plan (ZSSP) as of December 31, 2013. The savings plan matching contributions include matching funds under the Pfizer Savings Plan (PSP) and the ZSP (both tax-qualified retirement savings plans), as well as matching contributions under the related Pfizer Supplemental Savings Plan (PSSP) and the ZSSP, as shown in the table below. The ZSP and ZSSP became effective on July 1, 2013. Balances as of July 10, 2013 in the PSP and PSSP were transferred into the ZSP and ZSSP respectively on July 11, 2013. The ZSSP is discussed in more detail in the 2013 Non-Qualified Deferred Compensation Table. In addition, the “Other” column in the table below represents the imputed income related to Zoetis’ group term life insurance coverage in excess of $50,000 and other miscellaneous reimbursements from Zoetis.

			Savings Plan								Supplemental Savings Plan												All Other
			($)								($)										Other		Compensation
	Named Executive Officer		Pfizer			Zoetis			Total			Pfizer			Zoetis			Total			($)		($)
	Juan Ramón Alaix		11,195			10,200			21,395			26,774			44,050			70,824			7,461		99,679
	Richard A. Passov		9,367			10,200			19,567			17,236			34,460			51,695			4,500		75,762
	Kristin C. Peck		11,475			10,200			21,675			18,823			37,403			56,226			6,002		83,903
	Clinton A. Lewis, Jr.		11,475			10,200			21,675			4,646			17,796			22,441			2,787		46,904
	Catherine A. Knupp		10,871			12,200			23,070			4,646			15,796			20,442			1,419		44,931

32  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

2013 GRANTS OF PLAN-BASED AWARDS TABLE

The following “2013 Grants of Plan Based Awards Table” provides additional information about non-equity incentive awards and long-term incentive awards granted to our NEOs during the year ended December 31, 2013.

																					All
																					Other		All Other											Grant
																					Stock		Option											Date Fair
											Estimated Future Payouts Under										Awards:		Awards:				Exercise		Closing					Value
											Non-Equity Incentive Plan										Number		Number of				or Base		Market					of Stock
											Awards(1)										of Shares		Securities				Price of		Price on					and
									Date of												of Stock		Underlying				Option		Date of					Option
	Named Executive				Grant				Committee		Threshold			Target			Maximum				or Units		Options				Awards		Grant					Awards (2)(3)
	Officer		Award		Date				Action		($)			($)			($)				(#)		(#)				($/Sh)		($)					($)
	Juan Ramón Alaix		Annual Incentive									0			870,000			1,740,000
			Stock Options(4)			1/31/13			1/30/13															285,306			26.00							1,999,995
			Restricted Stock Units(4)			1/31/13			1/30/13												76,923									26.00	(6)			1,999,998
			Restricted Stock Units(5)			8/15/13			8/1/13												15,471									30.02				464,439
	Richard A. Passov		Annual Incentive									0			385,000			770,000
			Stock Options(4)			1/31/13			1/30/13															99,857			26.00							699,998
			Restricted Stock Units(4)			1/31/13			1/30/13												26,923									26.00	(6)			699,998
			Restricted Stock Units(5)			8/15/13			8/1/13												11,046									30.02				331,601
	Kristin C. Peck		Annual Incentive									0			385,000			770,000
			Stock Options(4)			1/31/13			1/30/13															79,885			26.00							559,994
			Restricted Stock Units(4)			1/31/13			1/30/13												21,538									26.00	(6)			559,988
			Restricted Stock Units(5)			8/15/13			8/1/13												34,696									30.02				1,041,574
	Clinton A. Lewis, Jr.		Annual Incentive									0			180,000			360,000
			Stock Options(4)			1/31/13			1/30/13															42,796			26.00							300,000
			Restricted Stock Units(4)			1/31/13			1/30/13												11,538									26.00	(6)			299,988
			Restricted Stock Units(5)			8/15/13			8/1/13												20,620									30.02				619,012
	Catherine A. Knupp		Annual Incentive									0			240,000			480,000
			Stock Options(4)			1/31/13			1/30/13															42,796			26.00							300,000
			Restricted Stock Units(4)			1/31/13			1/30/13												11,538									26.00	(6)			299,988
			Restricted Stock Units(5)			8/15/13			8/1/13												20,315									30.02				609,856

(1)	The amounts represent the threshold, target and maximum non-equity incentive plan awards under the Zoetis Annual Incentive Plan for 2013.
(2)	The RSU award values were converted to units using the Zoetis IPO price on February 1, 2013 of $26.00 and the Zoetis closing stock price on August 15, 2013 of $30.02; the Stock Option award values were converted to units using a Black-Scholes value on January 31, 2013 of $7.01. Zoetis’ closing stock price on December 31, 2013 was $32.69.
(3)	The amounts shown in this column represent the award values as of the grant dates. The value of the RSUs is shown at the IPO price on February 1, 2013 of $26.00 and at the closing stock price on August 15, 2013 of $30.02. The value of the Stock Options are shown with a Black-Scholes value of $7.01 as of January 31, 2013. For each Named Executive Officer, the values of the January 31, 2013 stock option and RSU awards were intended to be equal prior to their conversion to units. There are slight differences in value due to rounding down to the next lowest whole unit.
(4)	These Zoetis stock option and RSU awards cliff vest on the third anniversary of the grant date.
(5)	The August 15, 2013 RSU awards were provided to replace forfeited Pfizer equity awards, and vest on the same schedule as the Pfizer awards they are replacing.
(6)	The Zoetis IPO price on February 1, 2013.

ZOETIS 2014 PROXY STATEMENT  33

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EXECUTIVE COMPENSATION

2013 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

The following “2013 Outstanding Equity Awards at Fiscal Year-End Table” summarizes the equity-based long-term incentive awards made to our NEOs that were outstanding as of December 31, 2013. The information shown in this table reflects outstanding Zoetis equity awards; it does not include outstanding Pfizer equity awards. Pfizer equity awards outstanding as of December 31, 2013 are shown in a separate table below. The values provided in that table are based on Pfizer’s closing stock price of $30.63 on December 31, 2013.

Option Awards																					Stock Awards
																										Market
						Number of			Number of												Number					Value of
						Securities			Securities												of Shares					Shares or
						Underlying			Underlying												or Units					Units
						Unexercised			Unexercised					Option							of Stock					of Stock
						Options			Options					Exercise					Option		That Have					That Have
			Grant			Exercisable			Unexercisable					Price					Expiration		Not Vested					Not Vested
	Named Executive Officer		Date			(#)				(#)				($)					Date		(#)(1)					($)(2)
	Juan Ramón Alaix		01/31/13							285,306	(3)				26.00	(4)			1/31/2023
			01/31/13																			77,397	(3)			2,530,093
			08/15/13																			15,503	(5)			506,779
			Total			—				285,306												92,899				3,036,872
	Richard A. Passov		01/31/13							99,857	(3)				26.00	(4)			1/31/2023
			01/31/13																			27,089	(3)			885,531
			08/15/13																			11,069	(5)			361,831
			Total			—				99,857												38,157				1,247,362
	Kristin C. Peck		01/31/13							79,885	(3)				26.00	(4)			1/31/2023
			01/31/13																			21,671	(3)			708,411
			08/15/13																			34,767	(5)			1,136,528
			Total			—				79,885												56,437				1,844,939
	Clinton A. Lewis, Jr.		01/31/13							42,796	(3)				26.00	(4)			1/31/2023
			01/31/13																			11,609	(3)			379,499
			08/15/13																			20,662	(5)			675,444
			Total			—				42,796												32,271				1,054,943
	Catherine A. Knupp		01/31/13							42,796	(3)				26.00	(4)			1/31/2023
			01/31/13																			11,609	(3)			379,499
			08/15/13																			20,356	(5)			665,453
			Total			—				42,796												31,965				1,044,952

(1)	Includes accrued dividend equivalent units.
(2)	Based on Zoetis’ closing stock price on December 31, 2013, of $32.69.
(3)	These Zoetis stock option and RSU awards cliff vest on the third anniversary of the grant date.
(4)	Zoetis IPO stock price on February 1, 2013.

34  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

(5)	These Zoetis RSUs, which include dividend equivalent units applied after the grant date, were provided to replace forfeited Pfizer equity awards, and have the following vesting dates:

ZOETIS 2014 PROXY STATEMENT  35

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EXECUTIVE COMPENSATION

Pfizer Option/TSRU Awards

Pfizer Stock Awards

Incentive

Incentive

Number

Plan

Plan

of

Awards:

Awards:

Shares

Market

Number

Market

Number of

Number of

Number of

Number of

or Units

Value of

of

Value of

Securities

Securities

Securities

Securities

of Stock

Shares or

Unearned

Unearned

Grant

Underlying

Underlying

Underlying

Underlying

Option/

That

Units

Shares

Shares

Date/

Unexercised

Unexercised

Unexercised

Unexercised

TSRU

Option/

Have

of Stock

That

That

Performance

Options

Options

TSRUs

TSRUs

Exercise

TSRU

Not

That Have

Have Not

Have Not

Named Executive

Share

Exercisable

Unexercisable

Vested

Unvested

Price

Expiration

Vested

Not Vested

Vested

Vested

Officer

Period

(#)(a)

(#)

(#)(b)(c)

(#)(c)

($)

Date

(#)(c)(d)

($)

(#)(c)

($)

Juan Ramón Alaix

2/26/2004

40,000

37.15

2/25/2014

2/26/2009

38,557

12.70

2/26/2014

12/31/2009

37,473

18.19

12/31/2014

2/25/2010

36,599

17.69

2/25/2015

2/24/2011

42,348

18.90

2/24/2016

8,316

(e)

254,732

2/24/2011

35,058

18.90

2/24/2018

2/23/2012

53,635

21.03

2/23/2017

4,956

(e)

151,814

2/23/2012

45,468

21.03

2/23/2019

1/1/2011 -

12/31/2013

7,451

228,224

1/1/2012 -

12/31/2014

4,627

141,725

40,000

112,629

176,509

13,273

406,546

12,078

369,949

Richard A. Passov

2/26/2004

80,000

37.15

2/25/2014

2/26/2009

40,423

12.70

2/26/2014

2/25/2010

32,939

17.69

2/25/2015

2/24/2011

34,171

18.90

2/24/2016

6,710

(e)

205,538

2/24/2011

28,288

18.90

2/24/2018

2/23/2012

36,408

21.03

2/23/2017

3,364

(e)

103,051

2/23/2012

30,864

21.03

2/23/2019

1/1/2011 -

12/31/2013

6,012

184,148

1/1/2012 -

12/31/2014

3,141

96,209

80,000

73,362

129,731

10,075

308,589

9,153

280,356

Kristin C. Peck

2/26/2009

24,493

12.70

2/26/2014

12/31/2009

26,767

18.19

12/31/2014

2/25/2010

28,857

17.69

2/25/2015

2/24/2011

26,534

18.90

2/24/2016

2/24/2011

21,966

18.90

2/24/2018

2/23/2012

22,916

21.03

2/23/2017

2/23/2012

19,427

21.03

2/23/2019

1/1/2011 -

12/31/2013

6,012

184,148

1/1/2012 -

12/31/2014

4,449

136,273

—

170,960

—

—

—

10,461

320,420

36  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

Pfizer Option/TSRU Awards

Pfizer Stock Awards

Incentive

Incentive

Number

Plan

Plan

of

Awards:

Awards:

Shares

Market

Number

Market

Number of

Number of

Number of

Number of

or Units

Value of

of

Value of

Securities

Securities

Securities

Securities

of Stock

Shares or

Unearned

Unearned

Grant

Underlying

Underlying

Underlying

Underlying

Option/

That

Units

Shares

Shares

Date/

Unexercised

Unexercised

Unexercised

Unexercised

TSRU

Option/

Have

of Stock

That

That

Performance

Options

Options

TSRUs

TSRUs

Exercise

TSRU

Not

That Have

Have Not

Have Not

Named Executive

Share

Exercisable

Unexercisable

Vested

Unvested

Price

Expiration

Vested

Not Vested

Vested

Vested

Officer

Period

(#)(a)

(#)

(#)(b)(c)

(#)(c)

($)

Date

(#)(c)(d)

($)

(#)(c)

($)

Clinton A. Lewis, Jr.

2/26/2004

27,000

37.15

2/25/2014

2/26/2009

11,940

12.70

2/26/2014

12/31/2009

10,707

18.19

12/31/2014

2/25/2010

11,655

17.69

2/25/2015

2/24/2011

9,071

18.90

2/24/2016

2/24/2011

7,510

18.90

2/24/2018

2/23/2012

7,010

21.03

2/23/2017

2/23/2012

5,942

21.03

2/23/2019

1/1/2011 -

12/31/2013

2,055

62,945

1/1/2012 -

12/31/2014

1,361

41,687

27,000

63,835

—

—

—

3,416

104,632

Catherine A. Knupp

2/26/2004

27,500

37.15

2/25/2014

2/26/2009

9,204

12.70

2/26/2014

12/31/2009

16,060

18.19

12/31/2014

2/25/2010

10,417

17.69

2/25/2015

2/24/2011

9,071

18.90

2/24/2016

2/24/2011

7,510

18.90

2/24/2018

2/23/2012

6,740

21.03

2/23/2017

2/23/2012

5,714

21.03

2/23/2019

1/1/2011 -

12/31/2013

2,055

62,945

1/1/2012 -

12/31/2014

1,308

40,064

27,500

64,716

—

—

—

3,363

103,009

(a)		Outstanding Pfizer stock options are fully vested.
(b)		Outstanding Pfizer TSRUs vested in accordance with the schedule below:

Grant Date	Vesting
2/26/2009	These Pfizer TSRUs vested on 2/26/2012 and become payable on 2/26/2014.
12/31/2009	These Pfizer TSRUs vested on 12/31/2012 and become payable on 12/31/2014.
2/25/2010	These Pfizer TSRUs vested on 2/25/2013 and become payable on 2/25/2015.
2/24/2011	These Pfizer TSRUs vested on 6/24/2013 upon Zoetis' separation from Pfizer, and become payable on 2/24/2016
	and 2/24/2018, respectively.
2/23/2012	These Pfizer TSRUs vested on 6/24/2013 upon Zoetis' separation from Pfizer, and become payable on 2/23/2017
	and 2/23/2019, respectively.

(c)		A portion of the original Pfizer 2011 and 2012 TSRU, RSU and PSA awards to NEOs were forfeited and replaced by one time Zoetis RSU awards on August 15, 2013. More details on the forfeited Pfizer TSRUs, RSUs and PSAs are shown in Note 4 to the Summary Compensation Table.
(d)		Includes accrued dividend equivalent units.
(e)		These Pfizer RSU awards vested on June 24, 2013 upon Zoetis’ separation from Pfizer, but will not be released until the 3rd anniversary of the grant date (i.e., original vest date). These awards were not cancelled upon separation from Pfizer because Mr. Alaix and Mr. Passov were considered retirement-eligible under Pfizer’s long-term incentive plan.

ZOETIS 2014 PROXY STATEMENT  37

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EXECUTIVE COMPENSATION

2013 OPTION EXERCISES AND STOCK VESTED TABLE

The following “2013 Option Exercises and Stock Vested Table” provides additional information about the value realized by our NEOs on stock option exercises and the vesting of stock/unit awards during the year ended December 31, 2013. As Zoetis long-term incentive awards are subject to three-year cliff vesting and do not vest until the third anniversary of the grant date, and the first grants under Zoetis’ 2013 Equity and Incentive Plan were made in 2013, there are currently no option exercises or stock vesting to report. This table excludes any information related to Pfizer equity awards.

	Option Awards				Stock Awards
	Number of Shares	Value Realized			Number of Shares	Value Realized
	Acquired on Exercise	on Exercise			Acquired on Vesting	on Vesting
Named Executive Officer	(#)	($)			(#)	($)
Juan Ramón Alaix	0	0			0	0
Richard A. Passov	0	0			0	0
Kristin C. Peck	0	0			0	0
Clinton A. Lewis, Jr.	0	0			0	0
Catherine A. Knupp	0	0			0	0

The table below shows Pfizer Stock Options that were exercised in 2013, as well as Pfizer RSUs and Performance Share Awards (PSAs) that vested in 2013:

				Option Awards										Restricted Stock Units									Performance Share Awards*
				Number										Number									Number
				of Shares					Value					of Shares					Value				of Shares						Value
				Acquired					Realized					Acquired					Realized				Acquired						Realized
				on Exercise					on Exercise					on Vesting					on Vesting				on Vesting						on Vesting
	Named Executive Officer			(#)					($)					(#)					($)				(#)						($)
	Juan Ramón Alaix				193,000					368,355					10,210					274,036				15,787	**				432,090
	Richard A. Passov				239,000					472,255					9,189					246,642				14,208					388,873
	Kristin C. Peck				28,000					43,243					19,254					526,517				12,448					340,702
	Clinton A. Lewis, Jr.				76,000					152,248					8,859					242,641				5,027					137,589
	Catherine A. Knupp				71,700					138,365					8,459					231,860				4,494					123,001

*		The performance shares were determined based on Pfizer’s relative TSR performance over the 2010-2012 performance period and were paid on February 28, 2013 at $27.37.
**		These shares were deferred per Mr. Alaix’ election.

The table below shows Pfizer TSRUs granted on February 28, 2008 that were settled on February 28, 2013 at $27.37:

	Number of Shares			Value Realized
	Acquired on Settlement			on Settlement
Named Executive Officer	(#)			($)
Juan Ramón Alaix		7,879			215,657
Richard A. Passov		12,338			337,684
Kristin C. Peck		5,266			144,119
Clinton A. Lewis, Jr.		3,075			84,161
Catherine A. Knupp		2,345			64,172

38  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

2013 NON-QUALIFIED DEFERRED COMPENSATION TABLE

The following “2013 Non-Qualified Deferred Compensation Table” summarizes activity during 2013 and account balances in the Zoetis Supplemental Savings Plan for our NEOs as of December 31, 2013. These amounts include prior Supplemental Savings Plan balances held by our NEOs when they served as executives of Pfizer.

		Aggregate												Aggregate	Aggregate
		Balance at			Executive			Company			Aggregate			Withdrawals/	Balance as of
		January 1,			Contributions			Contributions			Earnings in			Distributions	December 31,
Named Executive		2013			in 2013			in 2013			2013			in 2013	2013
Officer	Plan (1)	($)			($) (2)			($) (3)			($)			($)	($)
Juan Ramón Alaix	Zoetis Supplemental
	Savings Plan		1,157,566			167,195			70,824			247,351		-		1,642,935
Richard A. Passov	Zoetis Supplemental
	Savings Plan		2,583,728			186,790			51,695			221,849		-		3,044,062
Kristin C. Peck	Zoetis Supplemental
	Savings Plan		356,049			43,247			56,226			105,146		-		560,667
Clinton A. Lewis, Jr.	Zoetis Supplemental
	Savings Plan		0			18,194			22,441			1,694		-		42,330
Catherine A. Knupp	Zoetis Supplemental
	Savings Plan		516,317			51,550			20,442			70,960		-		659,268

(1)		The key features of the plan are described in the Compensation Discussion and Analysis. January 1, 2013 balances reflect balances under the Pfizer Supplemental Savings Plan (PSSP). The Zoetis Supplemental Savings Plan (ZSSP) was implemented on July 1, 2013. Balances under the PSSP as of July 10, 2013 were transferred into the ZSSP on July 11, 2013. Amounts shown in the “Executive Contributions in 2013,” “Company Contributions in 2013” and “Aggregate Earnings in 2013” columns reflect the aggregate totals from both the PSSP and ZSSP. The table below shows the balances transferred from the PSSP into the ZSSP on July 11, 2013.

(2)		Executive contribution amounts shown in this table are reflected in the “Salary” column of the Summary Compensation Table.
(3)		Company contribution amounts shown in this table include profit sharing and company matching contributions and are reflected in the “All Other Compensation” column of the Summary Compensation Table. Company contribution amounts under the Zoetis Savings Plan are also reflected in the “All Other Compensation” column of the Summary Compensation Table but not in the table above. Aggregate earnings are not reflected in the Summary Compensation Table.

ZOETIS 2014 PROXY STATEMENT  39

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EXECUTIVE COMPENSATION

POTENTIAL PAYMENTS UPON EMPLOYMENT TERMINATION TABLE

The following “Potential Payments upon Employment Termination Table” shows the estimated benefits payable upon a hypothetical termination of employment under Zoetis’ Executive Severance Plan and 2013 Equity and Incentive Plan under various termination scenarios as of December 31, 2013. Severance benefits are subject to the execution of a release agreement.

											Change in						Death or
Named Executive					Without Cause						Control						Disability						Retirement
Officer		Description			($)						($)						($)						($)
Juan Ramón Alaix		Severance Amount				2,835,000	(1)					4,725,000	(5)					-					-
		Value of Benefits Continuation				13,365	(2)					20,048	(6)					-					-
		Value of Outplacement Services				16,560	(3)					16,560	(3)					-					-
		Equity Acceleration				2,871,012	(4)					4,945,569	(7)					4,945,569	(8)				-
		TOTAL				5,735,937						9,707,177						4,945,569
Richard A. Passov		Severance Amount				1,000,000	(1)					2,000,000	(5)					-					-
		Value of Benefits Continuation				18,964	(2)					28,445	(6)					-					-
		Value of Outplacement Services				16,560	(3)					16,560	(3)					-					-
		Equity Acceleration				1,080,266	(4)					1,915,405	(7)					1,915,405	(8)				-
		TOTAL				2,115,790						3,960,410						1,915,405
Kristin C. Peck		Severance Amount				990,000	(1)					1,980,000	(5)					-					-
		Value of Benefits Continuation				18,937	(2)					28,405	(6)					-					-
		Value of Outplacement Services				16,560	(3)					16,560	(3)					-					-
		Equity Acceleration				1,002,844	(4)					2,379,370	(7)					2,379,370	(8)				-
		TOTAL				2,028,341						4,404,335						2,379,370
Clinton A. Lewis, Jr.		Severance Amount				580,000	(1)					1,160,000	(5)					-					-
		Value of Benefits Continuation				18,699	(2)					28,049	(6)					-					-
		Value of Outplacement Services				16,560	(3)					16,560	(3)					-					-
		Equity Acceleration				533,399	(4)					1,341,248	(7)					1,341,248	(8)				-
		TOTAL				1,148,658						2,545,857						1,341,248
Catherine A. Knupp		Severance Amount				640,000	(1)					1,280,000	(5)					-					-
		Value of Benefits Continuation				19,772	(2)					29,658	(6)					-					-
		Value of Outplacement Services				16,560	(3)					16,560	(3)					-					-
		Equity Acceleration				531,634	(4)					1,331,257	(7)					1,331,257	(8)				-
		TOTAL				1,207,965						2,657,475						1,331,257

(1)		These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 18 months’ base salary and target bonus for the CEO, and equal to 12 months’ base salary and target bonus for the other NEOs in the event of the executive’s involuntary termination without Cause.
(2)		These amounts represent the cost of 12 months of active health and life insurance coverage.
(3)		These amounts represent the program fee for outplacement services for 12 months.
(4)		These amounts represent the value of Zoetis long-term incentive awards that vest on the executive’s involuntary termination without Cause using Zoetis’ closing stock price of $32.69 on December 31, 2013. In the event of an executive’s involuntary termination without Cause, unvested stock options fully vest while unvested RSUs vest on a pro rata basis.
(5)		These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 30 months’ base salary and target bonus for the CEO, and equal to 24 months’ base salary and target bonus for the other NEOs in the event of the executive’s involuntary termination without Cause or for Good Reason within 24 months after a change in control.
(6)		These amounts represent the cost of 18 months of active health and life insurance coverage.
(7)		These amounts represent the value of Zoetis long-term incentive awards that vest following a change in control using Zoetis’ closing stock price of $32.69 on December 31, 2013. In the event of the executive’s involuntary termination without Cause or for Good Reason within 24 months after a change in control, all unvested stock options and RSUs fully vest.
(8)		These amounts represent the value of Zoetis long-term incentive awards that vest on termination of employment due to death or disability using Zoetis’ closing stock price of $32.69 on December 31, 2013. In the event of the executive’s termination due to death or disability, all unvested stock options and RSUs fully vest.

40  ZOETIS 2014 PROXY STATEMENT

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EXECUTIVE COMPENSATION

Under our Executive Severance Plan, “Cause” includes acts of dishonesty, fraud, or misrepresentation in connection with the executive’s responsibilities to the company; a willful, material violation of any law or regulation applicable to the business of the company; a conviction of, or plea of nolo contendere to, a felony or any crime that results in or is reasonably expected to result in material injury to the business or reputation of the company; willful misconduct or gross negligence in carrying out the executive’s job responsibilities; unauthorized use or disclosure of proprietary information or trade secrets; willful breach of obligations under any written agreement or covenant with the company that is injurious to the company; violation or disregard of any company policy that results in or is reasonably expected to result in material injury to the business or reputation of the company; failure or refusal to perform the executive’s duties or responsibilities to the company; and neglect or persistent unsatisfactory performance of the executive’s duties, and failure to cure such condition within 30 days after receiving written notice.

Under our Executive Severance Plan, “Good Reason” is defined as the executive’s resignation, within 24 months of a change in control, due to one of the following conditions occurring without the executive’s written consent (providing the requirements regarding advance notice and an opportunity to cure the condition are satisfied): a material reduction in the executive’s base compensation; a material reduction in the executive’s duties, authority, responsibilities, or reporting relationship; or a requirement to relocate to a facility or location more than 25 miles from the executive’s current location, with an increase in commuting time of more than 30 minutes during normal commuting hours and under typical traffic conditions.

EQUITY COMPENSATION PLANS

The following table shows shares reserved for issuance for outstanding awards granted under the company’s equity plans as of December 31, 2013.

Number of securities

remaining available for

Number of securities to

Weighted-average

future issuance under

be issued upon exercise

exercise price of

equity compensation

of outstanding options,

outstanding options,

plans (excluding securities

warrants and rights

warrants and rights

reflected in column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved

by security holders

3,863,958

(1)

$

26.11

20,728,313

Equity compensation plans not approved

by security holders

—

—

—

Total

3,863,958

(1)

$

26.11

20,728,313

(1)		Includes 2,879,564 stock options, 35,023 shares underlying deferred stock units (DSUs) and 949,370 shares underlying restricted stock units (RSUs). DSUs and RSUs are disregarded for purposes of determining weighted average exercise price.

ZOETIS 2014 PROXY STATEMENT  41

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ITEM 1 — ELECTION OF DIRECTORS

Our Board of Directors currently consists of nine directors divided into three classes. The directors hold office for staggered terms of three years (and until their successors are elected and qualified). One of the three classes is elected each year to succeed the directors whose terms are expiring.

The directors in Class I, whose terms expire at the 2014 Annual Meeting, are Gregory Norden, Louise M. Parent and Robert W. Scully. Each of these directors has been nominated by the Board of Directors, upon the recommendation of its Corporate Governance Committee, to stand for election for a term expiring at the 2017 Annual Meeting of Shareholders. Each of these nominees has consented to being named in this proxy statement as a Board nominee and to serve if elected.

Unless otherwise instructed, it is the intention of the proxy holders to vote the proxies received by them in response to this solicitation FOR the election of the nominees named above as directors. If any such nominee should refuse or be unable to serve, the proxies will be voted for such person as shall be designated by the Board of Directors to replace such nominee. The Board of Directors has no reason to believe that any of the Board nominees will refuse or be unable to serve as a director if elected.

In order to be elected, a nominee must receive more votes cast “For” than “Against” his or her election. Abstentions and broker non-votes will have no effect on the outcome of the vote. See “Corporate Governance — Majority Voting Standard for Director Elections” for information about our procedures if a nominee fails to receive a majority of the votes.

INFORMATION ABOUT DIRECTORS

The following table sets forth certain information regarding the director nominees and the directors of the company whose terms will continue after the Annual Meeting.

(1)		As of April 3, 2014.
(2)		Nominee for re-election at the 2014 Annual Meeting for a term expiring in 2017.

Set forth below is certain information with respect to the director nominees and continuing directors. Unless otherwise indicated, the principal occupation listed below for each person has been his or her principal occupation for the past five years. In addition, described below are each director’s particular experiences, qualifications, attributes or skills that contributed to the Board’s conclusion that the person should continue to serve as a director of the company.

42  ZOETIS 2014 PROXY STATEMENT

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ITEM 1 — ELECTION OF DIRECTORS

DIRECTOR NOMINEES

ZOETIS 2014 PROXY STATEMENT  43

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ITEM 1 — ELECTION OF DIRECTORS

44  ZOETIS 2014 PROXY STATEMENT

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ITEM 1 — ELECTION OF DIRECTORS

CONTINUING DIRECTORS

ZOETIS 2014 PROXY STATEMENT  45

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ITEM 1 — ELECTION OF DIRECTORS

46  ZOETIS 2014 PROXY STATEMENT

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ITEM 1 — ELECTION OF DIRECTORS

ZOETIS 2014 PROXY STATEMENT  47

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ITEM 1 — ELECTION OF DIRECTORS

EXECUTIVE OFFICERS

The following persons currently serve as our executive officers.

48  ZOETIS 2014 PROXY STATEMENT

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ITEM 1 — ELECTION OF DIRECTORS

ZOETIS 2014 PROXY STATEMENT  49

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ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY ON PAY)

50  ZOETIS 2014 PROXY STATEMENT

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ITEM 3 — ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

ZOETIS 2014 PROXY STATEMENT  51

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

KEY TERMS OF THE PLAN

The following is a summary of the key provisions of our 2013 Equity and Incentive Plan. Some of these provisions are described in greater detail below. The summary and descriptions are qualified by reference to the text of the Plan, which is set forth as Appendix A to this Proxy Statement.

Shares Authorized	25 million (subject to adjustment to reflect stock splits and other changes in capitalization); no more than 50% of such shares may be issued with respect to incentive stock options (ISOs).
Eligible Participants	Employees (including officers) of the company and its affiliates, and non-employee directors of the company. Award recipients are selected by the Administrator from among those eligible.
Types of Awards	stock options stock appreciation rights (SARs) restricted stock restricted stock units (RSUs) stock payment awards performance awards (cash or stock) dividend equivalents other incentive awards The plan authorizes awards that are intended to qualify as performance-based under Section 162(m) as well as awards that are not intended to so qualify.
Individual Award Limits      (per person in any       calendar year)	1.5 million shares subject to options and SARs granted in any year 1.5 million shares subject to awards other than options and SARs granted in any year $10 million paid in any year under cash-denominated awards intended to be performance-based under Section 162(m) $500,000 aggregate grant date fair value for awards to non-employee directors These limits are subject to adjustment to reflect stock splits and other changes in capitalization.
No Discounted Stock Options       or SARs	Stock options and SARs may not be granted with exercise prices lower than the fair market value of the underlying shares on the date of grant.
No Repricing Without       Shareholder Approval	We will not reduce the exercise price of a stock option or SAR or exchange such award for cash, an award of a different type, or another award with a lower exercise price without shareholder approval (except in accordance with the Plan’s adjustment provision).
No Liberal Share Recycling	Shares surrendered or withheld to pay the exercise price of an award or withholding taxes related to an award will not become available for future awards.
Vesting	Restricted stock and RSU awards whose vesting is time-based generally vest no earlier than pro rata over a 3-year period, except for awards covering up to 5% of the shares authorized under the Plan and awards made to replace forfeited Pfizer equity awards. We intend to grant awards that cliff vest on the third anniversary of the grant date.
Claw-back	All awards under the plan are subject to the company’s claw-back policy as from time to time in effect.
Plan Termination	No awards may be granted after January 28, 2023.

52  ZOETIS 2014 PROXY STATEMENT

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

DESCRIPTION OF THE EQUITY PLAN

ADMINISTRATION

LIMITATIONS ON SIZE OF AWARDS

ZOETIS 2014 PROXY STATEMENT  53

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

ADJUSTMENTS

ELIGIBILITY

TYPES OF AWARDS

54  ZOETIS 2014 PROXY STATEMENT

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

ZOETIS 2014 PROXY STATEMENT  55

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

GENERAL PROVISIONS APPLICABLE TO AWARDS

AMENDMENT OR TERMINATION

56  ZOETIS 2014 PROXY STATEMENT

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

AWARDS GRANTED UNDER THE PLAN

		# RSUs	# RSUs
	# Stock	(Incentive	(Replacement of
Individual or Group	Options	Grants)	Pfizer Grants)
Juan Ramón Alaix	597,415	157,855	15,471
Richard A. Passov	199,732	52,821	11,046
Kristin C. Peck	158,536	41,932	34,696
Clinton A. Lewis, Jr.	89,612	23,677	20,620
Catherine A. Knupp	89,612	23,677	20,315
All current executive officers as a group (11 persons)	1,471,060	388,851	157,954
All current employees who are not executive officers (9,820 persons)	4,424,442	1,431,194	0
All current non-employee directors as a group (7 persons)	0	71,060	0

FEDERAL INCOME TAX INFORMATION

ZOETIS 2014 PROXY STATEMENT  57

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ITEM 4 — APPROVAL OF 2013 EQUITY AND INCENTIVE PLAN

OTHER INFORMATION

58  ZOETIS 2014 PROXY STATEMENT

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ITEM 5 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG FEES AND SERVICES

The following table sets forth the aggregate fees for professional services billed or to be billed by KPMG for the years ended December 31, 2013 and 2012 for the audits of our financial statements, and fees for other services rendered by KPMG during those periods.

ZOETIS 2014 PROXY STATEMENT  59

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ITEM 5 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

POLICY ON PRE-APPROVAL OF AUDIT FIRM SERVICES

60  ZOETIS 2014 PROXY STATEMENT

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ITEM 5 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF THE AUDIT COMMITTEE

THE AUDIT COMMITTEE*

Gregory Norden, Chair
Robert W. Scully (committee member beginning June 27, 2013)
William C. Steere, Jr.

*	Louise M. Parent joined the Audit Committee on March 26, 2014. Ms. Parent did not participate in the matters discussed in this Report of the Audit Committee.

ZOETIS 2014 PROXY STATEMENT  61

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OWNERSHIP OF OUR COMMON STOCK

*	Less than 1%.

62  ZOETIS 2014 PROXY STATEMENT

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OWNERSHIP OF OUR COMMON STOCK

(1)	Includes the following shares which directors have a right to acquire 60 days after leaving our Board, consisting of deferred stock units and related dividend equivalent units:

(2)	Includes the following shares held by executive officers in our 401(k) plan:

(3)	Percentages based on 500,729,429 shares outstanding on March 19, 2014.
(4)	Based on a Schedule 13G that BlackRock Inc. filed with the SEC on January 31, 2014, which contained information as of December 31, 2013. Such Schedule 13G states that BlackRock Inc. has sole voting power with respect to 23,517,679 shares of Zoetis common stock, and sole dispositive power with respect to 30,313,975 shares of Zoetis common stock.
(5)	Based on a Schedule 13G that State Street Corporation filed with the SEC on February 5, 2014, which contained information as of December 31, 2013. Such Schedule 13G states that State Street Corporation is the parent holding company of State Street Global Advisors France S.A.; State Street Bank and Trust Company; SSGA Funds Management, Inc.; State Street Global Advisors Limited; State Street Global Advisors Ltd.; State Street Global Advisors, Australia Limited; State Street Global Advisors Japan Co., Ltd.; and State Street Global Advisors, Asia Limited, and that State Street Corporation and such subsidiaries have shared voting and dispositive power with respect to 25,056,144 shares of Zoetis common stock.
(6)	Based on a Schedule 13G that Wellington Management Company, LLP filed with the SEC on February 14, 2014, which contained information as of December 31, 2013. Such Schedule 13G states that Wellington Management Company LLP, in its capacity as investment adviser, may be deemed to have shared voting power with respect to 8,351,738 shares of Zoetis common stock, and shared dispositive power with respect to 29,279,420 shares of Zoetis common stock, which are held by clients of Wellington Management Company, LLP.

SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

ZOETIS 2014 PROXY STATEMENT  63

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TRANSACTIONS WITH RELATED PERSONS

POLICY CONCERNING RELATED PERSON TRANSACTIONS

RELATED PERSON TRANSACTIONS

TRANSACTIONS BETWEEN ZOETIS AND PFIZER

64  ZOETIS 2014 PROXY STATEMENT

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TRANSACTIONS WITH RELATED PERSONS

GLOBAL SEPARATION AGREEMENT

ZOETIS 2014 PROXY STATEMENT  65

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TRANSACTIONS WITH RELATED PERSONS

TRANSITIONAL SERVICES AGREEMENTS

TAX MATTERS AGREEMENT

66  ZOETIS 2014 PROXY STATEMENT

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TRANSACTIONS WITH RELATED PERSONS

RESEARCH AND DEVELOPMENT COLLABORATION AND LICENSE AGREEMENT

ZOETIS 2014 PROXY STATEMENT  67

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TRANSACTIONS WITH RELATED PERSONS

68  ZOETIS 2014 PROXY STATEMENT

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TRANSACTIONS WITH RELATED PERSONS

EMPLOYEE MATTERS AGREEMENT

ZOETIS 2014 PROXY STATEMENT  69

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TRANSACTIONS WITH RELATED PERSONS

MASTER MANUFACTURING AND SUPPLY AGREEMENTS

ENVIRONMENTAL MATTERS AGREEMENT

70  ZOETIS 2014 PROXY STATEMENT

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TRANSACTIONS WITH RELATED PERSONS

SCREENING SERVICES AGREEMENT

INTELLECTUAL PROPERTY LICENSE AGREEMENTS

ZOETIS 2014 PROXY STATEMENT  71

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TRANSACTIONS WITH RELATED PERSONS

72  ZOETIS 2014 PROXY STATEMENT

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TRANSACTIONS WITH RELATED PERSONS

BRAZIL LEASE AGREEMENTS

ZOETIS 2014 PROXY STATEMENT  73

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TRANSACTIONS WITH RELATED PERSONS

74  ZOETIS 2014 PROXY STATEMENT

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INFORMATION ABOUT 2015 ANNUAL MEETING

www.zoetis.com

ZOETIS 2014 PROXY STATEMENT  75

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TEXT OF ZOETIS INC. 2013 EQUITY AND INCENTIVE PLAN

ZOETIS INC.

2013 EQUITY AND INCENTIVE PLAN

ARTICLE I

PURPOSE

     The purposes of the Zoetis Inc. 2013 Equity and Incentive Plan (as it may be amended, the “Plan”) are to provide long-term incentives to those individuals with significant responsibility for the success and growth of the Company and its Affiliates, to align the interests of such individuals with those of the Company’s stockholders, to assist the Company in recruiting, retaining and motivating qualified employees and to provide an effective means to link pay to performance for such employees.

ARTICLE II

DEFINITIONS AND CONSTRUCTION

     Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

          2.1 “Administrator” shall have the meaning provided in Section 12.1 hereof.

          2.2 “Affiliate” shall mean (i) any Parent or Subsidiary, (ii) any entity that, directly or through one or more intermediaries, is controlled by the Company, or (iii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.

          2.3 “Applicable Accounting Standards” shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.

          2.4 “Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award (which includes, but is not limited to, cash bonuses as set forth in Article IX), a Dividend Equivalent award, a Stock Payment award, an award of Stock Appreciation Rights, or Other Incentive Award, which may be awarded or granted under the Plan.

          2.5 “Award Agreement” shall mean the written notice, agreement, contract or other instrument or document evidencing an Award, including through an electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan.

          2.6 “Beneficial Owner” (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.

          2.7 “Board” shall mean the Board of Directors of the Company.

          2.8 “Change in Capitalization” shall have the meaning provided in Section 3.2(a) hereof.

          2.9 “Change in Control” shall be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:

               (a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including the securities beneficially owned by such Person or any securities acquired directly from the Company or any Affiliate thereof) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (1) of paragraph (c) below; or

ZOETIS 2014 PROXY STATEMENT A-1

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               (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

               (c) there is consummated a merger, amalgamation or consolidation of the Company or any Subsidiary thereof with any other corporation, other than (1) a merger, amalgamation or consolidation which results in the voting securities of the Company outstanding immediately prior to such merger, amalgamation or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, amalgamation or consolidation or (2) a merger, amalgamation or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company’s then outstanding securities; or

               (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than (1) a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions as their ownership of the Company immediately prior to such sale or (2) a sale or disposition of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.

Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of (i) the consummation of any transaction or series of integrated transactions immediately following which the holders of Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions, or (ii) the consummation of the Distribution (as such term is defined in that certain Global Separation Agreement entered into between Pfizer Inc. and the Company).

For each Award that constitutes deferred compensation under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to such Award, resulting in the payment of such Award, only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.

          2.10 “Code” shall mean the Internal Revenue Code of 1986, as amended.

          2.11 “Committee” shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board described in Article XII hereof.

          2.12 “Common Stock” shall mean the Class A common stock of the Company, par value $0.01 per share. 2.13 “Company” shall mean Zoetis Inc., a Delaware corporation, and any successor corporation.

          2.14 “Covered Employee” shall mean any Employee who is a “covered employee” within the meaning of Section 162(m) of the Code.

          2.15 “Director” or “Non-Employee Director” shall mean a non-employee member of the Board, as constituted from time to time.

A-2 ZOETIS 2014 PROXY STATEMENT

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          2.16 “Disaffiliation” means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for any reason (including, without limitation, as a result of a public offering, or a spinoff or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company or its Affiliates.

          2.17 “Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 9.2 hereof.

          2.18 “Effective Date” shall mean January 28, 2013.

          2.19 “Eligible Individual” shall mean any natural person who is an Employee or a Non-Employee Director, as determined by the Administrator.

          2.20 “Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code) of the Company or any Affiliate.

          2.21 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

          2.22 “Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:

               (a) if the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (b) if the Common Stock is traded only otherwise than on a securities exchange and is not quoted on the NASDAQ, the closing quoted selling price of the Common Stock on such date as quoted in “pink sheets” published by the National Daily Quotation Bureau;

               (c) if the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

               (d) if the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Committee in good faith on the date awarded.

          2.23 “Greater Than 10% Stockholder” shall mean an individual then-owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any “parent corporation” or “subsidiary corporation” (as defined in Sections 424(e) and 424(f) of the Code, respectively).

          2.24 “Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.

          2.25 “Individual Award Limit” shall mean the cash and Share limits applicable to Awards granted under the Plan, as set forth in Section 3.3 hereof.

          2.26 “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option or which is designated as an Incentive Stock Option but does not meet the applicable requirements of the Code.

          2.27 “Option” shall mean a right to purchase Shares at a specified exercise price, granted under Article VI hereof. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors shall only be Non-Qualified Stock Options.

          2.28 “Other Incentive Award” shall mean an Award denominated in, linked to or derived from Shares or value metrics related to Shares, granted pursuant to Section 9.4 hereof.

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          2.29 “Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

          2.30 “Participant” shall mean an Eligible Individual who has been granted an Award.

          2.31 “Performance Award” shall mean an Award that is granted under Section 9.1 hereof.

          2.32 “Performance-Based Compensation” shall mean any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

          2.33 “Performance Goals” shall mean the performance goals (and adjustments) established by the Committee for a Performance Period, based on one or more of the following criteria:

               (a) (i) net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation, (D) amortization and (E) non-cash equity-based compensation expense); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders’ equity; (x) total stockholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs; (xiv) funds from operations; (xv) expenses; (xvi) working capital; (xvii) earnings per Share; (xviii) adjusted earnings per Share; (xix) price per Share; (xx) implementation or completion of critical projects; (xxi) market share; (xxii) debt levels or reduction; (xxiii) customer retention; (xxiv) sales-related goals; (xxv) customer satisfaction and/or growth; (xxvi) research and development achievements; (xxvii) financing and other capital raising transactions; (xxviii) capital expenditures, and (xxix) economic profit, any of which may be measured either in absolute terms for the Company or any operating unit of the Company or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.

               (b) Performance Goals may be expressed in terms of overall Company performance, or the performance of an Affiliate or one or more divisions, business units or product lines. In addition, such Performance Goals may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other corporations or the performance of an index, survey or other benchmark.

               (c) The Committee may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include, but are not limited to, one or more of the following: (i) items related to a change in accounting principles; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal or sale of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments; (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.

          2.34 “Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award. Notwithstanding the foregoing, in no event shall the Performance Period be less than one (1) year in duration.

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          2.35 “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any Subsidiary thereof, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary thereof, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Shares of the Company.

          2.36 “Plan” shall have the meaning set forth in Article I.

          2.37 “Restricted Stock” shall mean an Award of Shares made under Article VII hereof that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.

          2.38 “Restricted Stock Unit” shall mean a contractual right awarded under Article VIII hereof to receive in cash or Shares the Fair Market Value of a Share of Common Stock.

          2.39 “Restriction Period” shall mean the period of time specified by the Administrator during which an Award of Restricted Stock shall be subject to restrictions.

          2.40 “Securities Act” shall mean the Securities Act of 1933, as amended.

          2.41 “Share Limit” shall have the meaning provided in Section 3.1(a) hereof.

          2.42 “Shares” shall mean shares of Common Stock.

          2.43 “Stock Appreciation Right” shall mean a stock appreciation right granted under Article X hereof.

          2.44 “Stock Payment” shall mean a payment in the form of Shares awarded under Section 9.3 hereof.

          2.45 “Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

          2.46 “Substitute Award” means any Award granted in assumption of, or in substitution for, an award of a company or business (that is not, prior to the applicable transaction, a Subsidiary or Affiliate of the Company) acquired by the Company or a Subsidiary or Affiliate or with which the Company or a Subsidiary or Affiliate combines.

          2.47 “Termination of Employment” shall mean, unless otherwise provided in the Award Agreement, the termination of the applicable Participant’s employment with, or performance of services for, the Company and any of its Subsidiaries or Affiliates. Unless otherwise determined by the Committee, a Participant employed by, or performing services for, a Subsidiary or an Affiliate or a division of the Company or its Affiliates shall be deemed to incur a Termination of Employment if, as a result of a Disaffiliation, such Subsidiary, Affiliate, or division ceases to be a Subsidiary, Affiliate or division, as the case may be, and the Participant does not immediately become an employee of, or service provider for, the Company or another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation, or leave of absence, and transfers among the Company and its Subsidiaries and Affiliates, shall not be considered Terminations of Employment. Notwithstanding the foregoing, with respect to any Award that constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, “Termination of Employment” shall mean a “separation from service” as defined under Section 409A of the Code.

          2.48 “Vesting Period” shall mean the period of time before unrestricted Shares become non-forfeitable and issuable to a Participant pursuant to the applicable Award Agreement.

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ARTICLE III

SHARES SUBJECT TO THE PLAN

          3.1 Number of Shares.

               (a) Subject to Section 3.2 hereof, the maximum aggregate number of Shares available for issuance under the Plan (the “Share Limit”) shall be equal to 25,000,000 Shares. Notwithstanding the generality of the foregoing, subject to Sections 3.2 hereof, the maximum number of Shares available for issuance under the Plan with respect to Incentive Stock Options shall be the number of Shares that is equal to fifty percent (50%) of the Share Limit. Any Shares granted in connection with Options and Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Option or Stock Appreciation Right awarded. Any Shares granted in connection with Awards other than Options and Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted in connection with such Award or by which the Award is valued by reference.

               (b) Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions, or otherwise. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of Shares to the Participant, the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, Shares surrendered or withheld as payment of either the exercise price of an Award and/or withholding taxes in respect of an Award shall no longer be available for grant under the Plan. In addition, in the case of any Substitute Award, Shares delivered or deliverable in connection with such Substitute Award shall not be deemed granted or issued under the Plan for purposes of Sections 3.1 or 3.3.

          3.2 Adjustments.

               (a) In the event of any stock dividend, stock split, combination or exchange of Shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, amalgamation, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event, or any other change affecting the Shares or the Share price (any such occurrence or event, a “Change in Capitalization”), the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of Shares that may be issued under the Plan (including, but not limited to, adjustments of the Share Limit and Individual Award Limits); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and/or (iv) the grant or exercise price per Share for any outstanding Awards under the Plan; provided, however, that the Administrator shall make such equitable adjustments as it determines to be appropriate and equitable, in its sole discretion, to prevent dilution or enlargement of rights. Without limiting the generality of the foregoing, in connection with a Change in Capitalization, the Administrator may provide, in its sole discretion, for the cancellation of any outstanding Award granted hereunder in exchange for payment in cash or other property having an aggregate Fair Market Value of the Shares covered by such award, reduced by the aggregate exercise price or purchase price thereof, if any. In the case where the exercise price per Share of an Option or Stock Appreciation Right exceeds the Fair Market Value per Share, the Administrator may cancel, in its sole discretion, such Option or Stock Appreciation Right for no payment. The Administrator’s determinations pursuant to this Section 3.2(a) shall be final, binding and conclusive.

               (b) Any adjustment affecting an Award intended as Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code unless otherwise determined by the Administrator. No action shall be taken under this Section 3.2(b) which shall cause an Award to fail to comply with Section 409A of the Code or an exemption therefrom, in either case, to the extent applicable to such Award.

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          3.3 Individual Award Limits. Notwithstanding any provision in the Plan to the contrary, and subject to Section 3.2, to the extent required to comply with Section 162(m):

               (a) the aggregate number of Shares subject to Options and Stock Appreciation Rights awarded to any one Participant during any calendar year may not exceed 1.5 million Shares;

               (b) the aggregate number of Shares subject to Awards other than Options and Stock Appreciation Rights (excluding Awards referenced in Section 3.3(c) below) awarded to any one Participant during any calendar year may not exceed 1.5 million Shares;

               (c) the aggregate amount of compensation to be paid to any one Participant in respect to all Awards that are intended to constitute Performance-Based Compensation denominated in cash in any calendar year is $10 million; and

               (d) the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any Director during any single calendar year shall not exceed $500,000.

ARTICLE IV

GRANTING OF AWARDS

          4.1 Participation. The Committee may, from time to time, select from among all Eligible Individuals, those to whom one or more Awards shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. No Eligible Individual shall have any right to be granted an Award pursuant to the Plan.

          4.2 Award Agreement. Each Award shall be evidenced by an Award Agreement stating the terms and conditions applicable to such Award, consistent with the requirements of the Plan.

          4.3 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole discretion of the Administrator, be granted either alone, in addition to or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

ARTICLE V

PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION

          5.1 Purpose. The Committee, in its sole discretion, may determine whether any Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article V shall control over any contrary provision contained in the Plan. The Administrator may in its sole discretion grant Awards to Eligible Individuals that are based on Performance Goals but that do not satisfy the requirements of this Article V and that are not intended to qualify as Performance-Based Compensation.

          5.2 Payment of Performance-Based Awards. Performance Awards shall be paid, unless otherwise determined by the Committee, no later than 2 ½ months after the tax year in which the Performance Award vests, consistent with the requirements of Section 409A of the Code. Unless otherwise provided in the applicable Performance Goals or Award Agreement, a Participant shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such applicable Performance Period are achieved. The achievement of each Performance Goal shall be (i) determined in accordance with Applicable Accounting Standards, to the extent applicable and (ii) for all Awards intended to qualify as Performance-Based Compensation, certified in accordance with the requirements of Section 162(m) of the Code.

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          5.3 Additional Limitations. Notwithstanding any other provision of the Plan and except as otherwise determined by the Committee, any Award which is granted to an Eligible Individual and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations imposed under Section 162(m) of the Code that are requirements for qualification as Performance-Based Compensation, and the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements. Determinations by the Committee in respect of all Awards intended to qualify as Performance-Based Compensation shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code, and payment in respect of such Awards may be decreased, but not increased, in the discretion of the Committee.

ARTICLE VI

OPTIONS

          6.1 Granting of Options to Eligible Individuals. The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which shall not be inconsistent with the Plan.

          6.2 Eligibility for Incentive Stock Options. No Incentive Stock Option shall be granted to any individual who is not an Employee of the Company or any “parent corporation” or “subsidiary corporation” of the Company (as defined in Sections 424(e) and 424(f) of the Code, respectively).

          6.3 Option Exercise Price. The exercise price per Share subject to each Option shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).

          6.4 Option Term. The term of each Option shall be set forth in the Award Agreement; provided, however, that the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The Award Agreement shall set forth the time period, including the time period following a Termination of Employment, during which the Participant has the right to exercise the vested Options, which time period may not extend beyond the stated term of the Option. Except as limited by the requirements of Section 409A or Section 422 of the Code, the Administrator may extend the term of any outstanding Option, and may extend the time period during which vested Options may be exercised, and, subject to Section 13.1 hereof, may amend any other term or condition of such Option relating to a Termination of Employment.

          6.5 Option Vesting.

               (a) The terms and conditions pursuant to which an Option vests in the Participant and becomes exercisable shall be set forth in the applicable Award Agreement. Such vesting may be based on service with the Company or any Affiliate, attainment of one or more of the Performance Goals, or any other criteria selected by the Administrator. At any time after the grant of an Option, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the vesting of the Option, including following a Termination of Employment; provided, that in no event shall an Option become exercisable following its expiration, termination or forfeiture.

               (b) No portion of an Option which is unexercisable at a Participant’s Termination of Employment shall thereafter become exercisable, except as may be otherwise provided in the applicable Award Agreement or by action of the Administrator following the grant of the Option.

          6.6 Treatment of Options upon Certain Events. The applicable Award Agreement shall provide for the treatment of each Option upon a Termination of Employment.

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          6.7 Substitution of Stock Appreciation Rights. The Administrator may, in its sole discretion, substitute an Award of Stock Appreciation Rights for an outstanding Option at any time prior to or upon exercise of such Option; provided, however, that such Stock Appreciation Rights shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable, and shall also have the same exercise price and remaining term as the substituted Option.

          6.8 Partial Exercise of Options. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional Shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of Shares.

          6.9 Manner of Exercise of Options. A Participant may exercise an exercisable Option, subject to applicable requirements, by paying the full exercise price and applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Option, or portion thereof, is exercised, in one or more of the following manners: (i) cash or check, (ii) Shares (including, in the case of payment of the exercise price of an Option, Shares issuable pursuant to the exercise of the Option), in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, or (iii) other form of legal consideration acceptable to the Administrator (including cashless exercise via a broker). Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

          6.10 Notification Regarding Disposition. The Participant shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two (2) years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Participant, or (b) one (1) year after the transfer of such Shares to such Participant.

ARTICLE VII

RESTRICTED STOCK

          7.1 Award of Restricted Stock.

               (a) The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions, applicable to each award of Restricted Stock, which terms and conditions shall be set forth in the Award Agreement and shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.

               (b) The Award Agreement shall set forth the purchase price, if any, and form of payment for Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value of the Shares to be purchased, unless otherwise permitted by applicable law. In all cases, legal consideration shall be required for each issuance of Restricted Stock to the extent required by applicable law.

               (c) The Award Agreement shall set forth the treatment of each Award of Restricted Stock upon a Termination of Employment.

          7.2 Rights as Stockholders. Upon issuance of Restricted Stock, the Participant shall have, unless otherwise provided herein or in the Award Agreement, all the rights of a stockholder with respect to said Shares. This includes, but is not limited to, the right to vote Shares of Restricted Stock as the record owner thereof, and the right to receive dividends and other distributions payable to an Eligible Individual during the restriction period; provided, however, that, the Award Agreement may provide that any distributions with respect to the Shares shall be subject to the restrictions set forth in Section 7.3 hereof.

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          7.3 Restrictions. All Shares of Restricted Stock (including any Shares received by Participants thereof with respect to Shares of Restricted Stock as a result of a Change in Capitalization) shall be subject to restrictions and vesting requirements as set forth in the Award Agreement. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability. Such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as set forth in the Award Agreement, including, without limitation, criteria based on the Participant’s duration of employment or directorship with the Company, the Performance Goals, Company or Affiliate performance, individual performance or other criteria set forth in the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.

          7.4 Restriction Period. All Shares of Restricted Stock shall have a Restriction Period of not less than three (3) years, which may include pro-rata lapsing of restrictions thereon. Notwithstanding the foregoing, Awards covering up to five (5) percent of the total number of Shares that may be issued or delivered under the Plan and any Awards made in respect of or in substitution for Pfizer Inc. equity awards, may contain no restrictions or be subject to a Restriction Period of less than three (3) years.

          7.5 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing Shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, in it sole discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse.

          7.6 Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

ARTICLE VIII

RESTRICTED STOCK UNITS

          8.1 Award of Restricted Stock Units.

               (a) The Administrator is authorized to grant Restricted Stock Units to Eligible Individuals, and shall determine the terms and conditions, including the restrictions, applicable to each award of Restricted Stock Units, which terms and conditions shall be set forth in the Award Agreement and shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock Units as it deems appropriate. The Award Agreement shall set forth the time and form of payment of each Award of Restricted Stock Units.

               (b) All Restricted Stock Units shall have a Vesting Period of not less than three (3) years, which may include pro-rata lapsing of restrictions thereon. Notwithstanding the foregoing, Awards covering up to five (5) percent of the total number of Shares that may be issued or delivered under the Plan and any Awards made in respect of or in substitution for Pfizer Inc. equity awards, may contain no restrictions or be subject to a Vesting Period of less than three (3) years.

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               (c) The Administrator shall specify, or permit the Participant to elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units shall be issued (or cash in lieu thereof shall be paid), which dates shall not be earlier than the date as of which the Restricted Stock Units vest and become nonforfeitable. Such conditions and dates shall be established in accordance with the applicable provisions of Section 409A of the Code or an exemption therefrom.

               (d) The Award Agreement shall set forth the treatment of each Award of Restricted Stock Units upon a Termination of Employment.

               (e) On the distribution dates, the Company shall issue to the Participant one unrestricted, fully transferable Share (or if provided in the Award Agreement, the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.

ARTICLE IX

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS, OTHER INCENTIVE AWARDS

          9.1 Performance Awards.

               (a) The Administrator is authorized to grant Performance Awards to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation per Article V of this Plan. The vesting and value of Performance Awards may be linked to any one or more of the Performance Goals or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods as set forth in the applicable Award Agreement. Performance Awards may be paid in cash, Shares or a combination of both.

               (b) Without limiting Section 9.1(a) hereof, the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such cash bonuses paid to a Participant which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article V hereof.

          9.2 Dividend Equivalents.

               (a) Subject to Section 9.2(b) hereof, Dividend Equivalents may be granted by the Administrator, either alone or in tandem with another Award, based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date the Dividend Equivalents are granted to a Participant and the date such Dividend Equivalents terminate or expire, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula, at such time and subject to such limitations as set forth in the applicable Award Agreement. In addition, the Award Agreement may provide that Dividend Equivalents with respect to Shares covered by an Award shall only be paid out to the Participant at the same time or times and to the same extent that the vesting conditions and/or performance goals, if any, are subsequently satisfied and the Award vests with respect to such Shares.

               (b) Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights, unless otherwise determined by the Administrator.

          9.3 Stock Payments. The Administrator is authorized to make one or more Stock Payments to any Eligible Individual. The number or value of Shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Goals or any other specific criteria, including service to the Company or any Affiliate, determined by the Administrator.

          9.4 Other Incentive Awards. The Administrator is authorized to grant Other Incentive Awards to any Eligible Individual, which Awards may cover Shares or the right to purchase Shares or have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in or based

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on, Shares, stockholder value or stockholder return, in each case, on a specified date or dates or over any period or periods determined by the Administrator. The terms and conditions applicable to such Other Incentive Awards shall be set forth in the applicable Award Agreement. Other Incentive Awards may be linked to any one or more of the Performance Goals or other specific criteria determined appropriate by the Administrator and may be payable in cash or Shares.

          9.5 Other Terms and Conditions. All applicable terms and conditions of each Award described in this Article IX, including without limitation, as applicable, the term, vesting conditions and exercise/purchase price applicable to the Award, shall be set by the Administrator in its sole discretion, provided, however, that the value of the consideration paid by a Participant for an Award shall not be less than the par value of a Share, unless otherwise permitted by applicable law. The rights of Participants granted Performance Awards, Dividend Equivalents, or Other Incentive Awards upon Termination of Employment shall be set forth in the Award Agreement.

ARTICLE X

STOCK APPRECIATION RIGHTS

          10.1 Grant of Stock Appreciation Rights.

               (a) The Administrator is authorized to grant Awards of Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.

               (b) Each Award of Stock Appreciation Rights shall entitle the Participant (or other individual entitled to exercise the Award of Stock Appreciation Rights pursuant to the Plan) to exercise all or a specified portion of the Award of Stock Appreciation Rights (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per Share of the Stock Appreciation Rights from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Stock Appreciation Rights that shall have been exercised, subject to any limitations the Administrator may impose or set forth in the Award Agreement. Such amount shall be payable in Shares or in cash, as determined by the Administrator. The exercise price per Share subject to each Award of Stock Appreciation Rights shall be set by the Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value on the date the Stock Appreciation Rights are granted.

               (c) The Award Agreement shall set forth the treatment of each Award of Stock Appreciation Rights upon a Termination of Employment.

          10.2 Stock Appreciation Right Vesting.

               (a) The Award Agreement shall set forth the period during which a Participant shall vest in an Award of Stock Appreciation Rights and have the right to exercise such Stock Appreciation Rights (subject to Section 10.4 hereof) in whole or in part. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Goals or any other criteria selected by the Administrator. At any time after grant of an Award of Stock Appreciation Rights, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which the Stock Appreciation Rights vest.

               (b) No portion of an Award of Stock Appreciation Rights which is unexercisable upon Termination of Employment shall thereafter become exercisable, except as may be otherwise provided in an Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Rights; provided, that in no event shall an Award of Stock Appreciation Rights become exercisable following its expiration, termination or forfeiture.

          10.3 Manner of Exercise. A Participant may exercise an exercisable Stock Appreciation Right as follows, subject to applicable requirements established by the Administrator; full payment of the applicable withholding taxes shall be made to the stock administrator of the Company for the Shares with respect to which the Stock Appreciation Rights, or portion thereof, are exercised, in a manner permitted by Section 6.9 in respect of Options.

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          10.4 Stock Appreciation Right Term. The term of each Award of Stock Appreciation Rights shall be set forth in the Award Agreement; provided, however, that the term shall not be more than ten (10) years from the date the Stock Appreciation Rights are granted. The Award Agreement shall set forth the time period, including any time period following a Termination of Employment, during which the Participant has the right to exercise any vested Stock Appreciation Rights, which time period may not extend beyond the expiration date of the Award term. Except as limited by the requirements of Section 409A of the Code, the Administrator may extend the term of any outstanding Stock Appreciation Rights, and may extend the time period during which vested Stock Appreciation Rights may be exercised in connection with any Termination of Employment, and, subject to Section 13.1 hereof, may amend any other term or condition of such Stock Appreciation Rights relating to such a Termination of Employment.

ARTICLE XI

ADDITIONAL TERMS OF AWARDS

          11.1 Change in Control. Unless otherwise set forth in an Award Agreement, in the event of a Change in Control:

               (a) With respect to each outstanding Award that is assumed or substituted in connection with a Change in Control, in the event the Participant incurs a Termination of Employment other than for “cause,” as defined in the applicable Award Agreement, during the 24-month period following such Change in Control, on the date of such Termination of Employment (i) such Award shall become fully vested and, if applicable, exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse and (iii) and any performance conditions imposed with respect to such Award shall be deemed to be achieved at target performance levels.

               (b) With respect to each outstanding Award that is not assumed or substituted in connection with a Change in Control, immediately upon the occurrence of the Change in Control (i) such Award shall become fully vested and, if applicable, exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse and (iii) and any performance conditions imposed with respect to such Award shall be deemed to be achieved at target performance levels.

               (c) For purposes of this Section 11.1, an Award shall be considered assumed or substituted for if, following the Change in Control, the Award is of comparable value and remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to Shares, the Award instead confers the right to receive common stock of the acquiring entity or in the case of an amalgamation, the amalgamated company or its parent.

               (d) Notwithstanding the foregoing, if any Award is subject to Section 409A of the Code, this Section 11.1 shall be applicable only to the extent specifically provided in the Award Agreement and as permitted pursuant to Section 13.5.

          11.2 Tax Withholding. The Company and its Affiliates shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company or an Affiliate, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s social security, Medicare and any other employment tax obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising in connection with any Award. The Administrator may in its sole discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company or an Affiliate withhold Shares otherwise issuable under an Award (or allow the surrender of Shares), provided that the number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a Fair Market Value on the date of withholding no greater than the amount necessary to satisfy the minimum statutory withholding requirements.

          11.3 Transferability of Awards.

               (a) No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution;

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               (b) No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed, and any attempted disposition of an Award prior to the satisfaction of these conditions shall be null and void and of no effect;

               (c) During the lifetime of the Participant, only the Participant may exercise an Award (or any portion thereof) granted to him or her under the Plan. After the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or Award Agreement, be exercised by his personal representative or by any individual empowered to do so under the deceased Participant’s will or under the then-applicable laws of descent and distribution; and

               (d) Notwithstanding the foregoing, the Administrator may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) Non-Qualified Stock Options and/or Shares issued in connection with an Option or a Stock Appreciation Right exercise that are subject to restrictions on transferability, to be transferred to a member of a Participant’s immediate family or to a trust or similar vehicle for the benefit of a Participant’s immediate family members.

          11.4 Conditions to Issuance of Shares.

               (a) Notwithstanding anything herein to the contrary, neither the Company nor its Affiliates shall be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel, that the issuance of such Shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Administrator may require that a Participant make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems advisable in order to comply with any laws, regulations, or requirements.

               (b) All Share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.

               (c) The Administrator shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.

               (d) No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding down.

               (e) Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any applicable law, rule or regulation, the Company and/or its Affiliates may, in lieu of delivering to any Participant certificates evidencing Shares issued in connection with any Award, record the issuance of Shares in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

          11.5 Forfeiture and Recoupment Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Participant to agree by separate written or electronic instrument, that: any proceeds, gains or other economic benefit must be paid to the Company, and the Award shall terminate and

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any unexercised portion of the Award (whether or not vested) shall be forfeited, if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the Participant at any time, or during a specified time period, engages in any activity which violates any applicable restrictive covenants of the Company, as may be further specified in the Award Agreement or (iii) the Participant incurs a Termination of Employment for “cause,” as defined in the applicable Award Agreement. In addition, all Awards made under the Plan shall be subject to any clawback or recoupment policies of the Company, as in effect from time to time, or as otherwise required by law.

          11.6 Prohibition on Repricing. Subject to limitations imposed by Section 409A of the Code or other applicable law and the limitations contained in Section 13.1 below, in no event shall the exercise price with respect to an Award be reduced following the grant of an Award, nor shall an Award be cancelled in exchange for a replacement Award with a lower exercise price or in exchange for another type of Award or cash payment without stockholder approval.

          11.7 Leave of Absence. Unless the Administrator provides otherwise, vesting of Awards granted hereunder shall be suspended during any unpaid leave of absence. A Participant shall not cease to be considered an Employee or Non-Employee Director, as applicable, in the case of any (a) leave of absence approved by the Company, or (b) transfer between locations of the Company or between the Company and any of its Affiliates or any successor thereof.

ARTICLE XII

ADMINISTRATION

          12.1 Administrator. The Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and shall be referred to herein as the “Administrator.” Unless otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as a “non-employee director” as defined by Rule 16b-3 of the Exchange Act, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, in each case, to the extent required under such provision; provided, however, that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 12.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 12.5 hereof.

          12.2 Duties and Powers of Administrator. It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan and all Award Agreements, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent with the Plan, to interpret, amend or revoke any such rules and to amend any Award Agreement, provided that the rights or obligations of the holder of the Award that is the subject of any such Award Agreement are not affected adversely by such amendment unless the consent of the Participant is obtained or such amendment is otherwise permitted under Section 13.1 hereof. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act, Section 162(m) of the Code, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.

          12.3 Authority of Administrator. Subject to any specific designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:

               (a) Designate Eligible Individuals to receive Awards;

               (b) Determine the type or types of Awards to be granted to Eligible Individuals;

ZOETIS 2014 PROXY STATEMENT A-15

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               (c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

               (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;

               (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

               (f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

               (g) Decide all other matters that must be determined in connection with an Award;

               (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

               (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

               (j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.

          12.4 Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan or any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.

          12.5 Delegation of Authority. To the extent permitted by applicable law or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, the Board or Committee may from time to time delegate to a committee of one or more members of the Board, to one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article XII; provided, however, that in no event shall an officer of the Company be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, (b) Covered Employees with respect to Awards intended to constitute Performance-Based Compensation, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code and applicable securities laws or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Board and the Committee.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

          13.1 Amendment, Suspension or Termination of the Plan. The Plan may be amended or terminated at any time by action of the Board. However, no amendment may, without stockholder approval, except as set forth in Section 3.2 herein, (i) increase the aggregate number of Shares available for Awards, (ii) extend the term of the Plan, (iii) materially expand the types of awards available under the Plan, (iv) change the definition of Eligible Individual to add a category or categories of individuals who are eligible to participate in the Plan, (v) delete or limit the prohibition against repricing of Awards contained in Section 11.6, or (vi) make other changes which require approval by the

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stockholders of the Company in order to comply with applicable law or applicable stock market rules. No amendment or termination of the Plan may adversely modify any individual’s rights under an outstanding Award unless such individual consents to the modification in writing.

          13.2 Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.

          13.3 Titles and Headings, References to Sections of the Code or Exchange Act. 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. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.

          13.4 Governing Law. The Plan and any programs and agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.

          13.5 Section 409A. The intent of the parties is that payments and benefits under the Plan comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and be administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment with the Company for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary in the Plan, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s Termination of Employment shall instead be paid on the first business day after the date that is six (6) months following the Participant’s separation from service (or upon the Participant’s death, if earlier). In addition, for purposes of the Plan, each amount to be paid or benefit to be provided to the Participant pursuant to the Plan, which constitute deferred compensation subject to Section 409A of the Code, shall be construed as a separate identified payment for purposes of Section 409A of the Code.

          13.6 No Rights to Awards. No Eligible Individual or other individual shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Participants or any other individuals uniformly.

          13.7 Foreign Employees and Foreign Law Considerations. The Administrator may grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States, who are United States citizens or resident aliens on global assignments in foreign nations, who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Administrator may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.

          13.8 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate.

          13.9 Indemnification. To the extent allowable pursuant to applicable law, each member of the Board and any officer or other employee to whom authority to administer any component of the Plan is delegated shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding

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to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, however, that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

          13.10 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare, or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

          13.11 Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

          13.12 Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates.

          13.13 Term of Plan. The Plan shall terminate on the tenth anniversary of the Effective Date; provided, however, any Awards that are outstanding as of the date of the Plan’s termination shall remain in effect, and the terms of the Plan shall apply until such Awards terminate as provided in the applicable Award Agreements.

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FOR ANIMALS. FOR HEALTH. FOR YOU.

ZOETIS DISCOVERS, DEVELOPS, MANUFACTURES AND COMMERCIALIZES A
DIVERSE PORTFOLIO OF ANIMAL HEALTH MEDICINES AND VACCINES DESIGNED
TO MEET THE REAL-WORLD NEEDS OF VETERINARIANS AND THE LIVESTOCK
FARMERS AND COMPANION ANIMAL OWNERS THEY SUPPORT.

 

 

zoetis.com

 

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IMPORTANT 2014 ANNUAL MEETING INFORMATION

Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.

x

Zoetis 2014 Annual Meeting Proxy Card

6IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6

		Proposals — The Board recommends a vote FOR all nominees, FOR Proposals 2, 4 and 5 and every 1 YR for Proposal 3.
1. Election of Directors:

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

01 - Gregory Norden

c

c

c

02 - Louise M. Parent

c

c

c

03 - Robert W. Scully

c

c

c

Non-Voting Items

Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Date (mm/dd/yyyy) — Please print date below.		Signature 1 — Please keep signature within the box.		Signature 2 — Please keep signature within the box.
/       /

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6IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6

Proxy — Zoetis Inc.

Notice of 2014 Annual Meeting of Shareholders

Proxy Solicited by Board of Directors for Annual Meeting — May 13, 2014

Michael B. McCallister, Heidi C. Chen and Katherine H. Walden, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Zoetis Inc. to be held on May 13, 2014 or at any postponement or adjournment thereof.

Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees, FOR Proposals 2, 4 and 5 and every 1 YR for Proposal 3.

In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.

(Items to be voted appear on reverse side.)

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