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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2022
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number:001-35797
Zoetis Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
46-0696167
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
10 Sylvan Way,
Parsippany,
New Jersey
07054
(Address of principal executive offices)(Zip Code)
(973) 822-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareZTSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of October 28, 2022, there were 466,071,995 shares of common stock outstanding.


Table of Contents
TABLE OF CONTENTS
Page
Item 1.
Condensed Consolidated Statements of Income (Unaudited)
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Statements of Equity (Unaudited)
Condensed Consolidated Statements of Cash Flows (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.



Table of Contents
PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)2022202120222021
Revenue$2,002 $1,990 $6,040 $5,809 
Costs and expenses:
Cost of sales
607 586 1,801 1,703 
Selling, general and administrative expenses
501 504 1,495 1,408 
Research and development expenses
134 132 391 370 
Amortization of intangible assets
37 40 115 121 
Restructuring charges and certain acquisition-related costs6 9 9 39 
Interest expense, net of capitalized interest
53 56 159 170 
Other (income)/deductions—net
(3)4 6 16 
Income before provision for taxes on income667 659 2,064 1,982 
Provision for taxes on income139 107 413 361 
Net income before allocation to noncontrolling interests528 552 1,651 1,621 
Less: Net loss attributable to noncontrolling interests(1)— (2)(2)
Net income attributable to Zoetis Inc.$529 $552 $1,653 $1,623 
Earnings per share attributable to Zoetis Inc. stockholders:
 Basic$1.13 $1.16 $3.52 $3.42 
 Diluted$1.13 $1.16 $3.51 $3.40 
Weighted-average common shares outstanding:
 Basic467.8 474.0 470.0 474.8 
 Diluted469.1 476.3 471.6 477.1 
Dividends declared per common share$— $— $0.650 $0.500 

See notes to condensed consolidated financial statements.
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Table of Contents
ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Net income before allocation to noncontrolling interests$528 $552 $1,651 $1,621 
Other comprehensive (loss)/income, net of tax(a):
Unrealized gains on derivatives for cash flow hedges, net of tax of $9 and $0 for the three months ended September 30, 2022 and 2021; and $23 and $6 for the nine months ended September 30, 2022 and 2021, respectively
30 1 78 21 
Unrealized gains on derivatives for net investment hedges, net of tax of $11 and $5 for the three months ended September 30, 2022 and 2021; and $24 and $10 for the nine months ended September 30, 2022 and 2021, respectively
39 16 84 33 
Foreign currency translation adjustments(156)(61)(208)9 
Benefit plans: Actuarial gain, net of tax(b)
— — 1 — 
Total other comprehensive (loss)/income, net of tax(87)(44)(45)63 
Comprehensive income before allocation to noncontrolling interests441 508 1,606 1,684 
Less: Comprehensive loss attributable to noncontrolling interests(1)— (2)(2)
Comprehensive income attributable to Zoetis Inc.$442 $508 $1,608 $1,686 
(a) Presented net of reclassification adjustments, which are not significant in any period presented.
(b) Presented net of tax impacts, which are not significant in any period presented.


See notes to condensed consolidated financial statements.
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Table of Contents
ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,December 31,
20222021
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)(Unaudited)
Assets
Cash and cash equivalents(a)
$2,507 $3,485 
Accounts receivable, less allowance for doubtful accounts of $21 in 2022 and $17 in 2021
1,189 1,133 
Inventories2,303 1,923 
Other current assets552 389 
Total current assets6,551 6,930 
Property, plant and equipment, less accumulated depreciation of $2,232 in 2022 and $2,072 in 2021
2,623 2,422 
Operating lease right of use assets217 181 
Goodwill2,692 2,682 
Identifiable intangible assets, less accumulated amortization1,319 1,474 
Noncurrent deferred tax assets111 100 
Other noncurrent assets161 111 
Total assets$13,674 $13,900 
Liabilities and Equity
Short-term borrowings$3 $— 
Current portion of long-term debt1,350 — 
Accounts payable373 436 
Dividends payable— 154 
Accrued expenses679 710 
Accrued compensation and related items257 392 
Income taxes payable84 38 
Other current liabilities134 67 
Total current liabilities2,880 1,797 
Long-term debt, net of discount and issuance costs5,210 6,592 
Noncurrent deferred tax liabilities256 320 
Operating lease liabilities186 151 
Other taxes payable241 257 
Other noncurrent liabilities239 239 
Total liabilities9,012 9,356 
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock, $0.01 par value: 6,000,000,000 authorized; 501,891,243 and 501,891,243 shares issued; 466,442,095 and 472,574,090 shares outstanding at September 30, 2022, and December 31, 2021, respectively
5 5 
Treasury stock, at cost, 35,449,148 and 29,317,153 shares of common stock at September 30, 2022 and December 31, 2021, respectively
(4,139)(2,952)
Additional paid-in capital1,073 1,068 
Retained earnings8,533 7,186 
Accumulated other comprehensive loss(809)(764)
Total Zoetis Inc. equity4,663 4,543 
Noncontrolling interests(1)1 
Total equity4,662 4,544 
Total liabilities and equity$13,674 $13,900 
(a)    As of September 30, 2022 and December 31, 2021, includes $4 million and $3 million of restricted cash, respectively.
See notes to condensed consolidated financial statements.
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Table of Contents
ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
Three months ended September 30, 2022
Zoetis
Accumulated
AdditionalOther
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, June 30, 2022501.9 $5 33.3 $(3,766)$1,059 $8,004 $(722)$— $4,580 
Net income/(loss)— — — — — 529 — (1)528 
Other comprehensive loss— — — — — — (87)— (87)
Share-based compensation awards (b)
— — (0.1)4 13 — — — 17 
Treasury stock acquired (c)
— — 2.2 (377)— — — — (377)
Employee benefit plan contribution from Pfizer Inc. (d)
— — — — 1 — — — 1 
Balance, September 30, 2022501.9 $5 35.4 $(4,139)$1,073 $8,533 $(809)$(1)$4,662 
Three months ended September 30, 2021
Zoetis
Accumulated
AdditionalOther
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, June 30, 2021501.9 $5 27.7 $(2,568)$1,044 $6,492 $(623)$2 $4,352 
Net income— — — — — 552 — — 552 
Other comprehensive loss— — — — — — (44)— (44)
Share-based compensation awards (b)
— — (0.2)7 11 — — — 18 
Treasury stock acquired (c)
— — 1.0 (198)— — — — (198)
Employee benefit plan contribution from Pfizer Inc.(d)
— — — — 1 — — — 1 
Balance, September 30, 2021501.9 $5 28.5 $(2,759)$1,056 $7,044 $(667)$2 $4,681 
(a)    Shares may not add due to rounding.
(b)    Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-based Payments and Note 13. Stockholders' Equity.
(c)    Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 13. Stockholders' Equity.
(d)    Represents contributed capital from Pfizer Inc. associated with service credit continuation for certain Zoetis Inc. employees in Pfizer Inc.'s U.S. qualified defined benefit and U.S. retiree medical plans.







See notes to condensed consolidated financial statements.
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ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - Continued
(UNAUDITED)
Nine months ended September 30, 2022
Zoetis
Accumulated
AdditionalOther
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, December 31, 2021501.9 $5 29.3 $(2,952)$1,068 $7,186 $(764)$1 $4,544 
Net income/(loss)— — — — — 1,653 — (2)1,651 
Other comprehensive loss— — — — — — (45)— (45)
Share-based compensation awards (b)
— — (0.6)2 3 — — — 5 
Treasury stock acquired (c)
— — 6.7 (1,189)— — — — (1,189)
Employee benefit plan contribution from Pfizer Inc. (d)
— — — — 2 — — — 2 
Dividends declared— — — — — (306)— — (306)
Balance, September 30, 2022501.9 $5 35.4 $(4,139)$1,073 $8,533 $(809)$(1)$4,662 
Nine months ended September 30, 2021
Zoetis
Accumulated
AdditionalOther
Common StockTreasury StockPaid-inRetainedComprehensiveNoncontrollingTotal
(MILLIONS OF DOLLARS AND SHARES)
Shares (a)
Amount
Shares (a)
AmountCapitalEarningsLossInterestsEquity
Balance, December 31, 2020501.9 $5 26.6 $(2,230)$1,065 $5,659 $(730)$4 $3,773 
Net income/(loss)— — — — — 1,623 — (2)1,621 
Other comprehensive income— — — — — — 63 — 63 
Share-based compensation awards (b)
— — (1.2)16 (11)— — — 5 
Treasury stock acquired (c)
— — 3.1 (545)— — — — (545)
Employee benefit plan contribution from Pfizer Inc.(d)
— — — — 2 — — — 2 
Dividends declared— — — — — (238)— — (238)
Balance, September 30, 2021501.9 $5 28.5 $(2,759)$1,056 $7,044 $(667)$2 $4,681 
(a)    Shares may not add due to rounding.
(b)    Includes the issuance of shares of Zoetis Inc. common stock and the reacquisition of shares of treasury stock associated with exercises of employee share-based awards. Also includes the reacquisition of shares of treasury stock associated with the vesting of employee share-based awards to satisfy tax withholding requirements. For additional information, see Note 12. Share-based Payments and Note 13. Stockholders' Equity.
(c)    Reflects the acquisition of treasury shares in connection with the share repurchase program. For additional information, see Note 13. Stockholders' Equity.
(d)    Represents contributed capital from Pfizer Inc. associated with service credit continuation for certain Zoetis Inc. employees in Pfizer Inc.'s U.S. qualified defined benefit and U.S. retiree medical plans.

See notes to condensed consolidated financial statements.
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ZOETIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
(MILLIONS OF DOLLARS)20222021
Operating Activities
Net income before allocation to noncontrolling interests$1,651 $1,621 
Adjustments to reconcile net income before noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization expense346 331 
Share-based compensation expense46 44 
Asset write-offs and asset impairments7 19 
Net loss on sale of assets— 3 
Provision for losses on inventory49 36 
Deferred taxes(110)(121)
Employee benefit plan contribution from Pfizer Inc.2 2 
Other non-cash adjustments3 4 
Other changes in assets and liabilities, net of acquisitions and divestitures:
    Accounts receivable(120)(143)
    Inventories(438)(299)
    Other assets(20)8 
    Accounts payable(59)(71)
    Other liabilities(227)62 
    Other tax accounts, net41 38 
Net cash provided by operating activities1,171 1,534 
Investing Activities
Capital expenditures(415)(309)
Acquisitions(96)(14)
Purchase of investments(8)(10)
Proceeds on derivative instrument activity, net74 17 
Net cash used in investing activities(445)(316)
Financing Activities
Increase/(decrease) in short-term borrowings, net3 (4)
Principal payments on long-term debt— (600)
Payment of consideration related to previous acquisitions— (5)
Share-based compensation-related proceeds, net of taxes paid on withholding shares(38)(37)
Purchases of treasury stock(1,189)(545)
Cash dividends paid(460)(357)
Net cash used in financing activities(1,684)(1,548)
Effect of exchange-rate changes on cash and cash equivalents(20)— 
Net decrease in cash and cash equivalents(978)(330)
Cash and cash equivalents at beginning of period3,485 3,604 
Cash and cash equivalents at end of period$2,507 $3,274 
Supplemental cash flow information
Cash paid during the period for:
Income taxes$471 $412 
Interest, net of capitalized interest209 221 
Amounts included in the measurement of lease liabilities37 34 
Non-cash transactions:
Capital expenditures5 3 
Lease obligations obtained in exchange for right-of-use assets46 30 
See notes to condensed consolidated financial statements.
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Table of Contents
ZOETIS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization
Zoetis Inc. (including its subsidiaries, collectively, Zoetis, the company, we, us or our) is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health technology. We organize and operate our business in two geographic regions: the United States (U.S.) and International.
We directly market our products in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America. Our products are sold in more than 100 countries, including developed markets and emerging markets. We have a diversified business, marketing products across eight core species: dogs, cats and horses (collectively, companion animals) and cattle, swine, poultry, fish and sheep (collectively, livestock); and within seven major product categories: parasiticides, vaccines, dermatology, anti-infectives, other pharmaceutical products, animal health diagnostics and medicated feed additives.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. Balance sheet amounts and operating results for subsidiaries operating outside the U.S. are as of and for the three and nine months ended August 31, 2022 and August 31, 2021.
Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be representative of those for the full year.
We are responsible for the unaudited condensed consolidated financial statements included in this Form 10-Q. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The information included in this interim report should be read in conjunction with the financial statements and accompanying notes included in our 2021 Annual Report on Form 10-K.
3. Accounting Standards
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, it issued a subsequent amendment to the initial guidance: ASU No. 2021-01, Reference Rate Reform (Topic 848). The new guidance provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. Adoption of the guidance is optional and effective as of March 12, 2020, but only available through December 31, 2022. We currently have a revolving credit facility and various hedging transactions that reference LIBOR. We will make specific amendments to our affected contracts and hedge documentation to adopt these standards during the transition period and we do not expect these changes to have a material impact on our consolidated financial statements or related disclosures.
4. Revenue
A. Revenue from Product Sales
We offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors, retailers or e-commerce outlets. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top-selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network.
Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to all different brands or a particular product, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both companion animals and livestock within each of our major product categories.
Our major product categories are:
•parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms;
•vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response;
•dermatology products: products that relieve itch associated with allergic conditions and atopic dermatitis;
•anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa;
•other pharmaceutical products: pain and sedation, antiemetic, reproductive and oncology products;
•animal health diagnostics: blood, urine and fecal analysis testing capabilities, including point-of-care diagnostic products, instruments and reagents, rapid immunoassay tests, reference laboratory kits and services and blood glucose monitors; and
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•medicated feed additives: products added to animal feed that provide medicines to livestock.
Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals and agribusiness, as well as products and services in biodevices, genetic tests and precision animal health.
Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, deepening the human-animal bond, receiving increased medical treatment and benefiting from advances in animal health medicine, vaccines and diagnostics.
Our livestock products primarily help prevent or treat diseases and conditions to allow veterinarians and producers to care for their animals and to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive demand for improved nutrition, particularly through increased consumption of animal protein. Second, population growth leads to greater natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve and the global food chain faces increased scrutiny, there is more focus on food quality, safety and reliability of supply.
The following tables present our revenue disaggregated by geographic area, species and major product category:
Revenue by geographic area
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
United States$1,090 $1,065 $3,201 $3,002 
Australia80 70 225 196 
Brazil70 78 233 227 
Canada56 56 172 169 
Chile31 32 106 100 
China92 72 291 289 
France28 31 91 98 
Germany43 47 132 135 
Italy24 30 86 87 
Japan37 43 137 140 
Mexico33 31 101 98 
Spain29 33 97 97 
United Kingdom59 61 174 173 
Other developed markets121 127 354 350 
Other emerging markets186 193 581 591 
1,979 1,969 5,981 5,752 
Contract manufacturing & human health23 21 59 57 
Total Revenue$2,002 $1,990 $6,040 $5,809 

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Revenue by major species
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
U.S.
Companion animal$819 $775 $2,488 $2,227 
Livestock271 290 713 775 
1,090 1,065 3,201 3,002 
International
Companion animal452 427 1,412 1,280 
Livestock437 477 1,368 1,470 
889 904 2,780 2,750 
Total
Companion animal1,271 1,202 3,900 3,507 
Livestock708 767 2,081 2,245 
Contract manufacturing & human health23 21 59 57 
Total Revenue$2,002 $1,990 $6,040 $5,809 
Revenue by species
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Companion Animal:
Dogs and Cats$1,213 $1,142 $3,715 $3,319 
Horses58 60 185 188 
1,271 1,202 3,900 3,507 
Livestock:
Cattle371 403 1,063 1,144 
Swine129 153 427 504 
Poultry116 124 361 389 
Fish60 56 151 132 
Sheep and other32 31 79 76 
708 767 2,081 2,245 
Contract manufacturing & human health23 21 59 57 
Total Revenue$2,002 $1,990 $6,040 $5,809 
Revenue by major product category
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Parasiticides$422 $396 $1,417 $1,246 
Vaccines449 421 1,300 1,251 
Dermatology348 326 978 859 
Anti-infectives284 329 802 909 
Other pharmaceuticals252 243 771 717 
Animal health diagnostics83 95 268 283 
Medicated feed additives78 99 261 314 
Other non-pharmaceuticals63 60 184 173 
1,979 1,969 5,981 5,752 
Contract manufacturing & human health23 21 59 57 
Total Revenue$2,002 $1,990 $6,040 $5,809 
B. Revenue from Contracts with Customers
Contract liabilities reflected within Other current liabilities as of December 31, 2021 and 2020, and subsequently recognized as revenue during the first nine months of 2022 and 2021 were approximately $3 million and $4 million, respectively. Contract liabilities as of September 30, 2022 and December 31, 2021 were approximately $16 million and $12 million, respectively.
Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of September 30, 2022 is not material.

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5. Acquisitions
During the second quarter of 2022, we completed the acquisition of Basepaws, a privately held petcare genetics company based in the U.S., which provides pet owners with genetic tests, analytics and early health risk assessments that can help manage the health, wellness and quality of care for their pets. This transaction did not have a significant impact on our consolidated financial statements.
During 2021, we entered into an agreement to acquire Jurox, a privately held animal health company based in Australia, which develops, manufactures and markets a wide range of veterinary medicines for treating companion animals and livestock. On September 30, 2022, after satisfying all customary closing conditions, including clearance from the Australian Competition and Consumer Commission, we completed the acquisition of Jurox. We acquired 100% of the outstanding shares for an aggregate purchase price of $226 million, adjusted to reflect cash, working capital and indebtedness as of the closing date for net cash consideration transferred to the seller of $215 million.
In 2021, we also acquired certain assets to expand our portfolio of equine care products, which did not have a significant impact on our consolidated financial statements.
6. Restructuring Charges and Other Costs Associated with Acquisitions, Cost-Reduction and Productivity Initiatives
In connection with our cost-reduction/productivity initiatives, we typically incur costs and charges associated with site closings and other facility rationalization actions, workforce reductions and the expansion of shared services, including the development of global systems. In connection with our acquisition activity, we typically incur costs and charges associated with executing the transactions, integrating the acquired operations, which may include expenditures for consulting and the integration of systems and processes, product transfers and restructuring the consolidated company, which may include charges related to employees, assets and activities that will not continue in the consolidated company. All operating functions can be impacted by these actions, including sales and marketing, manufacturing and R&D, as well as enabling functions such as information technology, shared services and corporate operations.
The components of costs incurred in connection with restructuring initiatives, acquisitions and cost-reduction/productivity initiatives are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Restructuring charges and certain acquisition-related costs:
Integration costs(a)
$1 $1 $4 $6 
Restructuring charges(b):
Employee termination costs2 7 2 17 
Asset impairment charges2 — 2 13 
Exit costs1 1 1 3 
Total Restructuring charges and certain acquisition-related costs
$6 $9 $9 $39 
(a)    Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes, as well as product transfer costs.
(b)    The restructuring charges for the three and nine months ended September 30, 2022 represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as asset impairment charges primarily related to the consolidation of manufacturing sites in China.
The restructuring charges for the three months ended September 30, 2021 primarily represents employee termination costs associated with the realignment of our international operations. The restructuring charges for the nine months ended September 30, 2021 primarily represents employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives, as well as asset impairment charges related to the consolidation of manufacturing sites in China.
(MILLIONS OF DOLLARS)
Accrual(a)
Balance, December 31, 2021(a)
$25 
Provision5 
Non-cash activity(2)
Utilization and other(b)
(13)
Balance, September 30, 2022(a)
$15 
(a)     At September 30, 2022 and December 31, 2021, included in Accrued expenses ($5 million and $14 million, respectively) and Other noncurrent liabilities ($10 million and $11 million, respectively).
(b)     Includes adjustments for foreign currency translation.

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7. Other (Income)/Deductions—Net
The components of Other (income)/deductions—net are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Royalty-related income$(1)$(3)$(3)$(7)
Interest income(13)(1)(20)(4)
Identifiable intangible asset impairment charges1 — 1 — 
Other asset impairment charges— 3 — 3 
Net loss on sale of assets— — — 3 
Foreign currency loss(a)
11 8 36 20 
Other, net(1)(3)(8)1 
Other (income)/deductions—net$(3)$4 $6 $16 
(a)    Primarily driven by costs related to hedging and exposures to certain emerging and developed market currencies.
8. Income Taxes
A. Taxes on Income
Our effective tax rate was 20.8% for the three months ended September 30, 2022, compared with 16.2% for the three months ended September 30, 2021. The higher effective tax rate for the three months ended September 30, 2022, was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. In addition, the three months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
Our effective tax rate was 20.0% for the nine months ended September 30, 2022, compared with 18.2% for the nine months ended September 30, 2021. The higher effective tax rate for the nine months ended September 30, 2022, was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. In addition, the nine months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
On August 16, 2022, the U.S. Inflation Reduction Act of 2022 (the “IRA”) was enacted which, among other changes, implements a 15% alternative minimum tax on financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The alternative minimum tax and excise tax are effective in taxable years beginning after December 31, 2022 and the incentives to promote clean energy have various different effective dates. We do not currently expect the IRA to have a material impact on our financial results, including our annual estimated effective tax rate, when it becomes effective. We will continue to evaluate its impact as further information becomes available and as additional guidance is provided by the U.S. Department of Treasury and the Internal Revenue Service.
B. Deferred Taxes
As of September 30, 2022, the total net deferred income tax liability of $145 million is included in Noncurrent deferred tax assets ($111 million) and Noncurrent deferred tax liabilities ($256 million).
As of December 31, 2021, the total net deferred income tax liability of $220 million is included in Noncurrent deferred tax assets ($100 million) and Noncurrent deferred tax liabilities ($320 million).
C. Tax Contingencies
As of September 30, 2022, the net tax liabilities associated with uncertain tax positions of $179 million (exclusive of interest and penalties related to uncertain tax positions of $16 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($178 million).
As of December 31, 2021, the net tax liabilities associated with uncertain tax positions of $189 million (exclusive of interest and penalties related to uncertain tax positions of $15 million) are included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($188 million).
Our tax liabilities for uncertain tax positions relate primarily to issues common among multinational corporations. Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate. We do not expect that within the next twelve months any of our uncertain tax positions could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of uncertain tax positions and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible changes related to our uncertain tax positions, and such changes could be significant.

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9. Financial Instruments
A. Debt
Credit Facilities
In December 2016, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility). In December 2018, the maturity for the amended and restated credit facility was extended through December 2023. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition.
The credit facility also contains a financial covenant requiring that we maintain a minimum interest coverage ratio (the ratio of EBITDA at the end of the period to interest expense for such period) of 3.50:1. In addition, the credit facility contains other customary covenants.
We were in compliance with all financial covenants as of September 30, 2022 and December 31, 2021. There were no amounts drawn under the credit facility as of September 30, 2022 or December 31, 2021.
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of September 30, 2022, we had access to $50 million of lines of credit which expire at various times and are generally renewed annually. There were $3 million of borrowings outstanding related to these facilities as of September 30, 2022 and no borrowings outstanding related to these facilities as of December 31, 2021.
Commercial Paper Program
In February 2013, we entered into a commercial paper program with a capacity of up to $1.0 billion. As of September 30, 2022 and December 31, 2021, there was no commercial paper outstanding under this program.
Senior Notes and Other Long-Term Debt
On August 20, 2021, we redeemed, upon maturity, the $300 million aggregate principal amount of our 2018 floating rate senior notes due 2021 and the $300 million aggregate principal amount of our 2018 senior notes due 2021.
On May 12, 2020, we issued $1.25 billion aggregate principal amount of our senior notes (2020 senior notes), with an original issue discount of $10 million. These notes are comprised of $750 million aggregate principal amount of 2.000% senior notes due 2030 and $500 million aggregate principal amount of 3.000% senior notes due 2050. On October 13, 2020, the net proceeds were used to repay the $500 million aggregate principal amount of our 3.450% 2015 senior notes due 2020 and the remainder is being used for general corporate purposes. On August 20, 2018, we issued $1.5 billion aggregate principal amount of our senior notes (2018 senior notes), with an original issue discount of $4 million. On September 12, 2017, we issued $1.25 billion aggregate principal amount of our senior notes (2017 senior notes), with an original issue discount of $7 million. On November 13, 2015, we issued $1.25 billion aggregate principal amount of our senior notes (2015 senior notes), with an original issue discount of $2 million. On January 28, 2013, we issued $3.65 billion aggregate principal amount of our senior notes (2013 senior notes offering) in a private placement, with an original issue discount of $10 million.
The 2013, 2015, 2017, 2018 and 2020 senior notes are governed by an indenture and supplemental indenture (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our and certain of our subsidiaries' ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which the 2013, 2015, 2017, 2018 and 2020 senior notes may be declared immediately due and payable.
Pursuant to the indenture, we are able to redeem the 2013, 2015, 2017, 2018 and 2020 senior notes of any series, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. Upon the occurrence of a change of control of us and a downgrade of the 2013, 2015, 2017, 2018 and 2020 senior notes below an investment grade rating by each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding 2013, 2015, 2017, 2018 and 2020 senior notes at a price equal to 101% of the aggregate principal amount of the 2013, 2015, 2017, 2018 and 2020 senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase.

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The components of our long-term debt are as follows:
September 30,December 31,
(MILLIONS OF DOLLARS)20222021
3.250% 2013 senior notes due 2023
$1,350 $1,350 
4.500% 2015 senior notes due 2025
750 750 
3.000% 2017 senior notes due 2027
750 750 
3.900% 2018 senior notes due 2028
500 500 
2.000% 2020 senior notes due 2030
750 750 
4.700% 2013 senior notes due 2043
1,150 1,150 
3.950% 2017 senior notes due 2047
500 500 
4.450% 2018 senior notes due 2048
400 400 
3.000% 2020 senior notes due 2050
500 500 
6,650 6,650 
Unamortized debt discount / debt issuance costs(56)(60)
Less current portion of long-term debt1,350 — 
Cumulative fair value adjustment for interest rate swap contracts(34)2 
Long-term debt, net of discount and issuance costs$5,210 $6,592 
The fair value of our long-term debt was $4,575 million and $7,443 million as of September 30, 2022 and December 31, 2021, respectively, and has been determined using a third-party matrix-pricing model that uses significant inputs derived from, or corroborated by, observable market data and Zoetis’ credit rating (Level 2 inputs).
The principal amount of long-term debt outstanding, as of September 30, 2022, matures in the following years:
After
(MILLIONS OF DOLLARS)202220232024202520262026Total
Maturities$— $1,350 $— $750 $— $4,550 $6,650 
Interest Expense
Interest expense, net of capitalized interest, was $53 million and $159 million for the three and nine months ended September 30, 2022, respectively, and $56 million and $170 million for the three and nine months ended September 30, 2021, respectively. Capitalized interest expense was $5 million and $16 million for the three and nine months ended September 30, 2022, respectively, and $5 million and $14 million for the three and nine months ended September 30, 2021, respectively.
B. Derivative Financial Instruments
Foreign Exchange Risk
A significant portion of our revenue, earnings and net investment in foreign affiliates is exposed to changes in foreign exchange rates. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. Depending on market conditions, foreign exchange risk is also managed through the use of various derivative financial instruments. These derivative financial instruments serve to manage the exposure of our net investment in certain foreign operations to changes in foreign exchange rates and protect net income against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
All derivative financial instruments used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the Condensed Consolidated Balance Sheets. The derivative financial instruments primarily offset exposures in the British pound, Canadian dollar, Chinese yuan, euro, Japanese yen and Norwegian krone. Changes in fair value are reported in earnings or in Accumulated other comprehensive income/(loss), depending on the nature and purpose of the financial instrument, as follows:
•For foreign currency forward-exchange contracts not designated as hedging instruments, we recognize the gains and losses that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement. The vast majority of the foreign currency forward-exchange contracts mature within 60 days and all mature within three years.
•For foreign exchange derivative instruments that are designated as hedging instruments against our net investment in foreign operations, changes in the fair value are recorded as a component of cumulative translation adjustment within Accumulated other comprehensive income/(loss) and reclassified into earnings when the foreign investment is sold or substantially liquidated. These instruments include cross-currency interest rate swaps and foreign currency forward-exchange contracts. Gains and losses excluded from the assessment of hedge effectiveness are recognized in earnings (Interest expense—net of capitalized interest). The cash flows from these contracts are reflected within the investing section of our Condensed Consolidated Statement of Cash Flows. These contracts have varying maturities of up to three years.

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Interest Rate Risk
The company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rates and to reduce its overall cost of borrowing.
•In anticipation of issuing fixed-rate debt, we may use forward-starting interest rate swaps that are designated as cash flow hedges to hedge against changes in interest rates that could impact expected future issuances of debt. Unrealized gains or losses on the forward-starting interest rate swaps are reported in Accumulated other comprehensive loss and are recognized in earnings over the life of the future fixed rate notes. When the company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur within the originally expected period of execution, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings.
•As of September 30, 2022, we had outstanding forward-starting interest rate swaps, having an effective date and mandatory termination date in March 2023, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 3.250% 2013 senior notes due 2023, and a forward-starting interest rate swap, having an effective date and mandatory termination date in March 2026, to hedge against interest rate exposure related principally to the anticipated future issuance of fixed-rate debt to be used primarily to refinance our 4.500% 2015 senior notes due 2025.
•We may use fixed-to-floating interest rate swaps that are designated as fair value hedges to hedge against changes in the fair value of certain fixed-rate debt attributable to changes in the benchmark LIBOR or the Secured Overnight Financing Rate (SOFR). These derivative instruments effectively convert a portion of the company’s long-term debt from fixed-rate to floating-rate debt based on three-month LIBOR or daily SOFR plus a spread. Gains or losses on the fixed-to-floating interest rate swaps due to changes in LIBOR or SOFR are recorded in Interest expense, net of capitalized interest. Changes in the fair value of the fixed-to-floating interest rate swaps are offset by changes in the fair value of the underlying fixed-rate debt. As of September 30, 2022, we had outstanding fixed-to-floating interest rate swaps that correspond to a portion of the 3.900% 2018 senior notes due 2028 and the 2.00% senior notes due 2030. The amounts recorded during the three and nine months ended September 30, 2022 for changes in the fair value of these hedges are not material to our consolidated financial statements.
Outstanding Positions
The aggregate notional amount of derivative instruments are as follows:
Notional
September 30,December 31,
(MILLIONS)20222021
Derivatives not Designated as Hedging Instruments
     Foreign currency forward-exchange contracts $1,989 $1,749 
Derivatives Designated as Hedging Instruments
     Foreign exchange derivative instruments (in foreign currency):
          Euro 650 650 
          Danish krone600 600 
          Swiss franc25 25 
     Forward-starting interest rate swaps $700 $550 
     Fixed-to-floating interest rate swap contracts$250 $200 

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Fair Value of Derivative Instruments
The classification and fair values of derivative instruments are as follows:
Fair Value of Derivatives
September 30,December 31,
(MILLIONS OF DOLLARS)Balance Sheet Location20222021
Derivatives Not Designated as Hedging Instruments
   Foreign currency forward-exchange contractsOther current assets$14 $16 
   Foreign currency forward-exchange contracts
Other current liabilities
(17)(15)
Total derivatives not designated as hedging instruments$(3)$1 
Derivatives Designated as Hedging Instruments:
   Forward-starting interest rate swap contractsOther current assets$102 $— 
   Forward-starting interest rate swap contractsOther noncurrent assets10 17 
   Forward-starting interest rate swap contractsOther noncurrent liabilities— (5)
   Foreign exchange derivative instruments Other current assets53 12 
   Foreign exchange derivative instruments Other noncurrent assets40 14 
   Foreign exchange derivative instruments Other current liabilities— (3)
   Fixed-to-floating interest rate swap contractsOther noncurrent assets— 2 
   Fixed-to-floating interest rate swap contractsOther noncurrent liabilities(34)— 
Total derivatives designated as hedging instruments171 37 
Total derivatives$168 $38 
The company’s derivative transactions are subject to master netting agreements that mitigate credit risk by permitting net settlement of transactions with the same counterparty. The company also has collateral security agreements with certain of its counterparties. Under these collateral security agreements either party is required to post cash collateral when the net fair value of derivative instruments covered by the collateral agreement exceeds contractually established thresholds. At September 30, 2022, there was $63 million of collateral received and $16 million of collateral posted related to derivative instruments recorded in Other current liabilities and Other current assets, respectively. At December 31, 2021, there was $23 million of collateral received related to derivative instruments recorded in Other noncurrent assets.
We use a market approach in valuing financial instruments on a recurring basis. Our derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs in the calculation of fair value.
The amounts of net losses on derivative instruments not designated as hedging instruments, recorded in Other (income)/deductions—net, are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Foreign currency forward-exchange contracts$(23)$(2)$(49)$(13)
These amounts were substantially offset in Other (income)/deductions—net by the effect of changing exchange rates on the underlying foreign currency exposures.
The amounts of unrecognized net gains/(losses) on derivative instruments designated as hedging instruments, recorded, net of tax, in Accumulated other comprehensive loss, are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Forward-starting interest rate swap contracts$30 $1 $77 $20 
Foreign exchange derivative instruments$39 $16 $84 $33 
Gains on derivative instruments designated as hedging instruments, recognized within Interest expense, net of capitalized interest, are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Foreign exchange derivative instruments$4 $3 $11 $9 
The net amount of deferred losses related to derivative instruments designated as cash flow hedges that is expected to be reclassified from Accumulated other comprehensive loss into earnings over the next 12 months is insignificant.

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10. Inventories
The components of inventory are as follows:
September 30,December 31,
(MILLIONS OF DOLLARS)20222021
Finished goods$1,026 $888 
Work-in-process830 696 
Raw materials and supplies447 339 
Inventories$2,303 $1,923 
11. Goodwill and Other Intangible Assets
A. Goodwill
The components of, and changes in, the carrying amount of goodwill are as follows:
(MILLIONS OF DOLLARS)U.S.InternationalTotal
Balance, December 31, 2021$1,424 $1,258 $2,682 
Additions61 — 61 
Other(a)
— (51)(51)
Balance, September 30, 2022$1,485 $1,207 $2,692 
(a) Includes adjustments for foreign currency translation.
The gross goodwill balance was $3,228 million and $3,218 million as of September 30, 2022 and December 31, 2021, respectively. Accumulated goodwill impairment losses (generated entirely in fiscal 2002) were $536 million as of September 30, 2022 and December 31, 2021.
B. Other Intangible Assets
The components of identifiable intangible assets are as follows:
As of September 30, 2022As of December 31, 2021
IdentifiableIdentifiable
GrossIntangible AssetsGrossIntangible Assets
CarryingAccumulatedLess AccumulatedCarryingAccumulatedLess Accumulated
(MILLIONS OF DOLLARS)AmountAmortizationAmortizationAmountAmortizationAmortization
Finite-lived intangible assets:
Developed technology rights$1,865 $(1,009)$856 $1,933 $(949)$984 
Brands and tradenames395 (234)161 426 (260)166 
Other357 (229)128 473 (335)138 
Total finite-lived intangible assets2,617 (1,472)1,145 2,832 (1,544)1,288 
Indefinite-lived intangible assets:
Brands and tradenames91 — 91 91 — 91 
In-process research and development76 — 76 88 — 88 
Product rights7 — 7 7 — 7 
Total indefinite-lived intangible assets174 — 174 186 — 186 
Identifiable intangible assets$2,791 $(1,472)$1,319 $3,018 $(1,544)$1,474 
C. Amortization
Amortization expense related to finite-lived acquired intangible assets that contribute to our ability to sell, manufacture, research, market and distribute products, compounds and intellectual property is included in Amortization of intangible assets as it benefits multiple business functions. Amortization expense related to finite-lived acquired intangible assets that are associated with a single function is included in Cost of sales, Selling, general and administrative expenses or Research and development expenses, as appropriate. Total amortization expense for finite-lived intangible assets was $48 million and $147 million for the three and nine months ended September 30, 2022, respectively and $51 million and $154 million for the three and nine months ended September 30, 2021, respectively.
12. Share-based Payments
The Zoetis 2013 Equity and Incentive Plan (the Equity Plan) provides long-term incentives to our employees and non-employee directors. The principal types of share-based awards available under the Equity Plan may include, but are not limited to, stock options, restricted stock and restricted stock units (RSUs), deferred stock units (DSUs), performance-vesting restricted stock units (PSUs) and other equity-based or cash-based awards. At our 2022 Annual Shareholder Meeting on May 19, 2022, our shareholders approved our Amended and Restated Equity Plan, which, among other things, extended the plan termination date to May 19, 2032 and increased the number of shares approved for issuance from 25 million shares to 30 million shares.

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The components of share-based compensation expense are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Stock options / stock appreciation rights$2 $2 $7 $7 
RSUs / DSUs9 8 26 25 
PSUs4 5 13 12 
Share-based compensation expense—total(a)
$15 $15 $46 $44 
(a) Amounts capitalized to inventory were not material for the three and nine months ended September 30, 2022 and 2021.
During the nine months ended September 30, 2022, the company granted 235,900 stock options with a weighted-average exercise price of $201.23 per stock option and a weighted-average fair value of $51.13 per stock option. The fair-value based method for valuing each Zoetis stock option grant on the grant date uses the Black-Scholes-Merton option-pricing model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 1.81%; expected dividend yield of 0.64%; expected stock price volatility of 27.64%; and expected term of 4.9 years. In general, stock options vest after three years of continuous service and the values determined through this fair-value based method generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.
During the nine months ended September 30, 2022, the company granted 205,095 RSUs, with a weighted-average grant date fair value of $200.66 per RSU. RSUs are accounted for using a fair-value-based method that utilizes the closing price of Zoetis common stock on the date of grant. In general, RSUs vest after three years of continuous service from the grant date and the values generally are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.
During the nine months ended September 30, 2022, the company granted 104,113 PSUs with a weighted-average grant date fair value of $235.52 per PSU. PSUs are accounted for using a Monte Carlo simulation model. The units underlying the PSUs will be earned and vested over a three-year performance period, based upon the total shareholder return of the company in comparison to the total shareholder return of the companies comprising the S&P 500 stock market index at the start of the performance period, excluding companies that during the performance period are acquired or no longer publicly traded (Relative TSR). The weighted-average fair value was estimated based on volatility assumptions of Zoetis common stock and an average of the S&P 500 companies, which were 28.4% and 38.1%, respectively. Depending on the company’s Relative TSR performance at the end of the performance period, the recipient may earn from 0% to 200% of the target number of units. Vested units are settled in shares of the company’s common stock. PSU values are amortized on a straight-line basis over the vesting term into Cost of sales, Selling, general and administrative expenses, or Research and development expenses, as appropriate.
13. Stockholders' Equity
Zoetis is authorized to issue 6 billion shares of common stock and 1 billion shares of preferred stock.
In December 2018, the company's Board of Directors authorized a $2.0 billion share repurchase program. This program was completed as of June 30, 2022. In December 2021, the company's Board of Directors authorized an additional $3.5 billion share repurchase program. As of September 30, 2022, there was approximately $3.0 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs.
Accumulated other comprehensive loss
Changes, net of tax, in accumulated other comprehensive loss, were as follows:
Currency Translation Adjustments
Other CurrencyBenefit PlansAccumulated Other
Cash FlowNet InvestmentTranslationActuarialComprehensive
(MILLIONS OF DOLLARS)HedgesHedgesAdjustments(Losses)/GainsLoss
Balance, December 31, 2021$4 $5 $(756)$(17)$(764)
Other comprehensive income/(loss), net of tax78 84 (208)1 

(45)
Balance, September 30, 2022$82 $89 $(964)$(16)$(809)
Balance, December 31, 2020$(15)$(37)$(655)$(23)$(730)
Other comprehensive income, net of tax21 33 9 — 63 
Balance, September 30, 2021$6 $(4)$(646)$(23)$(667)

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14. Earnings per Share
The following table presents the calculation of basic and diluted earnings per share:
Three Months EndedNine Months Ended
(MILLIONS OF DOLLARS AND SHARES, EXCEPT PER SHARE DATA)September 30,September 30,
2022202120222021
Numerator
Net income before allocation to noncontrolling interests$528 $552 $1,651 $1,621 
Less: Net loss attributable to noncontrolling interests(1)— (2)(2)
Net income attributable to Zoetis Inc.$529 $552 $1,653 $1,623 
Denominator
Weighted-average common shares outstanding467.8 474.0 470.0 474.8 
Common stock equivalents: stock options, RSUs, PSUs and DSUs1.3 2.3 1.6 2.3 
Weighted-average common and potential dilutive shares outstanding469.1 476.3 471.6 477.1 
Earnings per share attributable to Zoetis Inc. stockholders—basic$1.13 $1.16 $3.52 $3.42 
Earnings per share attributable to Zoetis Inc. stockholders—diluted$1.13 $1.16 $3.51 $3.40 
The number of stock options outstanding under the company's Equity Plan that were excluded from the computation of diluted earnings per share, as the effect would have been antidilutive, were de minimis for the three and nine months ended September 30, 2022 and 2021.
15. Commitments and Contingencies
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our tax contingencies, see Note 8. Income Taxes.
A. Legal Proceedings
Our non-tax contingencies include, among others, the following:
•    Product liability and other product-related litigation, which can include injury, consumer, off-label promotion, antitrust and breach of contract claims.
•    Commercial and other matters, which can include product-pricing claims and environmental claims and proceedings.
•    Patent litigation, which typically involves challenges to the coverage and/or validity of our patents or those of third parties on various products or processes.
•    Government investigations, which can involve regulation by national, state and local government agencies in the U.S. and in other countries.
Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be substantial.
We believe that we have strong defenses in these types of matters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations or cash flows in the period in which the amounts are paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of these contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions.
The principal matters to which we are a party are discussed below. In determining whether a pending matter is significant for financial reporting and disclosure purposes, we consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might change a reader’s judgment about our financial statements in light of all of the information about the company that is available to the reader; the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent matters, we consider, among other things, the financial significance of the product protected by the patent.

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Ulianopolis, Brazil
In February 2012, the Municipality of Ulianopolis (State of Para, Brazil) filed a complaint against Fort Dodge Saúde Animal Ltda. (FDSAL), a Zoetis entity, and five other large companies alleging that waste sent to a local waste incineration facility for destruction, but that was not ultimately destroyed as the facility lost its operating permit, caused environmental impacts requiring cleanup.
The Municipality is seeking recovery of cleanup costs purportedly related to FDSAL's share of all waste accumulated at the incineration facility awaiting destruction, and compensatory damages to be allocated among the six defendants. We believe we have strong arguments against the claim, including defense strategies against any claim of joint and several liability.
At the request of the Municipal prosecutor, in April 2012, the lawsuit was suspended for one year. Since that time, the prosecutor has initiated investigations into the Municipality's actions in the matter as well as the efforts undertaken by the six defendants to remove and dispose of their individual waste from the incineration facility. On October 3, 2014, the Municipal prosecutor announced that the investigation remained ongoing and outlined the terms of a proposed Term of Reference (a document that establishes the minimum elements to be addressed in the preparation of an Environmental Impact Assessment), under which the companies would be liable to withdraw the waste and remediate the area.
On March 5, 2015, we presented our response to the prosecutor’s proposed Term of Reference, arguing that the proposed terms were overly general in nature and expressing our interest in discussing alternatives to address the matter. The prosecutor agreed to consider our request to engage a technical consultant to conduct an environmental diagnostic of the contaminated area. On May 29, 2015, we, in conjunction with the other defendant companies, submitted a draft cooperation agreement to the prosecutor, which outlined the proposed terms and conditions for the engagement of a technical consultant to conduct the environmental diagnostic. On August 19, 2016, the parties and the prosecutor agreed to engage the services of a third-party consultant to conduct a limited environmental assessment of the site. The site assessment was conducted during June 2017, and a written report summarizing the results of the assessment was provided to the parties and the prosecutor in November 2017. The report noted that waste is still present on the site and that further (Phase II) environmental assessments are needed before a plan to manage that remaining waste can be prepared. On April 1, 2019, the defendants met with the Prosecutor to discuss the conclusions set forth in the written report. Following that discussion, on April 10, 2019, the Prosecutor issued a procedural order requesting that the defendants prepare and submit a technical proposal outlining the steps needed to conduct the additional Phase II environmental assessments. The defendants presented the technical proposal to the Prosecutor on October 21, 2019. On March 3, 2020, the Prosecutor notified the defendants that he submitted the proposal to the Ministry of the Environment for its review and consideration by the Prosecutor. On July 15, 2020, the Prosecutor recommended certain amendments to the proposal for the Phase II testing. On September 28, 2020, the parties and the Prosecutor agreed to the final terms and conditions concerning the cooperation agreement with respect to the Phase II testing. Due to the ongoing issues presented by the COVID-19 pandemic, the parties have been unable to secure a start date for the Phase II testing and have no timeline at this point for when testing will begin.
Lascadoil Contamination in Animal Feed
An investigation by the U.S. Food and Drug Administration (FDA) and the Michigan Department of Agriculture into the alleged contamination of the feed supply of certain turkey and hog feed mills in Michigan led to the recall of certain batches of soy oil (intended for use as an animal feed additive) that had originated with Shur-Green Farms LLC, a producer of soy oil, and that had been contaminated with lascadoil, an industrial by-product of certain Zoetis manufacturing processes. The contaminated feed is believed to have caused the deaths of approximately 50,000 turkeys and the contamination (but not death) of at least 20,000 hogs in August 2014. The investigation posited that Shur-Green inadvertently contaminated soy oil with lascadoil which it purchased from Zoetis for use as a bio-fuel ingredient, and then sold the contaminated soy oil to fat recycling vendors, who in turn unknowingly sold to feed mills for use in animal feed.
During the course of its investigation, the FDA identified the process used to manufacture Zoetis’ Avatec® (lasalocid sodium) and Bovatec® (lasalocid sodium) products as the possible source of the lascadoil, since lascadoil contains small amounts of lasalocid, the active ingredient found in both products. Zoetis sold the industrial lascadoil byproduct to Shur-Green, through its broker, Heritage Interactive Services, LLC. Under the terms of the sale agreement, the lascadoil could only be incinerated or resold for use in biofuel, and the agreement expressly prohibited the reselling of lascadoil for use as a component in food. The FDA inspected the Zoetis site where Avatec and Bovatec are manufactured, and found no evidence that Zoetis was involved in the contamination of the animal feed.
On March 10, 2015, plaintiffs Restaurant Recycling, LLC (Restaurant Recycling) and Superior Feed Ingredients, LLC (Superior), both of whom are in the fat recycling business, filed a complaint in the Seventeenth Circuit Court for the State of Michigan against Shur-Green Farms alleging negligence and breach of warranty claims arising from their purchase of soy oil allegedly contaminated with lascadoil. Plaintiffs resold the allegedly contaminated soy oil to turkey feed mills for use in feed ingredient. Plaintiffs also named Zoetis as a defendant in the complaint alleging that Zoetis failed to properly manufacture its products and breached an implied warranty that the soy oil was fit for use at turkey and hog mills. Zoetis was served with the complaint on June 3, 2015, and we filed our answer, denying all allegations, on July 15, 2015. On August 10, 2015, several of the turkey feed mills filed a joint complaint against Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence, misrepresentation, and breach of warranty, arising out of their alleged purchase and use of the contaminated soy oil. The complaint raises only one count against Zoetis for negligence. We filed an answer to the complaint on November 2, 2015, denying the allegation. On May 16, 2016, two additional turkey producers filed a complaint in the Seventeenth Circuit Court for the State of Michigan against the company, Restaurant Recycling, Superior, Shur-Green Farms and others, alleging claims for negligence and breach of warranties. We filed an answer to the complaint on June 20, 2016, denying the allegations. The Court has consolidated all three cases in Michigan for purposes of discovery and disposition. On July 28, 2017, we filed a motion for summary disposition on the grounds that no genuine issues of material fact exist and that Zoetis is entitled to judgment as a matter of law. On October 19, 2017, the Court granted our motion and dismissed all claims against Zoetis. On October 31, 2017, the plaintiffs filed motions for reconsideration of the Court's decision granting summary disposition. The Court, denied all such motions on December 6, 2017, for the same reasons cited in the Court’s original decision. On December 27, 2017, the plaintiffs filed a request with the Michigan Court of Appeals seeking an interlocutory (or interim) appeal of the lower Court’s decision, which we opposed on January 17, 2018. On July 5, 2018, the Court of Appeals denied the plaintiffs’ request for an interlocutory appeal. The case was remanded back to the lower Court, where it was scheduled to proceed to trial by jury. We have been advised that the remaining parties have reached an agreement to settle the dispute, and on June 24, 2020, the remaining parties jointly stipulated to the dismissal of all remaining claims. On July 13, 2020, Plaintiffs filed a claim of appeal with Michigan Court of Appeals seeking

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reversal of the lower Court’s decision granting Zoetis’ motion for summary disposition. Plaintiffs’ filed their appeal brief on October 29, 2020, and we filed our reply brief on December 3, 2020. The Court of Appeals heard oral arguments on December 7, 2021.
On September 15, 2022, the Court of Appeals affirmed the lower Court’s ruling in favor of Zoetis. The plaintiffs do not have an automatic right to appeal the decision of the Court of Appeals; rather, they must petition the Supreme Court of Michigan for leave to appeal further. On October 27, 2022, the plaintiffs filed an application to the Michigan Supreme Court for leave to appeal the Court of Appeals' opinion. We have until November 24, 2022, by which to oppose that application.
Belgium Excess Profit Tax Regime
On February 14, 2019, the General Court of the European Union (General Court) annulled the January 11, 2016 decision of the European Commission (EC) that selective tax advantages granted by Belgium under its "excess profit" tax scheme constitute illegal state aid. As a result of the 2016 decision, the company recorded a net tax charge of approximately $35 million in the first half of 2016. On May 8, 2019, the EC filed an appeal to the decision of the General Court. On September 16, 2019, the EC opened separate in-depth investigations to assess whether Belgium excess profit rulings granted to 39 multinational companies, including Zoetis, constituted state aid for those companies. On September 16, 2021, the European Court of Justice upheld the EC’s decision that the Belgium excess profit ruling system is considered an aid scheme and referred the case back to the General Court to rule on open questions. On May 24, 2022, the General Court resumed all proceedings involved with the Excess Profit Rulings cases, including Zoetis. On June 23, 2022, as requested by the General Court, the company provided observations in relations to (i) the impact of the Court of Justice’s decision that the Belgium excess profit ruling system is considered an aid scheme and (ii) the impact of recent case laws by the General Court with regards to the existence of a selective advantage. The company has not reflected any potential benefits in its consolidated financial statements as of September 30, 2022 as a result of the 2019 annulment. We will continue to monitor the developments of the appeal and its ultimate resolution.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses, we indemnify our counterparties against certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of September 30, 2022, recorded amounts for the estimated fair value of these indemnifications were not significant.
16. Segment Information
Operating Segments
We manage our operations through two geographic operating segments: the U.S. and International. Each operating segment has responsibility for its commercial activities. Within each of these operating segments, we offer a diversified product portfolio, including parasiticides, vaccines, dermatology, anti-infectives, other pharmaceuticals, animal health diagnostics and medicated feed additives, for both companion animal and livestock customers. Our chief operating decision maker uses the revenue and earnings of the two operating segments, among other factors, for performance evaluation and resource allocation.
Other Costs and Business Activities
Certain costs are not allocated to our operating segment results, such as costs associated with the following:
•    Other business activities, includes our Client Supply Services (CSS) contract manufacturing results, our human health business, and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the international commercial segment.
•    Corporate, includes enabling functions such as information technology, facilities, legal, finance, human resources, business development, certain diagnostic costs and communications, among others. These costs also include compensation costs and other miscellaneous operating expenses not charged to our operating segments, as well as interest income and expense.
•Certain transactions and events such as (i) Purchase accounting adjustments, where we incur expenses associated with the amortization of fair value adjustments to inventory, intangible assets and property, plant and equipment; (ii) Acquisition-related activities, where we incur costs associated with acquiring and integrating newly acquired businesses, such as transaction costs and integration costs; and (iii) Certain significant items, which comprise substantive, unusual items that, either as a result of their nature or size, would not be expected to occur as part of our normal business on a regular basis, such as restructuring charges and implementation costs associated with our cost-reduction/productivity initiatives that are not associated with an acquisition, certain asset impairment charges, certain legal and commercial settlements and the impact of divestiture-related gains and losses.
•Other unallocated includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) procurement costs.
Segment Assets
We manage our assets on a total company basis, not by operating segment. Therefore, our chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, we do not report asset information by operating segment.

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Selected Statement of Income Information    
Earnings
Depreciation and Amortization(a)
Three Months EndedThree Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
U.S.
Revenue$1,090 $1,065 
Cost of sales204 199 
Gross profit886 866 
    Gross margin81.3 %81.3 %
Operating expenses206 183 
Other (income)/deductions-net1 — 
U.S. Earnings679 683 $12 $13 
International
Revenue(b)
889 904 
Cost of sales256 273 
Gross profit633 631 
    Gross margin71.2 %69.8 %
Operating expenses150 152 
Other (income)/deductions-net(3)(4)
International Earnings486 483 21 17 
Total operating segments1,165 1,166 33 30 
Other business activities
(106)(106)7 6 
Reconciling Items:
Corporate
(245)(252)33 29 
Purchase accounting adjustments
(40)(45)40 45 
Acquisition-related costs
(1)(1)— — 
Certain significant items(c)
(6)(12)— — 
Other unallocated
(100)(91)2 — 
Total Earnings(d)
$667 $659 $115 $110 
(a)    Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.
(b)    Revenue denominated in euros was $183 million and $204 million for the three months ended September 30, 2022 and 2021, respectively.
(c)    For the three months ended September 30, 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as asset impairment charges related to the consolidation of manufacturing sites in China.
For the three months ended September 30, 2021, primarily represents employee termination costs associated with the realignment of our international operations and asset impairment charges related to a dairy product termination.
(d)    Defined as income before provision for taxes on income.

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Earnings
Depreciation and Amortization(a)
Nine Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
U.S.
Revenue$3,201 $3,002 
Cost of sales587 575 
Gross profit2,614 2,427 
    Gross margin81.7 %80.8 %
Operating expenses578 484 
Other (income)/deductions-net(6)2 
U.S. Earnings2,042 1,941 $40 $40 
International
Revenue(b)
2,780 2,750 
Cost of sales809 833 
Gross profit1,971 1,917 
    Gross margin70.9 %69.7 %
Operating expenses456 429 
Other (income)/deductions-net(5)(4)
International Earnings1,520 1,492 62 52 
Total operating segments3,562 3,433 102 92 
Other business activities
(315)(301)21 20 
Reconciling Items:
Corporate
(771)(744)99 84 
Purchase accounting adjustments
(120)(133)120 133 
Acquisition-related costs
(4)(8)— — 
Certain significant items(c)
(10)(44)— — 
Other unallocated
(278)(221)4 2 
Total Earnings(d)
$2,064 $1,982 $346 $331 
(a)    Certain production facilities are shared. Depreciation and amortization is allocated to the reportable operating segments based on estimates of where the benefits of the related assets are realized.
(b)    Revenue denominated in euros was $590 million and $605 million for the nine months ended September 30, 2022 and 2021, respectively.
(c)    For the nine months ended September 30, 2022, primarily represents inventory and asset impairment charges related to the consolidation of manufacturing sites in China, as well as employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets.
For the nine months ended September 30, 2021, primarily represents asset impairment charges related to the consolidation of manufacturing sites in China and a dairy product termination, as well as employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives.
(d)    Defined as income before provision for taxes on income.

17. Subsequent Events
On September 30, 2022, after satisfying all customary closing conditions, including clearance from the Australian Competition and Consumer Commission, we completed the acquisition of Jurox. The closing of the transaction occurred subsequent to the Balance Sheet date for subsidiaries operating outside the U.S., as referenced in Note 2. Basis of Presentation. See Note 5. Acquisitions for additional information regarding the terms of the transaction.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview of our business
Zoetis is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health technology. For 70 years, we have been innovating ways to predict, prevent, detect, and treat animal illness, and continue to stand by those raising and caring for animals worldwide - from livestock farmers to veterinarians and pet owners.
We manage our operations through two geographic operating segments: the United States (U.S.) and International. Within each of these operating segments, we offer a diversified product portfolio for both companion animal and livestock customers in order to capitalize on local and regional trends and customer needs. See Notes to Condensed Consolidated Financial Statements — Note 16. Segment Information.
We directly market our products to veterinarians and livestock producers located in approximately 45 countries across North America, Europe, Africa, Asia, Australia and South America, and are a market leader in nearly all of the major regions in which we operate. Through our efforts to establish an early and direct presence in many emerging markets, such as Brazil, Chile, China and Mexico, we believe we are one of the largest animal health medicines and vaccines businesses as measured by revenue across emerging markets as a whole. In markets where we do not have a direct commercial presence, we generally contract with distributors that provide logistics and sales and marketing support for our products.
We believe our investments in one of the industry’s largest sales organizations, including our extensive network of technical and veterinary operations specialists, our high-quality manufacturing and reliability of supply, and our long track record of developing products that meet customer needs, has led to enduring and valued relationships with our customers. Our research and development (R&D) efforts enable us to deliver innovative products to address unmet needs and evolve our product lines so they remain relevant for our customers.
We have approximately 300 product lines that we sell in over 100 countries for the prediction, prevention, detection and treatment of diseases and conditions that affect various companion animal and livestock species. The diversity of our product portfolio and our global operations provides stability to our overall business. For instance, in livestock, impacts on our revenue that may result from disease outbreaks or weather conditions in a particular market or region are often offset by increased sales in other regions from exports and other species as consumers shift to other proteins.
A summary of our 2022 performance compared with the comparable 2021 period follows:
% Change
Three Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchange
Operational(a)
Revenue$2,002 $1,990 1 (4)5 
Net income attributable to Zoetis529 552 (4)(10)6 
Adjusted net income(a)
566 597 (5)(7)2 
% Change
Nine Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchange
Operational(a)
Revenue$6,040 $5,809 4 (3)7 
Net income attributable to Zoetis1,653 1,623 2 (9)11 
Adjusted net income(a)
1,758 1,766 — (6)6 
(a)    Operational growth and adjusted net income are non-GAAP financial measures. See the Non-GAAP financial measures section of this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) for more information.
Our operating environment
For a description of our operating environment, including factors which could materially affect our business, financial condition, or future results, see "Our Operating Environment" in the MD&A of our 2021 Annual Report on Form 10-K. Set forth below are updates to certain of the factors disclosed in our 2021 Form 10-K.
Global Supply Chain Disruption
We continue to experience supply chain challenges for certain products. Our global manufacturing network team remains committed to addressing specific issues with ongoing supply chain optimizations, controlled launches for new products in additional markets and customer coordination. However, some of these challenges are expected to continue throughout the remainder of 2022 and into 2023.
Russia’s Invasion of Ukraine
Russia’s invasion of Ukraine and the global response, including sanctions imposed by the United States and other countries, have increased global economic and political uncertainty. As we announced on March 16, 2022, our first concern remains the safety of our colleagues and their families in Ukraine. We have remained guided by our purpose to nurture the world and humankind by advancing care for animals. Our operations in Russia are focused on maintaining a supply of medicines and vaccines in compliance with any sanctions that are put in place. We do not directly source input materials or components from Russia and do not have any manufacturing plants in Russia or Ukraine. While we do expect sales in the affected regions to be impacted by this situation, Russia and Ukraine are not among our top 12 international markets and although we are unable to predict the

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impact of this crisis on the global economy or on our results of operations, we do not expect it to have a material adverse effect to our results or financial condition.
COVID-19 Update
We continue to closely monitor the impact of the coronavirus (COVID-19) pandemic and the resulting global recession on all aspects of our business across geographies, including how it has and may continue to impact our customers, workforce, suppliers and vendors. We cannot predict the impact that the COVID-19 pandemic will have on our customers, vendors and suppliers; however, any material effect on these parties could adversely impact us. The situation surrounding COVID-19 remains fluid, and we will continue to actively monitor the situation and may take actions that alter our business operations that we determine are in the best interests of our workforce, customers, vendors, suppliers, and other stakeholders, or as required by federal, state, or local authorities. For further information regarding the impact of COVID-19 on the Company, see Item 1A, Risk Factors in this Quarterly Report on Form 10-Q.
Quarterly Variability of Financial Results
Our quarterly financial results are subject to variability related to a number of factors including, but not limited to: the continuing decline in global macroeconomic conditions, global supply chain disruption, Russia’s invasion of Ukraine, the impact of the COVID-19 pandemic, variability in distributor inventory stocking levels as a result of expected demand and promotional activities, weather patterns, herd management decisions, regulatory actions, inflation, competitive dynamics, disease outbreaks, product and geographic mix, timing of price increases and timing of investment decisions.
Disease Outbreaks
Sales of our livestock products have in the past been, and may in the future be, adversely affected by the outbreak of disease carried by animals. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.
Foreign Exchange Rates
Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 100 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the nine months ended September 30, 2022, approximately 43% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, euro and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. Exchange rate fluctuations may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our goods and services between markets impacted by significant exchange rate variances. For the nine months ended September 30, 2022, approximately 57% of our total revenue was in U.S. dollars. Our year-over-year total revenue growth was unfavorably impacted by approximately 3% from changes in foreign currency values relative to the U.S. dollar.
We have accounted for operations in Venezuela and Argentina as highly inflationary since the date the prior three-year cumulative inflation rate surpassed 100%. Effective in the second quarter of 2022, we have accounted for operations in Turkey as highly inflationary, as the prior three-year cumulative inflation rate exceeded 100%. Revenue, earnings and balances of underlying net assets of our operations in these three markets are not material to our results of operations or financial position.
Non-GAAP financial measures
We report information in accordance with U.S. generally accepted accounting principles (GAAP). Management also measures performance using non-GAAP financial measures that may exclude certain amounts from the most directly comparable GAAP financial measure. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors and may not be comparable to the calculation of similar measures of other companies. We present certain identified non-GAAP measures solely to provide investors with useful information to more fully understand how management assesses performance.
Operational Growth
We believe that it is important to not only understand overall revenue and earnings growth, but also “operational growth.” Operational growth is a non-GAAP financial measure defined as revenue or earnings growth excluding the impact of foreign exchange. This measure provides information on the change in revenue and earnings as if foreign currency exchange rates had not changed between the current and prior periods to facilitate a period-to-period comparison. We believe this non-GAAP measure provides a useful comparison to previous periods for the company and investors, but should not be viewed as a substitute for U.S. GAAP reported growth.
Adjusted Net Income and Adjusted Earnings Per Share
Adjusted net income and the corresponding adjusted earnings per share (EPS) are non-GAAP financial measures of performance used by management. We believe these financial measures are useful supplemental information to investors when considered together with our U.S. GAAP financial measures. We report adjusted net income to portray the results of our major operations, and the discovery, development, manufacture and commercialization of our products, prior to considering certain income statement elements. We define adjusted net income and adjusted EPS as net income attributable to Zoetis and EPS before the impact of purchase accounting adjustments, acquisition-related costs and certain significant items.
We recognize that, as an internal measure of performance, the adjusted net income and adjusted EPS measures have limitations, and we do not restrict our performance management process solely to these metrics. A limitation of the adjusted net income and adjusted EPS measures is that they

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provide a view of our operations without including all events during a period, such as the effects of an acquisition or amortization of purchased intangibles, and do not provide a comparable view of our performance to other companies. The adjusted net income and adjusted EPS measures are not, and should not be viewed as, a substitute for U.S. GAAP reported net income and reported EPS. See the Adjusted Net Income section below for more information.
Analysis of the condensed consolidated statements of income
The following discussion and analysis of our statements of income should be read along with our condensed consolidated financial statements and the notes thereto included elsewhere in Part I— Item 1 of this Quarterly Report on Form 10-Q.
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Revenue$2,002 $1,990 1 $6,040 $5,809 4 
Costs and expenses:
Cost of sales607 586 4 1,801 1,703 6 
% of revenue30.3 %29.4 %29.8 %29.3 %
Selling, general and administrative expenses501 504 (1)1,495 1,408 6 
% of revenue25 %25 %25 %24 %
Research and development expenses134 132 2 391 370 6 
% of revenue7 %7 %6 %6 %
Amortization of intangible assets37 40 (8)115 121 (5)
Restructuring charges and certain acquisition-related costs6 9 (33)9 39 (77)
Interest expense, net of capitalized interest53 56 (5)159 170 (6)
Other (income)/deductions—net(3)4 *6 16 (63)
Income before provision for taxes on income667 659 1 2,064 1,982 4 
% of revenue33 %33 %34 %34 %
Provision for taxes on income139 107 30 413 361 14 
Effective tax rate20.8 %16.2 %20.0 %18.2 %
Net income before allocation to noncontrolling interests528 552 (4)1,651 1,621 2 
Less: Net loss attributable to noncontrolling interests(1)— *(2)(2)— 
Net income attributable to Zoetis Inc.$529 $552 (4)$1,653 $1,623 2 
% of revenue26 %28 %27 %28 %
*Calculation not meaningful
Revenue
Three months ended September 30, 2022 vs. three months ended September 30, 2021
Total revenue increased by $12 million, or 1%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, an increase of $100 million, or 5%, on an operational basis. Operational revenue growth was comprised primarily of the following:
•volume growth from new products of approximately 4%;
•price growth of approximately 1%; and
•volume growth from key dermatology products of approximately 1%,
partially offset by:
•volume decrease from other in-line products of approximately 1%.
Foreign exchange decreased reported revenue growth by approximately 4%.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Total revenue increased by $231 million, or 4%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, an increase of $429 million, or 7%, on an operational basis. Operational revenue growth was comprised primarily of the following:
•volume growth from new products of approximately 5%;
•price growth of approximately 2%; and
•volume growth from key dermatology products of approximately 2%,
partially offset by:
•volume decrease from other in-line products of approximately 2%.
Foreign exchange decreased reported revenue growth by approximately 3%.

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Costs and Expenses
Cost of sales
Three Months EndedNine Months Ended
September 30,% September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Cost of sales$607 $586 4 $1,801 $1,703 6 
% of revenue30.3 %29.4 %29.8 %29.3 %
Three months ended September 30, 2022 vs. three months ended September 30, 2021
Cost of sales as a percentage of revenue was 30.3% in the three months ended September 30, 2022, compared with 29.4% in the three months ended September 30, 2021. The increase was primarily as a result of:
•unfavorable manufacturing and other costs;
•unfavorable foreign exchange;
•inventory obsolescence, scrap and other charges; and
•higher freight and import costs,
partially offset by:
•favorable product mix; and
•price increases.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Cost of sales as a percentage of revenue was 29.8% in the nine months ended September 30, 2022, compared with 29.3% in the nine months ended September 30, 2021. The increase was primarily as a result of:
•unfavorable manufacturing and other costs;
•higher freight and import costs;
•unfavorable foreign exchange; and
•inventory obsolescence, scrap and other charges,
partially offset by:
•favorable product mix; and
•price increases.
Selling, general and administrative expenses
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Selling, general and administrative expenses$501 $504 (1)$1,495 $1,408 6 
% of revenue25 %25 %25 %24 %
Three months ended September 30, 2022 vs. three months ended September 30, 2021
SG&A expenses decreased by $3 million, or 1%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, primarily as a result of:
•favorable foreign exchange; and
•charitable contributions in the prior year,
partially offset by:
•higher travel and entertainment expenses;
•higher freight and logistics costs; and
•investments in information technology.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
SG&A expenses increased by $87 million, or 6%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, primarily as a result of:
•higher travel and entertainment expenses;
•an increase in investments to support revenue growth;
•higher freight and logistics costs;
•investments in information technology;
•an increase in certain compensation-related costs primarily due to additional headcount; and
•higher bad debt reserves for accounts receivables,

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Table of Contents
partially offset by:
•favorable foreign exchange; and
•charitable contributions in the prior year.
Research and development expenses
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Research and development expenses$134 $132 2 $391 $370 6 
% of revenue7 %7 %6 %6 %
Three months ended September 30, 2022 vs. three months ended September 30, 2021
R&D expenses increased by $2 million, or 2%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, primarily as a result of:
•an increase in certain compensation-related costs to support innovation;
•higher other operating costs; and
•higher travel and entertainment expenses,
partially offset by:
•lower spending on project investments; and
•favorable foreign exchange.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
R&D expenses increased by $21 million, or 6%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, primarily as a result of:
•an increase in certain compensation-related costs to support innovation;
•higher other operating costs; and
•increased spending driven by project investments,
partially offset by:
•favorable foreign exchange.
Amortization of intangible assets
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Amortization of intangible assets$37 $40 (8)$115 $121 (5)
Amortization of intangible assets decreased in the three and nine months ended September 30, 2022 versus the comparable prior year periods primarily due to assets that became fully amortized in the current year.
Restructuring charges and certain acquisition-related costs
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Restructuring charges and certain acquisition-related costs$6 $9 (33)$9 $39 (77)
Three months ended September 30, 2022 vs. three months ended September 30, 2021
Restructuring charges and certain acquisition-related costs were $6 million and $9 million in the three months ended September 30, 2022 and 2021, respectively. Restructuring charges and certain acquisition-related costs in the three months ended September 30, 2022 primarily consisted of employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets and asset impairment charges related to the consolidation of manufacturing sites in China. Restructuring charges and certain acquisition-related costs in the three months ended September 30, 2021 primarily consisted of employee termination costs associated with the realignment of our international operations.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Restructuring charges and certain acquisition-related costs were $9 million and $39 million in the nine months ended September 30, 2022 and 2021, respectively. Restructuring charges and certain acquisition-related costs in the nine months ended September 30, 2022 primarily consisted of employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, integration costs related to recent acquisitions and asset impairment charges related to the consolidation of manufacturing sites in China. Restructuring charges and certain acquisition-related costs in the nine months ended September 30, 2021 primarily consisted of employee termination costs associated with our

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international operations and other costs associated with cost-reduction and productivity initiatives, asset impairment charges related to the consolidation of manufacturing sites in China and integration costs related to recent acquisitions.
Interest expense, net of capitalized interest
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Interest expense, net of capitalized interest$53 $56 (5)$159 $170 (6)
Interest expense, net of capitalized interest, decreased in the three and nine months ended September 30, 2022 versus the comparable prior year periods. The decreases were primarily as a result of the redemption, upon maturity, of the $300 million aggregate principal amount of our 2018 floating rate senior notes and the $300 million aggregate principal amount of our 2018 senior notes in August 2021, as well as higher gains on foreign exchange derivative instruments as compared to the prior year periods.
Other (income)/deductions—net
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Other (income)/deductions—net$(3)$4 *$6 $16 (63)
*Calculation not meaningful
The change in Other (income)/deductions—net in the three and nine months ended September 30, 2022 versus the comparable prior year periods was primarily as a result of higher interest income, partially offset by higher foreign currency losses in the current year periods.
Provision for taxes on income
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
Provision for taxes on income
$139 $107 30 $413 $361 14 
Effective tax rate
20.8 %16.2 %20.0 %18.2 %
Three months ended September 30, 2022 vs. three months ended September 30, 2021
Our effective tax rate was 20.8% for the three months ended September 30, 2022, compared with 16.2% for the three months ended September 30, 2021. The higher effective tax rate for the three months ended September 30, 2022 was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. In addition, the three months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Our effective tax rate was 20.0% for the nine months ended September 30, 2022, compared with 18.2% for the nine months ended September 30, 2021. The higher effective tax rate for the nine months ended September 30, 2022 was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings from operations and repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible items and non-taxable items. In addition, the nine months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
On August 16, 2022, the U.S. Inflation Reduction Act of 2022 (the “IRA”) was enacted which, among other changes, implements a 15% alternative minimum tax on financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The alternative minimum tax and excise tax are effective in taxable years beginning after December 31, 2022 and the incentives to promote clean energy have various different effective dates. We do not currently expect the IRA to have a material impact on our financial results, including our annual estimated effective tax rate, when it becomes effective. We will continue to evaluate its impact as further information becomes available and as additional guidance is provided by the U.S. Department of Treasury and the Internal Revenue Service.

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Operating Segment Results
On a global basis, the mix of revenue between companion animal and livestock products was as follows:
% Change
Three Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchangeOperational
U.S.
Companion animal$819 $775 6 — 6 
Livestock271 290 (7)— (7)
1,090 1,065 2 — 2 
International
Companion animal452 427 6 (11)17 
Livestock437 477 (8)(8)— 
889 904 (2)(10)8 
Total
Companion animal1,271 1,202 6 (4)10 
Livestock708 767 (8)(5)(3)
Contract manufacturing & human health 23 21 10 (5)15 
$2,002 $1,990 1 (4)5 
% Change
Nine Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchangeOperational
U.S.
Companion animal$2,488 $2,227 12 — 12 
Livestock713 775 (8)— (8)
3,201 3,002 7 — 7 
International
Companion animal1,412 1,280 10 (8)18 
Livestock1,368 1,470 (7)(6)(1)
2,780 2,750 1 (7)8 
Total
Companion animal3,900 3,507 11 (3)14 
Livestock2,081 2,245 (7)(4)(3)
Contract manufacturing & human health 59 57 4 (1)5 
$6,040 $5,809 4 (3)7 

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Earnings by segment and the operational and foreign exchange changes versus the comparable prior year period were as follows:
% Change
Three Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchangeOperational
U.S.
Revenue$1,090 $1,065 2 — 2 
Cost of Sales204 199 3 — 3 
Gross Profit886 866 2 — 2 
Gross Margin81.3 %81.3 %
Operating Expenses206 183 13 — 13 
Other (income)/deductions-net1 — ***
U.S. Earnings679 683 (1)— (1)
International
Revenue889 904 (2)(10)8 
Cost of Sales256 273 (6)(7)1 
Gross Profit633 631 — (11)11 
Gross Margin71.2 %69.8 %
Operating Expenses150 152 (1)(10)9 
Other (income)/deductions-net(3)(4)(25)(5)(20)
International Earnings486 483 1 (11)12 
Total operating segments1,165 1,166 — (5)5 
Other business activities(106)(106)— 
Reconciling Items:
Corporate(245)(252)(3)
Purchase accounting adjustments(40)(45)(11)
Acquisition-related costs(1)(1)— 
Certain significant items(6)(12)(50)
Other unallocated(100)(91)10 
Total Earnings$667 $659 1 

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% Change
Nine Months EndedRelated to
September 30,Foreign
(MILLIONS OF DOLLARS)20222021TotalExchangeOperational
U.S.
Revenue$3,201 $3,002 7 — 7 
Cost of Sales587 575 2 — 2 
Gross Profit2,614 2,427 8 — 8 
Gross Margin81.7 %80.8 %
Operating Expenses578 484 19 — 19 
Other (income)/deductions-net(6)2 ***
U.S. Earnings2,042 1,941 5 — 5 
International
Revenue2,780 2,750 1 (7)8 
Cost of Sales809 833 (3)(5)2 
Gross Profit1,971 1,917 3 (8)11 
Gross Margin70.9 %69.7 %
Operating Expenses456 429 6 (7)13 
Other (income)/deductions-net(5)(4)25 (12)37 
International Earnings1,520 1,492 2 (9)11 
Total operating segments3,562 3,433 4 (4)8 
Other business activities(315)(301)5 
Reconciling Items:
Corporate(771)(744)4 
Purchase accounting adjustments(120)(133)(10)
Acquisition-related costs(4)(8)(50)
Certain significant items(10)(44)(77)
Other unallocated(278)(221)26 
Total Earnings$2,064 $1,982 4 
* Calculation not meaningful.
Three months ended September 30, 2022 vs. three months ended September 30, 2021
U.S. operating segment
U.S. segment revenue increased by $25 million, or 2%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, reflecting an increase of $44 million in companion animal products, partially offset by a decrease of $19 million in livestock products.
•Companion animal revenue growth was driven by increased sales of parasiticides, primarily Simparica Trio®. The key dermatology portfolio also contributed to growth across both the Apoquel® and Cytopoint® brands, as well as small animal vaccines, partially offset by declines in small animal diagnostics.
•Livestock revenue declined due to cattle, poultry and swine. Sales of cattle products declined as a result of generic competition, primarily for Draxxin®. Sales of products in our poultry portfolio declined due to the expanded use of lower cost alternatives and generic competition for Zoamix®, our alternative to antibiotics in medicated feed additives. Sales of swine products decreased primarily as a result of increased competition for vaccines.
U.S. segment earnings decreased by $4 million, or 1%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, primarily due to higher operating expenses and cost of sales, partially offset by revenue growth.
International operating segment
International segment revenue decreased by $15 million, or 2%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021. Operational revenue increased by $73 million, or 8%, driven by growth of approximately $74 million in companion animal products, partially offset by a decrease of approximately $1 million in livestock products. Growth in the quarter across species was impacted by lower sales due to the war in Ukraine.
•Companion animal operational revenue growth resulted from increased sales of our recently launched monoclonal antibody (mAb) products for osteoarthritis pain, Librela® and Solensia®, as well as the key dermatology portfolio across both the Apoquel and Cytopoint brands and small animal vaccines. Simparica Trio also contributed to growth in the quarter.
•Livestock revenue declined due to lower sales of swine and cattle products, partially offset by increased sales in fish, sheep and poultry products. Sales of swine products decreased in the quarter due to supply constraints across international markets, as well as lower sales across

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Europe due to reduced exports to China and higher input costs for producers. Sales of cattle products declined primarily due to supply constraints and market conditions in Brazil, partially offset by favorable market conditions and price in key and emerging markets, including Australia, Argentina, China and Canada. Growth in our fish portfolio was primarily the result of increased sales of vaccines across key salmon markets, including Norway and Chile. Sales of sheep products grew as a result of favorable market conditions and new product launches in Australia. Sales of poultry products grew due to strong results in Latin America.
•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by approximately $88 million, or 10%, primarily driven by the euro, British pound, Japanese yen, Turkish lira and Australian dollar.
International segment earnings increased by $3 million, or 1%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021. Operational earnings growth was $57 million, or 12%, primarily due to revenue and gross margin growth, partially offset by higher operating expenses.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
U.S. operating segment
U.S. segment revenue increased by $199 million, or 7%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, reflecting an increase of $261 million in companion animal products, partially offset by a decrease of $62 million in livestock products.
•Companion animal revenue growth was driven primarily by increased sales of parasiticides, primarily Simparica Trio. In-line product growth benefited from increased sales of our key dermatology portfolio and vaccines, partially offset by declines in small animal diagnostics.
•Livestock revenue declined due to cattle and poultry, partially offset by growth in swine. Sales of cattle products declined as a result of generic competition for Draxxin and unfavorable conditions in beef and dairy markets, including increased input costs and dry weather conditions. Sales of products in our poultry portfolio declined due to the expanded use of lower cost alternatives resulting from reduced disease pressure from smaller flock sizes and generic competition for Zoamix, the company's alternative to antibiotics in medicated feed additives. Sales of swine products grew slightly as a result of favorable market conditions for producers and increased disease prevalence.
U.S. segment earnings increased by $101 million, or 5%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, primarily due to revenue and gross margin growth, partially offset by higher operating expenses.
International operating segment
International segment revenue increased by $30 million, or 1%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021. Operational revenue increased by $227 million, or 8%, driven by growth of approximately $237 million in companion animal products, partially offset by a decrease of approximately $10 million in livestock products. Growth across species was impacted by lower sales due to the war in Ukraine.
•Companion animal operational revenue growth was driven primarily by increased sales of our key dermatology portfolio, the recent launches of our mAb products, Librela and Solensia, and growth in the Simparica franchise. Growth across the broader in-line portfolio benefited from increased pet ownership and standards of care.
•Livestock operational revenue declined due to decreased sales of swine products, partially offset by increased sales of fish, cattle and sheep products. Sales of swine products decreased due to lower pork prices and COVID-related lockdowns in China, which temporarily impacted our supply chain in the market, as well as a difficult comparative period versus the prior year. Swine was also impacted by supply constraints across other international markets, as well as lower sales across Europe due to reduced exports to China and higher input costs for producers. Growth in our fish portfolio was primarily the result of increased sales of vaccines across key salmon markets, including Chile and Norway. Sales of cattle products grew due to favorable market conditions and price in key and emerging markets, including Australia, Turkey, Argentina and China, partially offset by supply constraints and market conditions in Brazil. Sales of sheep products grew as a result of favorable market conditions and new product launches in Australia.
•Additionally, International segment revenue was unfavorably impacted by foreign exchange which decreased revenue by approximately $197 million, or 7%, primarily driven by the euro, Turkish lira, Japanese yen, Australian dollar and British pound.
International segment earnings increased by $28 million, or 2%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021. Operational earnings growth was $160 million, or 11%, primarily due to revenue and gross margin growth, partially offset by higher operating expenses.
Other business activities
Other business activities includes our Client Supply Services contract manufacturing results, our human health business and expenses associated with our dedicated veterinary medicine research and development organization, research alliances, U.S. regulatory affairs and other operations focused on the development of our products. Other R&D-related costs associated with non-U.S. market and regulatory activities are generally included in the International segment.
Three months ended September 30, 2022 vs. three months ended September 30, 2021
In the three months ended September 30, 2022, Other business activities was flat compared with the three months ended September 30, 2021, reflecting an increase in R&D costs due to an increase in certain compensation-related costs to support innovation and facility costs, offset by favorable foreign exchange.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Other business activities net loss increased by $14 million in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, reflecting an increase in R&D costs due to an increase in certain compensation-related costs to support innovation, increase in facility costs and an increase in project investments, partially offset by favorable foreign exchange and higher earnings in our human health business.

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Reconciling items
Reconciling items include certain costs that are not allocated to our operating segments results, such as costs associated with the following:
•Corporate, which includes certain costs associated with information technology, facilities, legal, finance, human resources, business development and communications, among others. These costs also include certain compensation costs, certain procurement costs, and other miscellaneous operating expenses that are not charged to our operating segments, as well as interest income and expense;
•Certain transactions and events such as (i) Purchase accounting adjustments, which includes expenses associated with the amortization of fair value adjustments to inventory, intangible assets, and property, plant and equipment; (ii) Acquisition-related activities, which includes costs for acquisition and integration; and (iii) Certain significant items, which includes non-acquisition-related restructuring charges, certain asset impairment charges, certain legal and commercial settlements, and costs associated with cost reduction/productivity initiatives; and
•Other unallocated, which includes (i) certain overhead expenses associated with our global manufacturing operations not charged to our operating segments; (ii) certain costs associated with finance that specifically support our global manufacturing operations; (iii) certain supply chain and global logistics costs; and (iv) certain procurement costs.
Three months ended September 30, 2022 vs. three months ended September 30, 2021
Corporate expenses decreased by $7 million, or 3%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, primarily due to lower compensation-related costs and favorable interest expense and higher interest income, as well as charitable contributions in the prior year, partially offset by unfavorable foreign exchange and investments in information technology.
Other unallocated expenses increased by $9 million, or 10%, in the three months ended September 30, 2022, compared with the three months ended September 30, 2021, primarily due to higher manufacturing costs and freight charges, partially offset by favorable foreign exchange.
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Corporate expenses increased by $27 million, or 4%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, primarily due to unfavorable foreign exchange and investments in information technology, partially offset by lower compensation-related costs and interest expense, as well as higher interest income and charitable contributions in the prior year.
Other unallocated expenses increased by $57 million, or 26%, in the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, primarily due to higher manufacturing costs and freight charges, partially offset by favorable foreign exchange.
See Notes to Condensed Consolidated Financial Statements—Note 16. Segment Information for further information.
Adjusted net income
General description of adjusted net income (a non-GAAP financial measure)
Adjusted net income is an alternative view of performance used by management, and we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. The adjusted net income measure is an important internal measurement for us. Additionally, we measure our overall performance on this basis in conjunction with other performance metrics. The following are examples of how the adjusted net income measure is utilized:
•senior management receives a monthly analysis of our operating results that is prepared on an adjusted net income basis;
•our annual budgets are prepared on an adjusted net income basis; and
•other goal setting and performance measurements.
Purchase accounting adjustments
Adjusted net income is calculated prior to considering certain significant purchase accounting impacts that result from business combinations and net asset acquisitions. These impacts, primarily associated with certain acquisitions, include amortization related to the increase in fair value of the acquired finite-lived intangible assets and depreciation related to the increase/decrease to fair value of the acquired fixed assets. Therefore, the adjusted net income measure includes the revenue earned upon the sale of the acquired products without considering the aforementioned significant charges.
While certain purchase accounting adjustments can occur through 20 or more years, this presentation provides an alternative view of our performance that is used by management to internally assess business performance. We believe the elimination of amortization attributable to acquired intangible assets provides management and investors an alternative view of our business results by providing a degree of parity to internally developed intangible assets for which R&D costs previously have been expensed.
A completely accurate comparison of internally developed intangible assets and acquired intangible assets cannot be achieved through adjusted net income. These components of adjusted net income are derived solely from the impact of the items listed above. We have not factored in the impact of any other differences in experience that might have occurred if we had discovered and developed those intangible assets on our own, and this approach does not intend to be representative of the results that would have occurred in those circumstances. For example, our R&D costs in total, and in the periods presented, may have been different; our speed to commercialization and resulting revenue, if any, may have been different; or our costs to manufacture may have been different. In addition, our marketing efforts may have been received differently by our customers. As such, in total, there can be no assurance that our adjusted net income amounts would have been the same as presented had we discovered and developed the acquired intangible assets.
Acquisition-related costs
Adjusted net income is calculated prior to considering transaction and integration costs associated with significant business combinations or net asset acquisitions because these costs are unique to each transaction and represent costs that were incurred to acquire and integrate certain businesses as a result of the acquisition decision. We have made no adjustments for the resulting synergies.

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We believe that viewing income prior to considering these charges provides investors with a useful additional perspective because the significant costs incurred in a business combination result primarily from the need to eliminate duplicate assets, activities or employees––a natural result of acquiring a fully integrated set of activities. For this reason, we believe that the costs incurred to convert disparate systems, to close duplicative facilities or to eliminate duplicate positions (for example, in the context of a business combination) can be viewed differently from those costs incurred in the ordinary course of business.
The integration costs associated with a business combination may occur over several years, with the more significant impacts generally ending within three years of the transaction. Because of the need for certain external approvals for some actions, the span of time needed to achieve certain restructuring and integration activities can be lengthy. For example, due to the regulated nature of the animal health medicines, vaccines and diagnostics business, the closure of excess facilities can take several years, as all manufacturing changes are subject to extensive validation and testing and must be approved by the U.S. Food and Drug Administration and/or other regulatory authorities.
Certain significant items
Adjusted net income is calculated excluding certain significant items. Certain significant items represent substantive, unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis; items that would be nonrecurring; or items that relate to products that we no longer sell. While not all-inclusive, examples of items that could be included as certain significant items would be costs related to a major non-acquisition-related restructuring charge and associated implementation costs for a program that is specific in nature with a defined term, such as those related to our non-acquisition-related cost-reduction and productivity initiatives; amounts related to disposals of products or facilities that do not qualify as discontinued operations as defined by U.S. GAAP; certain asset impairments; adjustments related to the resolution of certain tax positions; significant currency devaluation; the impact of adopting certain significant, event-driven tax legislation; costs related to our CEO transition in fiscal 2020; or charges related to legal matters. See Notes to Condensed Consolidated Financial Statements— Note 15. Commitments and Contingencies. Our normal, ongoing defense costs or settlements of and accruals on legal matters made in the normal course of our business would not be considered certain significant items.
Reconciliation
A reconciliation of net income, as reported under U.S. GAAP, to adjusted net income follows:
Three Months EndedNine Months Ended
September 30,%September 30,%
(MILLIONS OF DOLLARS)20222021Change20222021Change
GAAP reported net income attributable to Zoetis$529 $552 (4)$1,653 $1,623 2 
Purchase accounting adjustments—net of tax31 35 (11)92 103 (11)
Acquisition-related costs—net of tax1 1 — 3 7 (57)
Certain significant items—net of tax5 9 (44)10 33 (70)
Non-GAAP adjusted net income(a)
$566 $597 (5)$1,758 $1,766 — 
*Calculation not meaningful.
(a)    The effective tax rate on adjusted pretax income was 20.9% and 16.7% for the three months ended September 30, 2022 and 2021, respectively. The higher effective tax rate for the three months ended September 30, 2022, compared with the three months ended September 30, 2021, was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings, repatriation costs, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items. In addition, the three months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
The effective tax rate on adjusted pretax income was 20.1% and 18.6% for the nine months ended September 30, 2022 and 2021, respectively. The higher effective tax rate for the nine months ended September 30, 2022, compared with the nine months ended September 30, 2021, was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings, repatriation costs, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items. In addition, the nine months ended September 30, 2021 included a tax benefit related to foreign-derived intangible income.
A reconciliation of reported diluted earnings per share (EPS), as reported under U.S. GAAP, to non-GAAP adjusted diluted EPS follows:
Three Months EndedNine Months Ended
September 30,%September 30,%
20222021Change20222021Change
Earnings per share—diluted(a):
GAAP reported EPS attributable to Zoetis —diluted$1.13 $1.16 (3)$3.51 $3.40 3 
Purchase accounting adjustments—net of tax0.07 0.07 — 0.20 0.22 (9)
Acquisition-related costs—net of tax— — *— 0.01 *
Certain significant items—net of tax0.01 0.02 (50)0.02 0.07 (71)
Non-GAAP adjusted EPS—diluted$1.21 $1.25 (3)$3.73 $3.70 1 
* Calculation not meaningful.
(a)    Diluted earnings per share was computed using the weighted-average common shares outstanding during the period plus the common stock equivalents related to stock options, restricted stock units, performance-vesting restricted stock units and deferred stock units.

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Adjusted net income includes the following charges for each of the periods presented:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Interest expense, net of capitalized interest$53 $56 $159 $170 
Interest income13 1 20 4 
Income taxes149 120 442 403 
Depreciation66 56 195 171 
Amortization9 9 31 27 
Adjusted net income, as shown above, excludes the following items:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Purchase accounting adjustments:
Amortization and depreciation$40 $45 $120 $133 
Total purchase accounting adjustments—pre-tax40 45 120 133 
Income taxes(a)
9 10 28 30 
Total purchase accounting adjustments—net of tax31 35 92 103 
Acquisition-related costs:
Integration costs1 1 4 6 
Restructuring costs— — — 2 
Total acquisition-related costs—pre-tax1 1 4 8 
Income taxes(a)
— — 1 1 
Total acquisition-related costs—net of tax1 1 3 7 
Certain significant items:
Other restructuring charges and cost-reduction/productivity initiatives(b)
4 7 7 22 
Certain asset impairment charges(c)
2 5 6 19 
Net loss on sale of assets— — — 3 
Other— — (3)— 
Total certain significant items—pre-tax6 12 10 44 
Income taxes(a)
1 3 — 11 
Total certain significant items—net of tax5 9 10 33 
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax$37 $45 $105 $143 
(a)    Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction's applicable tax rate.
    Income taxes in Purchase accounting adjustments also includes tax benefits related to a deferred adjustment as a result of a change in tax basis for the nine months ended September 30, 2022 and a remeasurement of deferred taxes as a result of changes in statutory tax rates for the three and nine months ended September 30, 2022 and 2021.
Income taxes in Certain significant items also includes tax expense related to changes in valuation allowances for the nine months ended September 30, 2022.
(b)    For the three and nine months ended September 30, 2022, primarily represents employee termination and exit costs associated with cost-reduction and productivity initiatives in certain international markets, as well as product transfer costs.
For the three months ended September 30, 2021, primarily represents employee termination costs associated with the realignment of our international operations. For the nine months ended September 30, 2021, primarily represents employee termination costs associated with our international operations and other costs associated with cost-reduction and productivity initiatives.
(c)    For the three and nine months ended September 30, 2022, represents inventory and certain asset impairment charges primarily related to the consolidation of manufacturing sites in China.
For the three months ended September 30, 2021, primarily represents asset impairment charges related to a dairy product termination. For the nine months ended September 30, 2021, primarily represents asset impairment charges related to the consolidation of manufacturing sites in China and a dairy product termination.

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The classification of the above items excluded from adjusted net income are as follows:
Three Months EndedNine Months Ended
September 30,September 30,
(MILLIONS OF DOLLARS)2022202120222021
Cost of sales:
Purchase accounting adjustments$1 $2 $3 $5 
Inventory write-offs— 1 4 2 
Other1 — 4 5 
   Total Cost of sales2 3 11 12 
Selling, general & administrative expenses:
Purchase accounting adjustments8 8 22 23 
   Total Selling, general & administrative expenses8 8 22 23 
Research & development expenses:
Purchase accounting adjustments— — — 1 
   Total Research & development expenses— — — 1 
Amortization of intangible assets:
Purchase accounting adjustments31 35 95 104 
   Total Amortization of intangible assets31 35 95 104 
Restructuring charges and certain acquisition-related costs:
Integration costs1 1 4 6 
Employee termination costs2 7 2 17 
Asset impairments2 — 2 13 
Exit costs1 1 1 3 
   Total Restructuring charges and certain acquisition-related costs6 9 9 39 
Other (income)/deductions—net:
Net loss on sale of assets— — — 3 
Asset impairments— 3 — 3 
Other— — (3)— 
   Total Other (income)/deductions—net— 3 (3)6 
Provision for taxes on income10 13 29 42 
Total purchase accounting adjustments, acquisition-related costs, and certain significant items—net of tax$37 $45 $105 $143 

Analysis of the condensed consolidated statements of comprehensive income
Changes in other comprehensive income for the periods presented are primarily related to foreign currency translation adjustments and unrealized gains/(losses) on derivative instruments. The foreign currency translation adjustment changes result from the strengthening or weakening of the U.S. dollar as compared to the currencies in the countries in which we do business. Unrealized gains/(losses) on the changes in the fair value of derivative instruments are recorded within Accumulated other comprehensive income/(loss) and reclassified into earnings depending on the nature and purpose of the financial instrument, as described in Note 9. Financial Instruments of the Notes to Condensed Consolidated Financial Statements.
Analysis of the condensed consolidated balance sheets
September 30, 2022 vs. December 31, 2021
For a discussion about the changes in Cash and cash equivalents, Short-term borrowings, and Long-term debt, net of discount and issuance costs, see “Analysis of financial condition, liquidity and capital resources” below.
Inventories increased primarily as a result of the build-up of certain products and materials for increased demand, new product launches and to mitigate potential supply constraints, as well as the timing of material purchases and product shipments.
Other current assets increased primarily due to the mark-to-market adjustment of derivative instruments, collateral posted related to derivative contracts and the reclassification of derivative instruments maturing within one year from Other noncurrent assets.
Property, plant and equipment increased primarily as a result of capital spending, partially offset by depreciation expense.
The increase in Operating lease right of use assets and Operating lease liabilities reflect assets and liabilities established through new and amended lease obligations, partially offset by lease amortization and payments.

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Identifiable intangible assets, less accumulated amortization decreased primarily as a result of amortization expense and the impact of foreign exchange, partially offset by intangible asset additions from acquisitions.
Other noncurrent assets increased primarily due to the mark-to-market adjustment of derivative instruments and the reclassification of collateral received related to derivative contracts to Other current liabilities, partially offset by the reclassification of derivative instruments maturing within one year to Other current assets.
Accounts payable decreased as a result of the timing of vendor payments.
Accrued compensation and related items decreased due to the payments of 2021 annual incentive bonuses and savings plan contributions to eligible employees, as well as payments for sales incentive bonuses, partially offset by the accrual of 2022 annual incentive bonuses and savings plan contributions to eligible employees, sales incentive bonus accrual and the timing of the payment of payroll taxes.
Other current liabilities increased primarily due to collateral received related to derivative contracts during the period and a reclassification of collateral received from Other noncurrent assets.
The net changes in Noncurrent deferred tax assets, Noncurrent deferred tax liabilities, Income taxes payable and Other taxes payable primarily reflect adjustments to the accrual for the income tax provision, the timing of income tax payments, the tax impact of various acquisitions and the impact of the remeasurement of deferred taxes as a result of changes in tax rates.
For an analysis of the changes in Total Equity, see the Condensed Consolidated Statements of Equity and Notes to Condensed Consolidated Financial Statements— Note 13. Stockholders' Equity.
Analysis of the condensed consolidated statements of cash flows
Nine Months Ended
September 30,%
(MILLIONS OF DOLLARS)20222021Change
Net cash provided by (used in):
Operating activities
$1,171 $1,534 (24)
Investing activities
(445)(316)41 
Financing activities
(1,684)(1,548)9 
Effect of exchange-rate changes on cash and cash equivalents(20)— *
Net decrease in cash and cash equivalents$(978)$(330)*
*Calculation not meaningful.
Operating activities
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Net cash provided by operating activities was $1,171 million for the nine months ended September 30, 2022, and $1,534 million for the nine months ended September 30, 2021. The decrease in operating cash flows was primarily attributable to the timing of receipts and payments in the ordinary course of business and the inventory build-up of certain products for increased demand and to mitigate potential supply constraints, partially offset by higher net income as adjusted by non-cash items.
Investing activities
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Our net cash used in investing activities was $445 million for the nine months ended September 30, 2022, compared with net cash used in investing activities of $316 million for the nine months ended September 30, 2021. The net cash used in investing activities for 2022 was primarily due to capital expenditures and acquisitions, partially offset by net proceeds from interest rate swaps. The net cash used in investing activities for 2021 was primarily due to capital expenditures and acquisitions.
Financing activities
Nine months ended September 30, 2022 vs. nine months ended September 30, 2021
Our net cash used in financing activities was $1,684 million for the nine months ended September 30, 2022, compared with net cash used in financing activities of $1,548 million for the nine months ended September 30, 2021. The net cash used in financing activities for 2022 was primarily attributable to the purchase of treasury shares, the payment of dividends and taxes paid on withholding shares, partially offset by proceeds in connection with the issuance of common stock under our equity incentive plan. The net cash used in financing activities for 2021 was primarily attributable to the repayment of the $300 million aggregate principal amount of our 2018 floating rate senior notes due 2021 and the $300 million aggregate principal amount of our 2018 senior notes due 2021, the purchase of treasury shares, the payment of dividends and taxes paid on withholding shares, partially offset by proceeds in connection with the issuance of common stock under our equity incentive plan.
Analysis of financial condition, liquidity and capital resources
While we believe our cash and cash equivalents on hand, our operating cash flows and our existing financing arrangements will be sufficient to support our cash needs for the next twelve months and beyond, this may be subject to the environment in which we operate. Risks to our meeting future funding requirements include global economic conditions described in the following paragraph.
Global financial markets may be impacted by macroeconomic, business and financial volatility. As markets change, we will continue to monitor our liquidity position. While we do not anticipate it, there can be no assurance that a challenging economic environment or an economic downturn will not impact our liquidity or our ability to obtain future financing.

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Selected measures of liquidity and capital resources
Certain relevant measures of our liquidity and capital resources follow:
September 30,December 31,
(MILLIONS OF DOLLARS)20222021
Cash and cash equivalents$2,507 $3,485 
Accounts receivable, net(a)
1,189 1,133 
Short-term borrowings3 — 
Current portion of long-term debt1,350 — 
Long-term debt, net of discount and issuance costs5,210 6,592 
Working capital3,671 5,133 
Ratio of current assets to current liabilities2.27:13.86:1
(a)    Accounts receivable are usually collected over a period of 45 to 75 days. For the nine months ended September 30, 2022 compared with December 31, 2021, the number of days that accounts receivables were outstanding remained within this range. We regularly monitor our accounts receivable for collectability, particularly in markets where economic conditions remain uncertain. We believe that our allowance for doubtful accounts is appropriate. Our assessment is based on such factors as past due aging, historical and expected collection patterns, the financial condition of our customers, the robust nature of our credit and collection practices and the economic environment.
For additional information about the sources and uses of our funds, see the Analysis of the condensed consolidated balance sheets and Analysis of the condensed consolidated statements of cash flows sections of this MD&A.
Credit facility and other lines of credit
In December 2016, we entered into an amended and restated revolving credit agreement with a syndicate of banks providing for a multi-year $1.0 billion senior unsecured revolving credit facility (the credit facility). In December 2018, the maturity for the amended and restated credit facility was extended through December 2023. Subject to certain conditions, we have the right to increase the credit facility to up to $1.5 billion. The credit facility contains a financial covenant requiring us to not exceed a maximum total leverage ratio (the ratio of consolidated net debt as of the end of the period to consolidated Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA) for such period) of 3.50:1. Upon entering into a material acquisition, the maximum total leverage ratio increases to 4.00:1, and extends until the fourth full consecutive fiscal quarter ended immediately following the consummation of a material acquisition.
The credit facility also contains a financial covenant requiring that we maintain a minimum interest coverage ratio (the ratio of EBITDA at the end of the period to interest expense for such period) of 3.50:1. In addition, the credit facility contains other customary covenants.
We were in compliance with all financial covenants as of September 30, 2022 and December 31, 2021. There were no amounts drawn under the credit facility as of September 30, 2022 or December 31, 2021.
We have additional lines of credit and other credit arrangements with a group of banks and other financial intermediaries for general corporate purposes. We maintain cash and cash equivalent balances in excess of our outstanding short-term borrowings. As of September 30, 2022, we had access to $50 million of lines of credit which expire at various times and are generally renewed annually. There were $3 million of borrowings outstanding related to these facilities as of September 30, 2022 and and no borrowings outstanding related to these facilities as of December 31, 2021.
Domestic and international short-term funds
Many of our operations are conducted outside the U.S. The amount of funds held in the U.S. will fluctuate due to the timing of receipts and payments in the ordinary course of business and due to other reasons, such as business development activities. As part of our ongoing liquidity assessments, we regularly monitor the mix of U.S. and international cash flows (both inflows and outflows). Actual repatriation of overseas funds can result in additional U.S. and local income taxes, such as U.S. state income taxes, local withholding taxes, and taxes on currency gains and losses.
Global economic conditions
Challenging economic conditions in recent years have not had, nor do we anticipate that it will have, a significant impact on our liquidity. Due to our operating cash flows, financial assets, access to capital markets and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our liquidity needs for the foreseeable future. As markets change, we continue to monitor our liquidity position. There can be no assurance that a challenging economic environment or an economic downturn would not impact our ability to obtain financing in the future.
Debt
On August 20, 2021, we redeemed, upon maturity, the $300 million aggregate principal amount of our 2018 floating rate senior notes due 2021 and the $300 million aggregate principal amount of our 2018 senior notes due 2021.
On May 12, 2020, we issued $1.25 billion aggregate principal amount of our senior notes (2020 senior notes), with an original issue discount of $10 million. These notes are comprised of $750 million aggregate principal amount of 2.000% senior notes due 2030 and $500 million aggregate principal amount of 3.000% senior notes due 2050. On October 13, 2020, the net proceeds were used to repay the $500 million aggregate principal amount of our 3.450% 2015 senior notes due 2020 and the remainder is being used for general corporate purposes. On August 20, 2018, we issued $1.5 billion aggregate principal amount of our senior notes (2018 senior notes), with an original issue discount of $4 million. On September 12, 2017, we issued $1.25 billion aggregate principal amount of our senior notes (2017 senior notes), with an original issue discount of $7 million. On November 13, 2015, we issued $1.25 billion aggregate principal amount of our senior notes (2015 senior notes), with an original issue discount of $2 million. On January 28, 2013, we issued $3.65 billion aggregate principal amount of our senior notes (2013 senior notes offering) in a private placement, with an original issue discount of $10 million.

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The 2013, 2015, 2017, 2018 and 2020 senior notes are governed by an indenture and supplemental indenture (collectively, the indenture) between us and Deutsche Bank Trust Company Americas, as trustee. The indenture contains certain covenants, including limitations on our and certain of our subsidiaries' ability to incur liens or engage in sale lease-back transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the 2013, 2015, 2017, 2018 and 2020 senior notes may be declared immediately due and payable.
Pursuant to the indenture, we are able to redeem the 2013, 2015, 2017, 2018 and 2020 senior notes of any series, in whole or in part, at any time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the date of redemption. Upon the occurrence of a change of control of us and a downgrade of the 2013, 2015, 2017, 2018 and 2020 senior notes below an investment grade rating by each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, we are, in certain circumstances, required to make an offer to repurchase all of the outstanding 2013, 2015, 2017, 2018 and 2020 senior notes at a price equal to 101% of the aggregate principal amount of the 2013, 2015, 2017, 2018 and 2020 senior notes together with accrued and unpaid interest to, but excluding, the date of repurchase.
The components of our long-term debt follow:
DescriptionPrincipal AmountInterest RateTerms
2013 Senior Notes due 2023$1,350 million3.250%Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2023
2015 Senior Notes due 2025$750 million4.500%Interest due semi annually, not subject to amortization, aggregate principal due on November 13, 2025
2017 Senior Notes due 2027$750 million3.000%Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2027
2018 Senior Notes due 2028$500 million3.900%Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2028
2020 Senior Notes due 2030$750 million2.000%Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2030
2013 Senior Notes due 2043$1,150 million4.700%Interest due semi annually, not subject to amortization, aggregate principal due on February 1, 2043
2017 Senior Notes due 2047$500 million3.950%Interest due semi annually, not subject to amortization, aggregate principal due on September 12, 2047
2018 Senior Notes due 2048$400 million4.450%Interest due semi annually, not subject to amortization, aggregate principal due on August 20, 2048
2020 Senior Notes due 2050$500 million3.000%Interest due semi annually, not subject to amortization, aggregate principal due on May 15, 2050
Credit Ratings
Two major corporate debt-rating organizations, Moody's and S&P, assign ratings to our short-term and long-term debt. A security rating is not a recommendation to buy, sell or hold securities and the rating is subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.
The following table provides the current ratings assigned by these rating agencies to our commercial paper and senior unsecured non-credit-enhanced long-term debt:
Commercial
PaperLong-term DebtDate of
Name of Rating AgencyRatingRatingOutlookLast Action
Moody’sP-2Baa1StableAugust 2017
S&PA-2BBBStableDecember 2016
Share Repurchase Program
In December 2018, our Board of Directors authorized a $2.0 billion share repurchase program. This program was completed as of June 30, 2022. In December 2021, our Board of Directors authorized an additional $3.5 billion share repurchase program. As of September 30, 2022, there was approximately $3.0 billion remaining under this authorization. Purchases of Zoetis shares may be made at the discretion of management, depending on market conditions and business needs. Share repurchases may be executed through various means, including open market or privately negotiated transactions. During the first nine months of 2022, approximately 6.7 million shares were repurchased for $1.2 billion.
Off-balance sheet arrangements
In the ordinary course of business and in connection with the sale of assets and businesses, we may indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to activities prior to a transaction. These indemnifications typically pertain to environmental, tax, employee and/or product-related matters, and patent-infringement claims. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid significant amounts under these provisions and, as of September 30, 2022 and December 31, 2021, recorded amounts for the estimated fair value of these indemnifications are not significant.

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New accounting standards
Recently Issued Accounting Standards Not Adopted as of September 30, 2022
A description of recently issued accounting standards is contained in Note 3. Accounting Standards of the Notes to Condensed Consolidated Financial Statements.
Forward-looking statements and factors that may affect future results
This report contains “forward-looking” statements. We generally identify forward-looking statements by using words such as “anticipate,” “estimate,” “could,” “expect,” “intend,” “project,” “plan,” “predict,” “believe,” “seek,” “continue,” “outlook,” “objective,” “target,” “may,” “might,” “will,” “should,” “can have,” “likely” or the negative version of these words or comparable words or by using future dates in connection with any discussion of future performance, actions or events.
In particular, forward-looking statements include statements relating to future actions, business plans or prospects, prospective products, product approvals or products under development, product and supply chain disruptions, the impact of the COVID-19 pandemic, R&D costs, timing and likelihood of success, future operating or financial performance, future results of current and anticipated products and services, strategies, sales efforts, expenses, production efficiencies, production margins, anticipated timing of generic market entries, integration of acquired businesses, interest rates, tax rates, changes in tax regimes and laws, foreign exchange rates, growth in emerging markets, the outcome of contingencies, such as legal proceedings, plans related to share repurchases and dividends, government regulation and financial results. These statements are not guarantees of future performance, actions or events. Forward-looking statements are subject to risks and uncertainties, many of which are beyond our control, and are based on assumptions that could prove to be inaccurate. Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following:
•the continuing decline in global economic conditions, including the current crisis in Ukraine, and inflation;
•the impact of the COVID-19 global pandemic on our business, global supply chain, customers and workforce;
•a cyber-attack, information security breach or other misappropriation of our data;
•unanticipated safety, quality or efficacy concerns or issues about our products;
•failure of our R&D, acquisition and licensing efforts to generate new products and product lifecycle innovations;
•the possible impact and timing of competing products, including generic alternatives, on our products and our ability to compete against such products;
•disruptive innovations and advances in medical practices and technologies;
•difficulties or delays in the development or commercialization of new products;
•consolidation of our customers and distributors;
•changes in the distribution channel for companion animal products;
•the economic, political, legal and business environment of the foreign jurisdictions in which we do business;
•failure to successfully acquire businesses, license rights or products, integrate businesses, form and manage alliances or divest businesses;
•restrictions and bans on the use of and consumer preferences regarding antibacterials in food-producing animals;
•perceived adverse effects linked to the consumption of food derived from animals that utilize our products or animals generally;
•increased regulation or decreased governmental support relating to the raising, processing or consumption of food-producing animals;
•fluctuations in foreign exchange rates and potential currency controls;
•legal factors, including product liability claims, antitrust litigation and governmental investigations, including tax disputes, environmental concerns, commercial disputes and patent disputes with branded and generic competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products;
•failure to protect our intellectual property rights or to operate our business without infringing the intellectual property rights of others;
•product launch delays, inventory shortages, recalls or unanticipated costs caused by manufacturing problems and capacity imbalances;
•an outbreak of infectious disease carried by animals;
•adverse weather conditions and the availability of natural resources;
•the impact of climate change;
•quarterly fluctuations in demand and costs;
•governmental laws and regulations affecting domestic and foreign operations, including without limitation, tax obligations and changes affecting the tax treatment by the U.S. of income earned outside the U.S. that may result from pending or possible future proposals; and
•governmental laws and regulations affecting our interactions with veterinary healthcare providers.
However, there may also be other risks that we are unable to predict at this time. These risks or uncertainties may cause actual results to differ materially from those contemplated by a forward-looking statement. You should not put undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q and 8-K reports and our other filings with the SEC. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the above to be a complete discussion of all potential risks or uncertainties.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk
A significant portion of our revenue and costs are exposed to changes in foreign exchange rates. In addition, our outstanding borrowings may be subject to risk from changes in interest rates and foreign exchange rates. The overall objective of our financial risk management program is to seek to minimize the impact of foreign exchange rate movements and interest rate movements on our earnings. We manage these financial exposures through operational means and by using certain financial instruments. These practices may change as economic conditions change.
For a complete discussion of our exposure to interest rate and foreign exchange risk, refer to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes from the information discussed therein.
Item 4.    Controls and Procedures
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of the company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation as of September 30, 2022, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective at a reasonable level of assurance in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC.
Changes in Internal Control over Financial Reporting
During our most recent fiscal quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
Item 1.    Legal Proceedings
The information required by this Item is incorporated herein by reference to Notes to Condensed Consolidated Financial Statements—Note 15. Commitments and Contingencies in Part I— Item 1, of this Quarterly Report on Form 10-Q.
Item 1A.     Risk Factors
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in the "Our Operating Environment" and "Forward-Looking Statements and Factors That May Affect Future Results" sections of the MD&A and in Part I, Item 1A. "Risk Factors," of our 2021 Annual Report on Form 10-K, which could materially affect our business, financial condition, or future results and which are incorporated by reference herein. Set forth below are updates to certain of the risk factors disclosed in our 2021 Annual Report on Form 10-K.
The COVID-19 pandemic has negatively affected the global economy; has disrupted our and our customers', suppliers', and vendors' operations; has negatively affected certain elements of our business and operations; and may materially adversely affect our business, financial condition, results of operations and/or cash flows.
Our global operations expose us to risks associated with public health crises, including epidemics and pandemics such as COVID-19. The global spread of COVID-19 has had, and may continue to have, an adverse impact on our operations, sales and delivery and global supply chains. The spread of COVID-19 has resulted in authorities in various jurisdictions in which we operate implementing numerous measures since late 2019 to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns of non-essential businesses. There is no certainty that measures taken by governmental authorities will be sufficient to mitigate the risks posed by the virus, and our ability to continue to perform critical functions could be harmed.
The COVID-19 pandemic has and may continue to impact our global supply chain as we experience disruptions or delays in shipments of certain materials or components of our products. Any prolonged component shortages or supply chain disruption may result in manufacturing or R&D delays and could limit our ability to meet customer demand or otherwise adversely impact our revenue, and may have a material adverse effect on our business, financial condition, results of operations and/or cash flows.
The COVID-19 pandemic also has and may continue to reduce demand for some of our products as a result of the negative impact it has had and may continue to have on our customers. In particular, our livestock customers have been and may continue to be challenged by voluntary or mandatory facility closures, reduced packing plant capacity, travel bans and quarantines inhibiting consumption of protein and transportation of live animals, and labor shortages negatively impacting their operations. For example, a number of significant meat processing plants were closed temporarily in 2020 after employees tested positive for COVID-19, and plants continue to experience periodic disruptions. The resulting reduction in demand for some of our products has negatively impacted our business, financial condition, results of operations and cash flows and may have a material adverse effect on our business, financial condition, results of operations and/or cash flows, if such demand reduction accelerates or is prolonged.
Additionally, many of our workforce continue to work remotely as a result of the pandemic. Remote working arrangements could result in additional complexity or inefficiency or increase operational risks, including, but not limited to, risks associated with cybersecurity, information technology and systems which could have a material adverse effect on our business.
We cannot at this time predict the full impact of the COVID-19 pandemic, but we anticipate that the COVID-19 pandemic is likely to continue to impact our business, financial condition, results of operations and/or cash flows in 2022. Weak global economic conditions also may exacerbate the ongoing impact of the pandemic. The impact of the COVID-19 pandemic may also exacerbate the other risks discussed in this Risk Factors section and the Risk Factors section in our 2021 Annual Report on Form 10-K, any of which could have a material effect on us. This situation continues to change rapidly, especially as new variants of the virus are identified and additional impacts may arise that we are not aware of currently.
Our business is subject to risk based on global economic and political conditions.
Macroeconomic, business, political and financial disruptions, including the risks associated with the crisis resulting from Russia’s invasion of Ukraine and the imposition of sanctions and business disruptions, as well as inflation, could have a material adverse effect on our operating results, financial condition and liquidity. Certain of our customers and suppliers may be affected directly by the current economic downturn and could face credit issues or cash flow problems that could give rise to payment delays, increased credit risk, bankruptcies and other financial hardships that could decrease the demand for our products or hinder our ability to collect amounts due from customers. If one or more of our large customers, including distributors, discontinue their relationship with us as a result of economic conditions, sanctions or otherwise, our operating results and financial condition may be materially adversely affected. In addition, economic concerns and geopolitical instability may cause some pet owners to forgo or defer visits to veterinary practices or could reduce their willingness to treat pet health conditions or even to continue to own a pet. Moreover, customers may seek lower price alternatives to our products if they are negatively impacted by the current poor economic conditions. Infectious disease outbreaks, pandemics, sanctions, geopolitical instability and widespread fear of spreading disease through human contact can cause disruptions to or negatively impact our customers’ and our distributors’ business operations, which could materially adversely affect our operating results. Furthermore, our exposure to credit and collectability risk and cybersecurity risk is higher in certain international markets and as a result of the crisis resulting from Russia’s invasion of Ukraine, our ability to mitigate such risks may be limited. While we have procedures to monitor and limit exposure to credit and collectability risk and have defensive measures in place to prevent and mitigate cyberattacks, there can be no assurances that such procedures and measures will effectively limit such risks and avoid losses.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
In December 2018, our Board of Directors authorized a $2.0 billion share repurchase program. This program was completed as of June 30, 2022. In December 2021, our Board of Directors authorized an additional $3.5 billion share repurchase program.
The following table provides information with respect to the shares of the company’s common stock repurchased during the three months ended
September 30, 2022:
Issuer Purchases of Equity Securities
Total Number of Shares Purchased(a)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
July 1 - July 31, 2022531,009 $174.61519,923 $3,277,742,630
August 1 - August 31, 20221,055,008 $169.571,050,910 $3,099,516,820
September 1 - September 30, 2022677,636 $158.25677,565 $2,991,816,634
2,263,653 $167.372,248,398 $2,991,816,634
(a)     The company repurchased 15,255 shares during the three-month period ended September 30, 2022 that were not part of the publicly announced share repurchase authorization. These shares were reacquired from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards.
Item 3.    Defaults Upon Senior Securities
None
Item 4.    Mine Safety Disclosures
None
Item 5.    Other Information
None
Item 6.    Exhibits
Form of Restricted Stock Unit Award Agreement, effective as of July 27, 2022
Form of Stock Option Award Agreement, effective as of July 27, 2022
Form of Performance Restricted Stock Unit Award Agreement, effective as of July 27, 2022
Form of Cash Award Agreement, effective as of July 27, 2022
Form of Non-Employee Director Restricted Stock Unit Award Agreement, effective as of July 27, 2022
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302
Chief Executive Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906
Chief Financial Officer–Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906
EX-101.INSInline XBRL INSTANCE DOCUMENT
Inline XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
EX-104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Zoetis Inc.
November 3, 2022
By:
/S/ KRISTIN C. PECK
Kristin C. Peck
Chief Executive Officer and Director
November 3, 2022
By:
/S/ WETTENY JOSEPH
Wetteny Joseph
Executive Vice President and
Chief Financial Officer

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ZOETIS INC.
2013 EQUITY AND INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD

Zoetis Inc. (the “Company”) has granted to the person named below (the “Participant”), an Award of Restricted Stock Units under Section 8.1 of the Zoetis Inc. 2013 Equity and Incentive Plan, as amended and restated (the “Plan”). This Award is subject to all of the terms, definitions and provisions of this Restricted Stock Unit Award (this “RSU Award”) and the Plan, which is incorporated herein by reference, as follows:
Participant Name:                                
Date of Grant:        
Number of Restricted Stock Units:         
Unless otherwise defined in this RSU Award, the terms used in this RSU Award shall have the meanings defined in the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this RSU Award, the terms and conditions of the Plan will prevail.

1.Vesting Schedule.
    (a)    Regular Vesting Schedule. Subject to any acceleration provisions contained in the Plan or set forth below, 100% of the total Number of Restricted Stock Units subject to this Award shall vest and be settled on the third anniversary of the Date of Grant (the “Settlement Date”); provided that, except as set forth in Section 1(b) below, this Award shall cease vesting immediately upon Participant’s Termination of Service.
        Except as set forth in Section 1(b) below, Restricted Stock Units scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest on such date or occurrence unless Participant has continuously and actively been employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates from the Date of Grant until the date such vesting occurs. For non-U.S. Participants and for purposes of this Award only, except as determined by the Administrator (or any delegate) in its sole discretion, Termination of Service will be deemed to be as of the date that Participant is no longer actively providing services and will not be extended by any notice period or “garden leave” that may be required contractually or under applicable law. For U.S. Participants and for purposes of this Award only, such Participants shall be deemed to be continuously and actively employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates during any notification period required by the Worker Adjustment and Retraining Notification Act of 1988 (or any analogous state law) or during any such other period determined by the Administrator (or any delegate) in its sole discretion. Notwithstanding the foregoing, the Administrator (or any delegate) shall have the sole discretion to determine when Participant is no longer employed or providing services for purposes of this Award and participation in the Plan.
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        (b)    Accelerated or Special Vesting Conditions. Subject to the general provisions above, in the event of the following circumstances, the following vesting and settlement provisions shall apply:

(i)    Death. In the event of Participant’s Termination of Service due to Participant’s death, 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such termination. The person named in Participant’s will or Participant’s beneficiary, as the case may be, will receive the Shares issued upon settlement of Participant’s Restricted Stock Units, subject to applicable law.
(ii)    Total and Permanent Disability. In the event of Participant’s Termination of Service due to Participant’s Total and Permanent Disability (as defined below), 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such termination. For purposes of this Award, “Total and Permanent Disability” shall mean that Participant is receiving long-term disability benefits under the Company’s long-term disability program.
(iii)    Retirement. In the event of Participant’s Termination of Service due to Participant’s Retirement (as defined below) on or after the first anniversary of the Date of Grant, a pro-rata portion of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such Termination of Service. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was an active Employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. For purposes of this Award, “Retirement” means Participant has attained a minimum of sixty-five (65) combined years of age and service with the Company or any Affiliate, and a minimum age of fifty-five (55), and Participant is not eligible for Senior Retirement as defined in 1(b)(iv) below.
(iv)    Senior Retirement. In the event of Participant’s Termination of Service due to Participant’s Senior Retirement (as defined below) on or after the first anniversary of the Date of Grant, 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled upon the normal vesting date. For purposes of this Award, “Senior Retirement” means Participant has attained a minimum of sixty-five (65) years of age and ten (10) years of service with the Company or any Affiliate. For the avoidance of doubt, the benefits provided under this Section 1(b)(iv), if applicable, shall be in lieu of the benefits provided in Section 1(b)(iii) above and Section 1(b)(v) below. Notwithstanding the foregoing, if Participant dies following such Termination of Service due to Senior Retirement, 100% of the vested Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will be settled immediately.
    (v)    Termination as a Result of a Plant Closing or Restructuring Event. In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event (as defined below), a pro-rata portion of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such Termination of Service unless Participant’s Termination of Service as a result of Restructuring occurs on or after the first anniversary of the Date of Grant and at a time when Participant is eligible for “Senior Retirement”, in which case
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the Restricted Stock Units shall vest in accordance with Section 1(b)(iv) above. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was an active Employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. For purposes of this Award, a “Restructuring Event” means an involuntary Termination of Service without Cause and not related to performance that is the direct result of (i) a “restructuring event” as determined for financial statement reporting purposes, (ii) a divestiture or sale of a site or a business/business unit of the Company or its Affiliates, or (iii) a position elimination or a job restructuring including, but not limited to, a change in required competencies or qualifications for a position, as determined by the Plan Administrator, in its sole discretion.
    (vi)    Termination without Cause or Resignation for Good Reason following a Change in Control. In the event of Participant’s Termination of Service by the Company or an Affiliate without Cause (as defined below) or as a result of Participant’s resignation for Good Reason (as defined below), in either case, upon or within twenty-four (24) months following the consummation of a Change in Control, 100% of the Restricted Stock Units subject to this Award, as assumed or substituted by the acquiring company and adjusted to reflect the transaction if applicable (including dividend equivalents with respect thereto credited pursuant to Section 7 below), will immediately vest and be settled settle upon such termination.
    For purposes of this Award, “Cause” means (i) an act of dishonesty, fraud or misrepresentation made by Participant in connection with Participant’s responsibilities to the Company, (ii) Participant’s willful, material violation of any law or regulation applicable to the business of the Company; (iii) Participant’s conviction of, or plea of nolo contendere to, a felony or any crime that, in either case, has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company, (iv) Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company, (v) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Participant owes an obligation of nondisclosure as a result of Participant’s relationship with the Company; (vi) Participant’s willful breach of any obligations under any written agreement or covenant with the Company that is injurious to the Company; (vii) Participant’s violation or disregard of any Company policy that has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company; or (viii) Participant’s failure or refusal to perform Participant’s duties and responsibilities to the Company. For purposes of clarity, all references in this paragraph to the Company shall include references to any Affiliate and any successor to the Company or any Affiliate, and a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability.
    For purposes of this Award, “Good Reason” means Participant’s resignation due to the occurrence of any of the following conditions which occurs without Participant’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Participant’s base compensation (other than as part of an across-the-board salary reduction applicable to all similarly situated employees); (ii) a material reduction of Participant’s duties, authority, responsibilities or reporting relationship, relative to Participant’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; or (iii) the Company (or a successor, if appropriate) requires Participant to relocate to a facility or location more than twenty-five (25) miles away from the location at which Participant was working immediately prior to the required relocation and such relocation increases Participant’s one way commute by thirty (30) minutes or more during normal commuting hours and under typical traffic conditions.  In order for Participant to resign for Good Reason, Participant must provide written notice to the Company of the existence of the
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Good Reason condition within sixty (60) days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition. If the Good Reason condition is not remedied within such thirty (30) day period, Participant may resign based on the Good Reason condition specified in the notice effective no later than thirty (30) days following the expiration of the Company’s thirty (30) day cure period.
(vi)    Delay for Key Employees. Notwithstanding the foregoing provisions of this Section 1(b), if Participant is a Key Employee (as determined pursuant to the definition of the term “Key Employee” in the Zoetis Supplemental Savings Plan), any amounts which constitute “deferred compensation” under Internal Revenue Code Section 409A payable in connection with Participant’s Termination of Service shall not be paid upon such Participant’s Termination of Service, but instead shall be paid on the day that is six months following such Participant’s Termination of Service, or upon Participant’s death, if earlier.
2.Company’s Obligation to Pay. Each Restricted Stock Unit represents the right to receive a Share of Common Stock if the Restricted Stock Unit vests. Unless and until the Restricted Stock Units have vested in the manner set forth in Section 1 above, Participant will have no right to payment of any Shares. Prior to actual payment of any Shares, such Restricted Stock Unit will represent an unsecured obligation of the Company. Unless subject to a deferral election under the Company’s Equity Deferral Plan, Restricted Stock Units will be automatically settled and paid to Participant in Shares (cash will be paid in lieu of any fractional Shares) upon the Settlement Date (or earlier date for settlement provided in Section 1(b)) of such Restricted Stock Units, subject to Participant satisfying any applicable tax, tax withholding or other obligations as set forth in Section 5, and any other requirements or restrictions that may be imposed by the Company to comply with applicable laws or facilitate administration of the Plan.
3.Forfeiture upon Termination of Service. Subject to Section 1(b) hereof, in the event of Participant’s Termination of Service for any or no reason, the vesting of the Restricted Stock Units will immediately cease and the balance of the Restricted Stock Units that have not vested as of the date of Participant’s Termination of Service and do not vest as a result of Participant’s Termination of Service will be immediately forfeited without consideration. The Company shall have the sole discretion to determine when and under what circumstances Participant’s Termination of Service occurs for purposes of this RSU Award.
4.Inappropriate Activity; Clawbacks.
(a)    Forfeiture for Inappropriate Activity. If at any time Participant engages in any of the activities listed below, this Award (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited without consideration, subject to applicable law. The activities subject to this paragraph are any activity inimical, contrary or harmful to the interests of the Company or any Affiliate, including, but not limited to: (A) conduct related to Participant’s employment for which either criminal or civil penalties against Participant may be sought, (B) violation of Company or any Affiliate policies, including, without limitation, the Company’s insider trading policy, (C) accepting employment with or serving as a consultant, advisor or in any other capacity to a person or entity that is in competition with or acting against the interest of the Company or any Affiliate while employed by the Company or an Affiliate, and, for senior leaders (global job level 110 or above), within one year following a termination of employment for any reason1, (D) disclosing or misusing any confidential information or material
1 Not applicable to Participants employed by the Company or its Affiliates in the state of California or Oklahoma in the United States.
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concerning the Company or any Affiliate, or (E) participating in an attempted hostile takeover of the Company.
(b)    Clawbacks. Subject to applicable law, (A) if either the grant or the compensation realized under this Award was based on the achievement of financial results that were subsequently materially restated (other than a restatement due to a change in accounting principles) and such restatement caused the Company to reissue previously audited financial statements and the related audit opinions, (B) if Participant was determined to have altered the financial or operational results used to determine the amount earned under any Award under the Plan through fraud or material misconduct (C) if Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company has or might reasonably be expected to have significant business or reputational harm to the Company or any Affiliate, or (D) if Participant violates section 4 (a) (C) of this agreement, then (i) any compensation realized by Participant under this Award (as determined by the value of Shares and accumulated dividend equivalents received upon settlement) within three years prior to the date of such financial restatement, determination of financial misconduct or violation of section 4 (a) (C) of this agreement shall be recoverable by the Company, and (ii) all unpaid portions of this Award (whether or not vested) shall be cancelled and forfeited. In addition, with respect to circumstances or time periods not covered by the preceding sentence, the Company shall recover all or a portion of any compensation realized by Participant under this Award as defined in and to the extent required by regulations or stock exchange requirements adopted pursuant to the Dodd-Frank Act, subject to applicable law.
5.Tax Obligations. Regardless of any action the Company or Participant’s employer (the “Employer”) takes with respect to any or all applicable national, local, or other taxes or social contributions, withholdings, required deductions, or other payments, if any, that arise upon the grant, vesting or settlement of the Restricted Stock Units or the holding or subsequent sale of Shares, and the receipt of dividends (or dividend equivalent units), if any (“Tax-Related Items”), Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Participant is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant agrees to make adequate provision for (and indemnify the Company and any Subsidiary or Affiliate for) any Tax-Related Items. Participant further acknowledges and agrees that Participant is solely responsible for filing all relevant documentation that may be required in relation to this RSU Award or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to applicable law, such as but not limited to personal income tax returns or reporting statements in relation to the grant or vesting this Award, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Participant further acknowledges that the Company and the Employer make no representations or undertakings regarding the treatment of any Tax-Related Items and do not commit to and are under no obligation to structure the terms of the Restricted Stock Units or any aspect of this RSU Award to reduce or eliminate Participant’s liability for Tax-Related Items, or achieve any particular tax result. Participant also understands that applicable laws may require varying Share or Restricted Stock Unit valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation.  The Company is also not responsible or liable for any calculation or reporting of income or Tax-Related Items that may be required of Participant under applicable laws. Further, if Participant has become subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or
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former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Notwithstanding any contrary provision of this RSU Award, no Shares will be issued (or other payment made) to Participant, unless and until satisfactory arrangements (as determined by the Administrator) have been made by Participant with respect to the payment of any Tax-Related Items that the Company determines must be satisfied with respect to such Shares.
The Company may require Participant to satisfy applicable tax withholding obligations by (a) paying cash, (b) having the Company withhold Shares otherwise deliverable to Participant to satisfy the minimum withholding obligation (but only limited to such minimum to the extent required to avoid adverse tax consequences), (c) having the Company or the Employer withhold the required amount from Participant’s wages or other cash compensation or any other payment of any kind otherwise due to Participant, (d) surrendering already-owned Shares having a Fair Market Value equal to the minimum statutory withholding (but only limited to such minimum to the extent required to avoid adverse tax consequences), or (e) pursuant to such other procedures as may be specified by the Administrator from time to time. The Company in its discretion will have the right (but not the obligation) to satisfy any Tax-Related Items by reducing the number of Shares otherwise deliverable to Participant or by withholding such amounts from other compensation payable to Participant. If Participant fails to make satisfactory arrangements for the payment of any required Tax-Related Items hereunder at the time any applicable Restricted Stock Units otherwise are scheduled to be settled, Participant will permanently forfeit such Restricted Stock Units and any right to receive Shares thereunder and the Restricted Stock Units will be returned to the Company at no cost to the Company.
6.Rights as Stockholder. Until the issuance of the Shares subject to this Award (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to this Award. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 7 below and Section 3.2 of the Plan.
7.Dividend Equivalent Units. Unless otherwise set forth in the Country-Specific Addendum, if the Company declares a cash dividend on its Common Stock, Participant will be entitled to be credited with dividend equivalent units equal to (i) the amount of such dividend declared and paid with respect to one share of Common Stock, multiplied by (ii) the number of Restricted Stock Units subject to this Award plus the number of dividend equivalent units previously credited with respect to such Restricted Stock Units that are outstanding on the applicable dividend record date with respect to such dividend payment date, divided by (iii) the Fair Market Value of a Share of Common Stock on the dividend record date. Dividend equivalent units will not be credited with interest. Each dividend equivalent unit represents one Share of Common Stock and will be paid in Shares at the same time and to the same extent to which the Company issues the Shares underlying the Restricted Stock Units with respect to which they were credited. The Administrator may prospectively change the method of crediting dividend equivalent units as it, in its sole discretion, determines appropriate from time to time.
8.No Guarantee of Continued Service or Grants. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE
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EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS RSU AWARD, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE (SUBJECT TO APPLICABLE LAWS).
Participant also acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (b) the grant of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units even if Restricted Stock Units have been granted repeatedly in the past, and all decisions with respect to future grants of RSU Awards or other Awards, if any, will be at the sole discretion of the Company; (c) all decisions with respect to future awards of Restricted Stock Units, if any, will be at the sole discretion of the Company; (d) Participant’s participation in the Plan is voluntary; (e) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are extraordinary items that do not constitute regular compensation for services rendered to the Company or the Employer, and are outside the scope of Participant’s employment contract, if any; (f) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not intended to replace any pension rights or compensation; (g) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Employer.
9.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying this Award. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
10.Address for Notices. Except as required under Section 16, any notice to be given to the Company under the terms of this RSU Award shall be addressed to the Company, in care of its General Counsel at Zoetis Inc., 10 Sylvan Way, Parsippany, New Jersey 07054, or at such other address as the Company may hereafter designate in writing.
11.Non-Transferability of Restricted Stock Units. The Restricted Stock Units shall not be transferable other than by will or the laws of descent and distribution. The designation of a beneficiary does not constitute a transfer.
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12.Binding Agreement. Subject to the limitation on the transferability of this grant contained herein and to the other terms and conditions of the Plan, this RSU Award will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
13.Additional Conditions to Issuance of Shares. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of this Award or the Shares upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the grant of this Award or the issuance of Shares to Participant (or his or her beneficiary or estate), such grant or issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the grant of this Award or the delivery of the payment of any Shares will violate federal securities laws or other applicable laws, the Company will defer the grant of this Award or the delivery of the Shares until the earliest date at which the Company reasonably anticipates that the grant of this Award or the delivery of Shares will no longer cause such violation. The Company shall have no obligation, and will have no liability for failure, to satisfy the requirements of any such state, federal or foreign law or securities exchange or to obtain any such consent or approval of any such governmental authority. The Company shall not be obligated to treat this Award as outstanding or issue any Shares pursuant to this Award at any time if the grant of this Award or the issuance of Shares pursuant to this Award violates or is not in compliance with any laws, rules or regulations of the United States or any state or country.
Furthermore, Participant understands that the applicable laws of the country in which Participant is residing or working at the time of grant, vesting, and/or settlement of the Restricted Stock Units (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the vesting and/or settlement of the Restricted Stock Units, and neither the Company nor any Subsidiary or Affiliate assumes any liability in relation to this RSU Award in such case. As a condition to the vesting and settlement of the Restricted Stock Units, the Company may require Participant to make any representation and warranty to the Company as may be required by applicable laws.
14.Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with applicable law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Participant understands that the laws of the country in which he or she is resident at the time of grant or vesting or settlement of this Award or the holding or disposition of Shares or receipt of dividends (or dividend equivalent units), if any (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the grant of this Award or the issuance of Shares or may subject Participant to additional procedural or regulatory requirements he or she is solely responsible for and will have to independently fulfill in relation to this Award or the Shares. Notwithstanding any provision herein, this Award and any Shares issuable hereunder shall be subject to any
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special terms and conditions or disclosures as set forth in any addendum for Participant’s country (the “Country-Specific Addendum,”) which forms part this RSU Award.
15.Administrator Authority. The Administrator has the power to interpret the Plan and this RSU Award and to adopt such rules for the administration, interpretation and application of the Plan and this RSU Award as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this RSU Award.
16.Electronic Delivery and Language. The Company may, in its sole discretion, decide to deliver any documents related to this Award, any future restricted stock units or other equity awards granted by the Company, whether under the Plan or otherwise, or any other Company securities by electronic means. By accepting this Award, whether electronically or otherwise, Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions. If Participant has received this RSU Award, including appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.
17.Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this RSU Award.
18.Severability. In the event that any provision in this RSU Award will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this RSU Award.
19.Modifications to the RSU Award and the Plan.
(a)    This RSU Award and the Plan constitute the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award in reliance on any promises, representations, or inducements other than those contained herein.
(b)    In the event of a Change in Capitalization (as defined in Section 3.2 of the Plan), the Administrator shall make equitable adjustments to this Award as provided in Section 3.2 of the Plan. Except as provided in the preceding sentence, modifications to this Award can be made only in an express written contract executed by a duly authorized officer of the Company.
(c)    The Administrator expressly reserves the right to terminate this RSU Award prior to the Settlement Date, in which case the number of Restricted Stock Units and related dividend equivalent units shall be calculated as if the Settlement Date was the trading day
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immediately prior to the date of such termination (without proration to reflect the shortened vesting period), and shall be settled immediately; provided, however, that if immediate settlement is not permitted under Section 409A of the Code, such Restricted Stock Units and related dividend equivalent units shall be converted to cash based on the Fair Market Value of a Share of Common Stock on the date of termination of the Award and such amount shall be paid to Participant at the earliest date permitted under Section 409A of the Code.
(d)    Notwithstanding anything to the contrary in the Plan or this RSU Award, the Company reserves the right to revise this RSU Award as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with this RSU Award.
(e)    Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time, subject to the terms of the Plan.
20.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s Personal Data (as described below) by and among, as applicable, the Company, any of its Affiliates, and third parties as may be selected by the Company, for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that refusal or withdrawal of consent will affect Participant’s ability to participate in the Plan; without providing consent, Participant will not be able to participate in the Plan or realize benefits from this Award.
Participant understands that the Company and its Affiliates and any designated third parties may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Restricted Stock Units, Shares, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”). Participant understands that Personal Data may be transferred to any Affiliates or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Participant’s country (if different than the United States), or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate that is Participant’s Employer and its payroll provider.

Participant should also refer to the Zoetis Privacy Policy (which is available to Participant separately and may be updated from time to time) for more information regarding the collection, use, storage, and transfer of Participant’s Personal Data.
21.Foreign Exchange Fluctuations and Restrictions. Participant understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease. Participant also understands that neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the
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07-2022 Zoetis Inc. RSU Award Agreement (A&R Equity Plan)


United States Dollar or the selection by the Company or any Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Restricted Stock Units or Shares received (or the calculation of income or Tax-Related Items thereunder). Participant understands and agrees that any cross-border remittance made to transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Participant to provide such entity with certain information regarding the transaction.
22.Governing Law. This RSU Award will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this RSU Award or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of New Jersey and agree that such litigation will be conducted in the state courts of Morris County, New Jersey, or the federal courts of the United States for the District of New Jersey, and no other courts.
23.Acceptance of Award. By Participant’s acceptance of this RSU Award, Participant and the Company agree that this Award of Restricted Stock Units is granted under and governed by the terms and conditions of this RSU Award (including any Country-Specific Addendum hereto) and the Plan, and any ancillary documents, all of which are being delivered simultaneously with, and made a part of, this RSU Award. In addition, Participant acknowledges and agrees that Participant has reviewed the Plan and this RSU Award in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting this RSU Award and fully understand all provisions of the Plan and this RSU Award. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this RSU Award. Participant further agrees to notify the Company upon any change in Participant’s residence address.


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07-2022 Zoetis Inc. RSU Award Agreement (A&R Equity Plan)


ZOETIS INC.
2013 EQUITY AND INCENTIVE PLAN
STOCK OPTION AWARD

Zoetis Inc. (the “Company”) has granted to the person named below (the “Participant”), a Non-Qualified Stock Option (the “Option”) to purchase the number of Shares of Company common stock (the “Shares”) set forth below at the exercise price per Share set forth below (the “Exercise Price”). This Option is granted under Article VI of the Zoetis Inc. 2013 Equity and Incentive Plan, as amended and restated (the “Plan”), and is subject to all of the terms, definitions and provisions of this Stock Option Award and the Plan, which is incorporated herein by reference, as follows:
Participant Name:        
Date of Grant:        
Number of Shares subject to Option:        
Exercise Price:    $USD ____________ per Share
Expiration Date:        
Unless otherwise defined in this Stock Option Award, the terms used in this Stock Option Award shall have the meanings defined in the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Stock Option Award, the terms and conditions of the Plan will prevail.
1.Vesting Schedule/Exercise Schedule; Post-Termination Exercise Period.
        (a)(1)    Regular Vesting Schedule/Exercise Schedule. Subject to any acceleration provisions contained in the Plan or set forth below, this Option shall vest and become exercisable in accordance with the following schedule: this Option shall vest and become exercisable with respect to 100% of the Number of Shares subject to this Option (as set forth above) on the third anniversary of the Date of Grant (the “Vesting Date”); provided that this Option shall cease vesting, and any unvested Options shall be forfeited, immediately upon Participant’s Termination of Service.
        Except as otherwise provided herein or in the Plan, the portion of this Option scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Stock Option Award unless Participant has continuously and actively been employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates from the Date of Grant until the date such vesting occurs. For non-U.S. Participants and for purposes of this Option only, except as determined by the Administrator (or any delegate) in its sole discretion, Termination of Service will be deemed to be as of the date that Participant is no longer actively providing services and will not be extended by any notice period or “garden leave” that may be required contractually or under applicable law. For U.S. Participants and for purposes of this Option only, such Participants shall be deemed to be continuously and actively employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates during any notification period required by the Worker Adjustment and


Retraining Notification Act of 1988 (or any analogous state law) or during any such other period determined by the Administrator (or any delegate) in its sole discretion. Notwithstanding the foregoing, the Administrator (or any delegate) shall have the sole discretion to determine when Participant is no longer employed or providing services for purposes of this Stock Option Award and participation in the Plan.
    (2)    Regular Post-Termination Exercise Period. In the event of Participant’s Termination of Service other than as a result of (i) Participant’s death, (ii) Participant’s “Total and Permanent Disability,” (iii) Participant’s “Retirement,” (iv) Participant’s Termination of Service as a result of a plant closing or “Restructuring Event,” (v) Participant’s Termination of Service without “Cause” or resignation for “Good Reason” within twenty-four (24) months following a Change in Control, or (vi) Participant’s Termination for Employment for “Cause” (each as defined below), Participant may, to the extent Participant is vested in this Option, exercise this Option for up to three (3) months after Participant’s Termination of Service, but in no event beyond the Expiration Date set forth above. If Participant dies within this 3-month post-termination exercise period, this Option, to the extent vested on the date of Termination of Service, may be exercised for up to twelve (12) months from the date of Participant’s death, but in no event beyond the Expiration Date set forth above.
    (3)    Failure to Exercise during Post-Termination Exercise Period. If Participant does not exercise this Option within the applicable post-termination option exercise period set forth in Section 1(a)(2) or the applicable provision of Section 1(b), the unexercised portion of this Option shall terminate upon expiration of the post-termination exercise period. Participant is responsible for keeping track of the expiration date of the post-termination exercise period and the option Expiration Date for this Option. The Company will not provide further notice of these dates.
    (4)    Early Termination. Notwithstanding anything stated in this Stock Option Award, this Option may be subject to earlier termination as provided in the Plan or in Section 1(a)(5) or Section 20(c) of this Stock Option Award.
(5)    Change in Control. If this Option is not assumed or substituted in connection with a Change in Control, this Option shall become vested and exercisable in its entirety immediately prior to and contingent upon the closing of the Change in Control and this Option shall terminate in its entirety immediately following such Change in Control, provided the Company shall provide Participant with at least seven (7) days advance notice of any such termination.
    (b)    Accelerated Vesting Schedules/Exercise Schedules; Alternate Post-Termination Exercise Periods. The following vesting, exercisability and post-termination exercise provisions shall apply in the following circumstances:
    (1)    Death.
    (i)    Vesting Schedule/Exercise Schedule. In the event of Participant’s Termination of Service due to Participant’s death, the Option shall vest and become exercisable with respect to 100% of the Shares subject to this Option immediately upon such termination. The person named in Participant’s will or Participant’s beneficiary, as the case may be, may exercise this Option, subject to applicable law.
    (ii)    Post-Termination Exercise Period. In the event of Participant’s Termination of Service due to Participant’s death or in the event of Participant’s death following Termination of Service, the period of time to exercise this Option depends on the time and circumstances of Participant’s death, as follows:


    (A)    If Participant dies while still employed by the Company, but before Participant is eligible for Retirement, this Option may be exercised for up to twelve (12) months from the date of Participant’s death, but in no event beyond the Expiration Date set forth above.
    (B)    If Participant dies while still employed by the Company and while eligible for Retirement, this Option may be exercised until the Expiration Date set forth above.
    (C)    If Participant’s Termination of Service occurs in circumstances other than those listed in clauses (i) through (vi) of paragraph 1(a)(2) above and Participant dies within the three (3) month post-termination exercise period set forth in that paragraph, this Option may be exercised, to the extent Participant was vested in the Option at the date of his or her Termination of Service, for up to twelve (12) months from the date of Participant’s death, but in no event beyond the Expiration Date set forth above. If Participant’s Termination of Service occurs in one of the circumstances listed in clauses (i) through (vi) of paragraph 1(a)(2), the post-termination exercise period of this Option, upon Participant’s death after Termination of Service, shall be extended to the extent set forth in the applicable paragraph of Section 1(b).
    (2)    Total and Permanent Disability.
        (i)    Vesting Schedule/Exercise Schedule. In the event of Participant’s Termination of Service due to Participant’s Total and Permanent Disability, the Option shall vest and become exercisable with respect to 100% of the Shares subject to this Option immediately upon such termination. For purposes of this Option, “Total and Permanent Disability” shall mean that Participant is receiving long-term disability benefits under the Company’s long-term disability program.
    (ii)    Post-Termination Exercise Period.
    (A)     If Participant’s Termination of Service due to his or her Total and Permanent Disability occurs at a time when Participant is eligible for Retirement, Participant may exercise this Option until the Expiration Date set forth above.
    (B)    If Participant’s Termination of Service due to his or her Total and Permanent Disability occurs at a time when Participant is not eligible for Retirement, Participant may exercise this Option for up to twelve (12) months from the date of Participant’s Termination of Service, but in no event beyond the Expiration Date set forth above.
(3)    Retirement.
    (i)    Vesting Schedule/Exercise Schedule. In the event of Participant’s Termination of Service due to Participant’s Retirement on or after the first anniversary of the Date of Grant, this Option will continue to vest and become exercisable in accordance with the Vesting Schedule/Exercise Schedule set forth in the first paragraph of Section 1(a)(1) (disregarding for this purpose any requirement to continue employment or service). For avoidance of doubt, during the period of continued vesting after a Termination of Service due to Retirement described in the preceding sentence, until the Option has vested, it shall not be exercisable and shall be subject to forfeiture to the same extent as other unvested Options, including without limitation pursuant to Section 1(c). Notwithstanding the foregoing, if Participant dies following a Termination of Service described in this paragraph, the Option shall immediately vest and become exercisable with respect to 100% of the Shares subject to this Option. For purposes of this Option, “Retirement” means Participant has attained a minimum of


sixty-five (65) combined years of age and service with the Company or any Affiliate, and a minimum age of fifty-five (55).
    (ii)    Post-Termination Exercise Period. In the event of Participant’s Termination of Service due to his or her Retirement:
    (A)    If Participant’s Termination of Service occurs before the first anniversary of the Date of Grant, this Option shall terminate in its entirety immediately upon Participant’s Termination of Service.
    (B)    If Participant’s Termination of Service occurs on or after the first anniversary of the Date of Grant, Participant may, to the extent this Option is vested, exercise this Option until the Expiration Date set forth above.
(4)    Termination as a Result of a Plant Closing or Restructuring Event.
    (i)    Vesting Schedule/Exercise Schedule. In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event, a pro-rata portion of this Option will vest and become exercisable immediately upon such Termination of Service, unless Participant’s Termination of Service occurs on or after the first anniversary of the Date of Grant and when Participant is Retirement eligible, in which case this Option will continue to vest and become exercisable in accordance with Section 1(b)(3)(i). For this purpose, the pro-rata portion of this Stock Option Award that vests will be determined based on the number of days that Participant was an active Employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant, then rounded down to the nearest whole number of Options. For purposes of this Stock Option Award, a “Restructuring Event” means an involuntary Termination of Service without Cause (as defined below) and not related to performance, that is the direct result of (A) a “restructuring event” as determined for financial reporting purposes, (B) a divestiture or sale of a site or a business/business unit of the Company or its Affiliates, or (C) a position elimination or a job restructuring including, but not limited to, a change in required competencies or qualifications for a position, as determined by the Plan Administrator, in its sole discretion.
    (ii)    Post-Termination Exercise Period.
        (A)    In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event that occurs at a time when Participant is not eligible for Retirement, Participant may exercise this Option up until the date that is three (3) months after Participant’s Termination of Service, but in no event beyond the Expiration Date set forth above. If Participant dies within this three (3) month post-termination exercise period, this Option may be exercised for up to twelve (12) months from the date of Participant’s death, but in no event beyond the Expiration Date set forth above.
        (B)    In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event that occurs at a time when Participant is eligible for Retirement but before the first anniversary of the Date of Grant, Participant may exercise this Option for up to three (3) months from the date of Participant’s Termination of Service, but not beyond the Expiration Date set forth above.
    (C)    In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event that occurs at a time when Participant is eligible for Retirement and that is on or after the first anniversary of the Date of Grant, Participant may exercise this Option until the Expiration Date set forth above.


(5)    Termination without Cause or Resignation for Good Reason following a Change in Control.
    (i)    Vesting Schedule/Exercise Schedule. In the event of Participant’s Termination of Service by the Company without Cause or as a result of Participant’s resignation for Good Reason, in either case upon or within twenty-four (24) months following the consummation of a Change in Control, this Option will vest and become exercisable with respect to 100% of the Shares subject to this Option immediately upon such Termination of Service.
    (ii)    Post-Termination Exercise Period. In the event of Participant’s Termination of Service by the Company without Cause or as a result of Participant’s resignation for Good Reason, in either case, upon or within twenty-four (24) months following the consummation of a Change in Control, Participant may exercise this Option until the Expiration Date set forth above.
For purposes of this Option, “Cause” means (i) an act of dishonesty, fraud or misrepresentation made by Participant in connection with Participant’s responsibilities to the Company, (ii) Participant’s willful, material violation of any law or regulation applicable to the business of the Company; (iii) Participant’s conviction of, or plea of nolo contendere to, a felony or any crime that, in either case, has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company, (iv) Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company, (v) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Participant owes an obligation of nondisclosure as a result of Participant’s relationship with the Company; (vi) Participant’s willful breach of any obligations under any written agreement or covenant with the Company that is injurious to the Company; (vii) Participant’s violation or disregard of any Company policy that has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company; or (viii) Participant’s failure or refusal to perform Participant’s duties and responsibilities to the Company. For purposes of clarity, all references in this paragraph to the Company shall include references to any Affiliate and any successor to the Company or any Affiliate, and a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability.
    For purposes of this Award, “Good Reason” means Participant’s resignation due to the occurrence of any of the following conditions which occurs without Participant’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Participant’s base compensation (other than as part of an across-the-board salary reduction applicable to all similarly situated employees); (ii) a material reduction of Participant’s duties, authority, responsibilities or reporting relationship, relative to Participant’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; or (iii) the Company (or a successor, if appropriate) requires Participant to relocate to a facility or location more than twenty-five (25) miles away from the location at which Participant was working immediately prior to the required relocation and such relocation increases Participant’s one way commute by thirty (30) minutes or more during normal commuting hours and under typical traffic conditions.  In order for Participant to resign for Good Reason, Participant must provide written notice to the Company of the existence of the Good Reason condition within sixty (60) days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition. If the Good Reason condition is not remedied within such thirty (30) day period, Participant may resign based on the Good Reason condition specified in the notice effective no later than thirty (30) days following the expiration of the Company’s thirty (30) day cure period.


    (6)    Termination for Cause. In the event of Participant’s Termination of Service for Cause, this Option (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited upon first notification to Participant of such termination for Cause. If Participant’s employment is suspended pending an investigation as to whether he or she will be terminated for Cause, all of Participant’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

(c)    Other Forfeiture and Clawback Provisions.
(1)    Forfeiture for Inappropriate Activity. If at any time Participant engages in any of the activities listed below, this Option (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited without consideration, subject to applicable law. The activities subject to this paragraph are any activity inimical, contrary or harmful to the interests of the Company or any Affiliate, including, but not limited to: (A) conduct related to Participant’s employment for which either criminal or civil penalties against Participant may be sought, (B) violation of Company or any Affiliate policies, including, without limitation, the Company’s insider trading policy, (C) accepting employment with or serving as a consultant, advisor or in any other capacity to a person or entity that is in competition with or acting against the interest of the Company or any Affiliate while employed by the Company or an Affiliate, and, for senior leaders (global job level 110 or above), within one year following a termination of employment for any reason1, (D) disclosing or misusing any confidential information or material concerning the Company or any Affiliate, or (E) participating in an attempted hostile takeover of the Company.
(2)     Clawbacks. Subject to applicable law, (A) if either the grant or the compensation realized under this Stock Option Award was based on the achievement of financial results that were subsequently materially restated (other than a restatement due to a change in accounting principles) and such restatement caused the Company to reissue previously audited financial statements and the related audit opinions, (B) if Participant was determined to have altered the financial or operational results used to determine the amount earned under any Award under the Plan through fraud or material misconduct, (C) if Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company has or might reasonably be expected to have significant business or reputational harm to the Company or any Affiliate, or (D) if Participant violates section 1 (c) (1) (C) of this agreement, then (i) any compensation realized by a Participant under this Option (as determined by the option spread at the time of exercise) within three years prior to the date of such financial restatement, determination of financial misconduct or violation of section 1 (c) (1) (C) of this agreement shall be recoverable by the Company, and (ii) all remaining portions of this Option shall be cancelled and forfeited. In addition, with respect to circumstances or time periods not covered by the preceding sentence, the Company shall recover all or a portion of any compensation realized by Participant attributable to the grant or exercise of this Option or the sale of shares acquired upon such exercise, as defined in and to the extent required by regulations or stock exchange requirements adopted pursuant to the Dodd-Frank Act, subject to applicable law.
1 Not applicable to Participants employed by the Company or its Affiliates in the state of California or Oklahoma in the United States.


2.Exercise of Option.
(a)    Right to Exercise. This Option may be exercised only to the extent, and at the times, permitted pursuant to the terms set forth this Stock Option Award and the Plan.
(b)    Method of Exercise. This Option may only be exercised in a manner, and pursuant to such procedures, as the Administrator may determine from time to time, provided any such exercise procedure shall include a statement of Participant’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The election to exercise must be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option will be deemed to be exercised only upon receipt by the Company of Participant’s election to exercise, the aggregate Exercise Price for the Exercised Shares, and any payment or satisfaction in a manner acceptable to the Administrator of any applicable Tax-Related Items and any other requirements or restrictions that may be imposed by the Company to comply with applicable laws or facilitate administration of the Plan.
3.Method of Payment. Unless otherwise specified by the Company in its sole discretion to comply with applicable law or facilitate the administration of the Plan, payment of the aggregate Exercise Price may be by any of the following, or a combination thereof, at the election of Participant:
(a)cash or check (denominated in U.S. dollars) or a means of electronic payment acceptable to the Company or third party administrator;
(b)consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan and executed via a broker or other third party vendor;
(c)Shares (including Shares issuable pursuant to the exercise of the Option, and surrender or attestation of already-owned Shares) which have a Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Exercised Shares, provided that accepting such Shares, in the sole discretion of the Administrator, will not result in any adverse accounting consequences to the Company; or
(d)such other consideration as may be specified by the Administrator from time to time.
Participant understands and agrees that, if required by the Company or applicable law, any cross-border cash remittance made to exercise this Option or transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Participant to provide such entity with certain information regarding the transaction.


1.Tax Obligations.
(a)    Taxes and other Required Payments. Regardless of any action the Company or Participant’s employer (the “Employer”) takes with respect to any or all applicable national, local, or other taxes or social contributions, withholdings, required deductions, or other payments, if any, that arise upon the grant, vesting, or exercise of this Option, the holding or subsequent sale of Shares, and the receipt of dividends, if any (“Tax-Related Items”), Participant


acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Participant is and remains Participant’s responsibility, and may exceed the amount actually withheld by the Company or the Employer. Participant agrees to make adequate provision for (and indemnify the Company and any Subsidiary or Affiliate for) any Tax-Related Items. Participant further acknowledges and agrees that Participant is solely responsible for filing all relevant documentation that may be required in relation to this Option or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to applicable law, such as but not limited to personal income tax returns or reporting statements in relation to the grant, vesting or exercise of this Option, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Participant further acknowledges that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including the grant, vesting, or exercise of this Option, the holding or subsequent sale of Shares acquired under the Plan and the receipt of dividends, if any; and (ii) do not commit to and are under no obligation to structure the terms of this Option or any aspect of this Option to reduce or eliminate Participant’s liability for Tax-Related Items, or achieve any particular tax result. Participant also understands that applicable laws may require varying Share or Option valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation.  The Company is also not responsible or liable for any calculation or reporting of income or Tax-Related Items that may be required of Participant under applicable laws. Further, if Participant has become subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b)    Notwithstanding any contrary provision of this Stock Option Award, no Shares will be issued or other payment made to Participant (or his or her estate or beneficiary) pursuant to or with respect to this Option unless and until satisfactory arrangements (as determined by the Administrator) have been made with respect to the payment of any Tax-Related Items that the Company determines must be satisfied with respect to this Option. The Company may require Participant to satisfy applicable tax withholding obligations by one or a combination of the following methods:
(i)    paying cash at the time of exercise of the Option;
(ii)    having the Company or the Employer withhold the required amount from Participant’s wages or other cash compensation or any other payment of any kind otherwise due to Particpant;
(iii)    minimum statutory withholding from proceeds of the sale of Shares acquired upon exercise of this Option, through a mandatory sale executed by a broker or other third party vendor in accordance with procedures approved by the Company (but only limited to such minimum to the extent required to avoid adverse tax consequences);
(iv)    minimum statutory withholding in Shares to be issued upon exercise of this Option (but only limited to such minimum to the extent required to avoid adverse tax consequences);
(v)    surrendering already-owned Shares having a Fair Market Value equal to the minimum statutory withholding (but only limited to such minimum to the extent required to avoid adverse tax consequences); or
(vi)    pursuant to such other procedures as may be specified by the Administrator from time to time.


The Company in its discretion will have the right (but not the obligation) to satisfy any Tax-Related Items by reducing the number of Shares otherwise deliverable to Participant or by withholding such amounts from other compensation payable to Participant. If the obligation for Tax-Related Items is satisfied by withholding Shares, Participant is deemed to have been issued the full number of Shares purchased for tax purposes, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of Participant’s participation in the Plan. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Participant fails to comply with his or her obligations in connection with the Tax-Related Items.
2.Rights as Stockholder. Until the issuance of the Shares subject to this Option (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to this Option, notwithstanding the exercise of this Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 3.2 of the Plan.
3.No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THIS OPTION PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS STOCK OPTION AWARD, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE (SUBJECT TO APPLICABLE LAW).
4.Nature of Grant. In accepting this Option, Participant acknowledges that:
(a)    the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;
(b)    the grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options, even if Options have been granted repeatedly in the past, and all decisions with respect to future grants of Options or other Awards, if any, will be at the sole discretion of the Company;
(c)    all decisions with respect to future awards of Options, if any, will be at the sole discretion of the Company;
(d)    Participant’s participation in the Plan is voluntary;
(e)    this Option and the Shares subject to this Option are extraordinary items that do not constitute regular compensation for services rendered to the Company or the Employer, and that are outside the scope of Participant’s employment contract, if any;
(f)    this Option and the Shares subject to this Option are not intended to replace any pension rights or compensation;


(g)    this Option and the Shares subject to this Option are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer;
(h)    the future value of the underlying Shares is unknown and cannot be predicted with certainty; further, if Participant exercises this Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price;
(i)    neither the Company, nor any affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of this Option (or the calculation of income or Tax-Related Items thereunder);
(j)    in consideration of the grant of this Option, no claim or entitlement to compensation or damages shall arise from forfeiture of this Option resulting from Participant’s Termination of Service by the Employer (for any reason whatsoever and whether or not in breach of local labor laws), and Participant irrevocably releases the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, Participant shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and
(k)    this Option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a Change in Control, merger, take-over or transfer of liability.
5.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying this Option. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
6.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s Personal Data (as described below) by and among, as applicable, the Company, any of its Affiliates, and third parties as may be selected by the Company, for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that refusal or withdrawal of consent will affect Participant’s ability to participate in the Plan; without providing consent, Participant will not be able to participate in the Plan or realize benefits (if any) from this Option.
Participant understands that the Company and its Affiliates and any designated third parties may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Options, Shares, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Personal Data”). Participant understands that Personal Data may be transferred to any Affiliate or third parties assisting in the implementation, administration and


management of the Plan, that these recipients may be located in the United States, Participant’s country (if different than the United States), or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate that is Participant’s Employer and its payroll provider.

Participant should also refer to the Zoetis Privacy Policy (which is available to Participant separately and may be updated from time to time) for more information regarding the collection, use, storage, and transfer of Participant’s Personal Data.

7.Address for Notices. Except as required under Section 15, any notice to be given to the Company under the terms of this Stock Option Award shall be addressed to the Company, in care of its General Counsel at Zoetis Inc., 10 Sylvan Way, Parsippany New Jersey 07054 or at such other address as the Company may hereafter designate in writing.
8.Non-Transferability of Option. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.
9.Binding Agreement. Subject to the limitation on transferability contained in this Stock Option Award, this Option and this Stock Option Award will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
10.Additional Conditions to Issuance of Shares. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of this Option or the Shares upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the grant of this Option or the issuance of Shares to Participant (or his or her beneficiary or estate), such grant or issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the grant of this Option or the delivery of the payment of any Shares will violate federal securities laws or other applicable laws, the Company will defer the grant of this Option or the delivery of the Shares until the earliest date at which the Company reasonably anticipates that the grant of this Option or the delivery of Shares will no longer cause such violation. The Company shall have no obligation, and will have no liability for failure, to satisfy the requirements of any such state, federal or foreign law or securities exchange or to obtain any such consent or approval of any such governmental authority. Assuming such compliance, for income tax purposes the Exercised Shares will be considered transferred to Participant on the date this Option is exercised with respect to such Exercised Shares, subject to applicable law. The Company shall not be obligated to treat this Option as outstanding or issue any Shares pursuant to this Option at any time if the grant of this Option, the issuance of Shares pursuant to this Option, or the exercise of an Option by Participant, violates or is not in compliance with any laws, rules or regulations of the United States or any state or country.
Furthermore, Participant understands that the applicable laws of the country in which Participant is residing or working at the time of grant, vesting, and/or exercise of this Option (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of this Option, and neither the Company nor any Subsidiary or Affiliate assumes any liability in relation to this Option in such case. As a condition to the exercise of this Option, the Company may require Participant to make any representation and warranty to the Company as may be required by applicable laws.


11.Administrator Authority. The Administrator has the power to interpret the Plan and this Stock Option Award and to adopt such rules for the administration, interpretation and application of the Plan and this Stock Option Award as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any portions of this Option or Shares subject to this Option have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Stock Option Award.
12.Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Option, any future options or other equity awards granted by the Company, whether under the Plan or otherwise, or any other Company securities by electronic means. By accepting this Option, whether electronically or otherwise, Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions.
13.Language. If Participant has received this Stock Option Award, including appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.
14.Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on this Option and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with applicable law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Participant understands that the laws of the country in which he or she is resident at the time of grant, vesting, and/or exercise of this Option or the holding or disposition of Shares or receipt of dividends, if any (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of this Option or the issuance of Shares, or may subject Participant to additional procedural or regulatory requirements he or she is solely responsible for and will have to independently fulfill in relation to this Option or the Shares. Notwithstanding any provision herein, this Option and any Shares issuable hereunder shall be subject to any special terms and conditions or disclosures as set forth in any addendum for Participant’s country (the “Country-Specific Addendum”), which forms part this Stock Option Award. Participant also understands and agrees that if he works, resides, moves to, or otherwise is or becomes subject to applicable laws or Company policies of another jurisdiction at any time, certain country-specific notices, disclaimers and/or terms and conditions may apply to him as from the Date of Grant, unless otherwise determined by the Company in its sole discretion.
15.Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Stock Option Award.
16.Severability. In the event that any provision in this Stock Option Award will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Stock Option Award.


17.Modifications to Stock Option Award.
(a)    This Stock Option Award and the Plan constitute the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Stock Option Award in reliance on any promises, representations, or inducements other than those contained herein.
(b)    In the event of a Change in Capitalization (as defined in Section 3.2 of the Plan), the Administrator shall make equitable adjustments to this Stock Option Award as provided in Section 3.2 of the Plan. Except as provided in the preceding sentence, modifications to this Stock Option Award can be made only in an express written contract executed by a duly authorized officer of the Company.
(c)    The Administrator expressly reserves the right to terminate this Option prior to the Expiration Date, in which case the unexercised portion of this Option shall become fully vested (without proration to reflect the shortened vesting period) and the Administrator may provide in its sole discretion either (i) that Participant shall have at least ten (10) business days to exercise the Option after which any unexercised portion of the Option shall be cancelled without consideration, or (ii) that the unexercised portion of the Option shall be cancelled in exchange for payment of cash, Shares, or other property having an aggregate Fair Market Value equal to (x) the aggregate Fair Market Value of the Shares subject to the unexercised portion of the Option, reduced by (y) the aggregate Exercise Price for such Shares (and if the Exercise Price per Share equals or exceeds the Fair Market Value per Share, such cancellation shall be without consideration).
(d)    Notwithstanding anything to the contrary in the Plan or this Stock Option Award, the Company reserves the right to revise this Stock Option Award as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Option.
18.Governing Law. This Stock Option Award will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Option, this Stock Option Award or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of New Jersey, and agree that such litigation will be conducted in the state courts of Morris County, New Jersey, or the federal courts of the United States for the District of New Jersey, and no other courts.
22.    Acceptance of Award. By Participant’s acceptance of this Stock Option Award, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of this Stock Option Award (including any Country-Specific Addendum hereto) and the Plan, and any ancillary documents, all of which are being delivered simultaneously with, and made a part of, this Stock Option Award. In addition, Participant acknowledges and agrees that Participant has reviewed the Plan and this Stock Option Award in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting this Stock Option Award and fully understands all provisions of the Plan and this Stock Option Award. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Stock Option Award. Participant further agrees to notify the Company upon any change in Participant’s residence address.

ZOETIS INC.
2013 EQUITY AND INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AWARD

Zoetis Inc. (the “Company”) has granted to the person named below (the “Participant”), an Award of Performance Restricted Stock Units under Section 9.1 and Article V of the Zoetis Inc. 2013 Equity and Incentive Plan, as amended and restated (the “Plan”). This Award is subject to all of the terms, definitions and provisions of this Performance Restricted Stock Unit Award (this “Performance Award”) and the Plan, which is incorporated herein by reference, as follows:
Participant Name:                                
Date of Grant:        
Target Number of Performance Restricted Stock Units:         
Performance Period: The period beginning on January 1, [YEAR] and ending on December 31, [YEAR].
Unless otherwise defined in this Performance Award, the terms used in this Performance Award shall have the meanings defined in the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Performance Award, the terms and conditions of the Plan will prevail.

1.Vesting Schedule.
    (a)    Regular Vesting Schedule. Subject to any acceleration provisions contained in the Plan or set forth below, the percentage of the Target Number of Performance Restricted Stock Units subject to this Award as set forth above (the “Target Performance Restricted Stock Units”) that are earned by achievement of the Performance Goals as set forth in Exhibit A hereto (the “Earned Performance Restricted Stock Units”) and the dividend equivalent units credited with respect thereto shall vest on the third anniversary of the Date of Grant and be settled in the calendar year following the calendar year in which the Performance Period ends on the date (the “Settlement Date”) on or prior to March 15 of such year which is the later of (i) the third anniversary of the Date of Grant or (ii) the date on which the Human Resources Committee of the Board of Directors (the “Administrator”) determines the extent to which the Performance Goals have been achieved; provided that, except as set forth in Section 1(b) below, this Award shall cease vesting and be forfeited immediately upon Participant’s Termination of Service prior to the third anniversary of the Date of Grant. The level of achievement of Performance Goals shall be determined by the Administrator after the Performance Period has ended.
        Except as set forth in Sections 1(b)(iii) and (iv) below, Performance Restricted Stock Units scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest on such date or occurrence unless Participant has continuously and actively been employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates from the Date of Grant until the date such vesting occurs. For non-U.S. Participants and for purposes of this Award only, except as determined by the Administrator (or any delegate) in its
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sole discretion, Termination of Service will be deemed to be as of the date that Participant is no longer actively providing services and will not be extended by any notice period or “garden leave” that may be required contractually or under applicable law. For U.S. Participants and for purposes of this Award only, such Participants shall be deemed to be continuously and actively employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates during any notification period required by the Worker Adjustment and Retraining Notification Act of 1988 (or any analogous state law) or during any such other period determined by the Administrator (or any delegate) in its sole discretion. Notwithstanding the foregoing, the Administrator (or any delegate) shall have the sole discretion to determine when Participant is no longer employed or providing services for purposes of this Award and participation in the Plan.
        (b)    Accelerated or Special Vesting Conditions. Subject to the general provisions above, in the event of the following circumstances, the following vesting and settlement provisions shall apply:

(i)    Death. In the event of Participant’s Termination of Service due to Participant’s death, 100% of the Target Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such termination. The person named in Participant’s will or Participant’s beneficiary, as the case may be, will receive the Shares issued upon settlement of Participant’s Performance Restricted Stock Units, subject to applicable law.
(ii)    Total and Permanent Disability. In the event of Participant’s Termination of Service due to Participant’s Total and Permanent Disability (as defined below), 100% of the Target Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately upon such termination. For purposes of this Award, “Total and Permanent Disability” shall mean that Participant is receiving long-term disability benefits under the Company’s long-term disability program.
(iii)    Retirement. In the event of Participant’s Termination of Service due to Participant’s Retirement (as defined below) on or after the first anniversary of the Date of Grant, a pro-rata portion of the Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled on the Settlement Date subject to achievement of the Performance Goals as set forth in Exhibit A hereto, but disregarding for this purpose any requirement to continue employment or service. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was an active employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. Notwithstanding the foregoing, if Participant dies following any such Termination of Service, such pro-rata portion of the Target Performance Restricted Stock Units shall instead vest without regard to the achievement of the Performance Goals (including dividend equivalents with respect thereto credited pursuant to Section 7 below) and will be settled immediately. For purposes of this Award, “Retirement” means Participant has attained a minimum of sixty-five (65) combined years of age and service with the Company or any Affiliate, and a minimum age of fifty-five (55).
    (iv)    Termination as a Result of a Plant Closing or Restructuring Event. In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event (as defined below), a pro-rata portion of the Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled on the Settlement Date subject to achievement of the Performance Goals as set forth in Exhibit A hereto, but disregarding for this purpose any requirement to continue employment or service. For this purpose, the pro-rata portion of the Award that vests will be
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determined based on the number of days that Participant was an active employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. Notwithstanding the foregoing, if Participant dies following any such Termination of Service, a pro-rata portion (as determined in the preceding sentence) of the Target Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest and be settled immediately. For purposes of this Award, a “Restructuring Event” means an involuntary Termination of Service without Cause and not related to performance, that is the direct result of (i) a “restructuring event” as determined for financial statement reporting purposes, (ii) a divestiture or sale of a site or a business/business unit of the Company or its Affiliates, or (iii) a position elimination or a job restructuring including, but not limited to, a change in required competencies or qualifications for a position, as determined by the Plan Administrator, in its sole discretion.
    (v)    Award Not Assumed Upon Change in Control. If, at a time when vesting of the Performance Restricted Stock Units is subject to attainment of the Performance Goals, this Award is not assumed or substituted by the acquiring entity in connection with a Change in Control, the number of Performance Restricted Stock Units that will immediately vest and be settled immediately prior to the consummation of such Change in Control shall be 100% of the Target Performance Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below); provided, however, that such number of Performance Restricted Stock Units shall instead be settled on the Settlement Date to the extent necessary to comply with Code Section 409A. This paragraph 1(b)(v) shall not apply if the vesting of the Performance Restricted Stock Units is not subject to attainment of the Performance Goals.
    (vi)    Continued Employment Following a Change in Control. In the event this Award is assumed or substituted by the acquiring company and Participant continues in employment with the Company or its Subsidiaries or Affiliates following a Change in Control until the third anniversary of the Date of Grant, the number of Performance Restricted Stock Units that will vest and be settled upon such third anniversary shall be 100% of the Target Performance Restricted Stock Units subject to this Award, as adjusted to reflect the transaction, (including dividend equivalents with respect thereto credited pursuant to Section 7 below).
(vii)    Termination without Cause or Resignation for Good Reason following a Change in Control. In the event of Participant’s Termination of Service by the Company or an Affiliate without Cause (as defined below) or as a result of Participant’s resignation for Good Reason (as defined below), in either case, upon or within twenty-four (24) months following the consummation of a Change in Control, the number of Performance Restricted Stock Units that will immediately vest and settle upon such termination shall be 100% of the Target Performance Restricted Stock Units subject to this Award, as assumed or substituted by the acquiring company and adjusted to reflect the transaction, (including dividend equivalents with respect thereto credited pursuant to Section 7 below).
    For purposes of this Award, “Cause” means (i) an act of dishonesty, fraud or misrepresentation made by Participant in connection with Participant’s responsibilities to the Company; (ii) Participant’s willful, material violation of any law or regulation applicable to the business of the Company; (iii) Participant’s conviction of, or plea of nolo contendere to, a felony or any crime that, in either case, has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company; (iv) Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company; (v) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Participant owes an obligation of nondisclosure as a result of Participant’s relationship with the Company; (vi) Participant’s willful
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breach of any obligations under any written agreement or covenant with the Company that is injurious to the Company; (vii) Participant’s violation or disregard of any Company policy that has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company; or (viii) Participant’s failure or refusal to perform Participant’s duties and responsibilities to the Company. For purposes of clarity, all references in this paragraph to the Company shall include references to any Affiliate and any successor to the Company or any Affiliate, and a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability.
    For purposes of this Award, “Good Reason” means Participant’s resignation due to the occurrence of any of the following conditions which occurs without Participant’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Participant’s base compensation (other than as part of an across-the-board salary reduction applicable to all similarly situated employees); (ii) a material reduction of Participant’s duties, authority, responsibilities or reporting relationship, relative to Participant’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; or (iii) the Company (or a successor, if appropriate) requires Participant to relocate to a facility or location more than twenty-five (25) miles away from the location at which Participant was working immediately prior to the required relocation and such relocation increases Participant’s one way commute by thirty (30) minutes or more during normal commuting hours and under typical traffic conditions.  In order for Participant to resign for Good Reason, Participant must provide written notice to the Company of the existence of the Good Reason condition within sixty (60) days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition. If the Good Reason condition is not remedied within such thirty (30) day period, Participant may resign based on the Good Reason condition specified in the notice effective no later than thirty (30) days following the expiration of the Company’s thirty (30) day cure period.
(viii)    Delay for Key Employees. Notwithstanding the foregoing provisions of this Section 1(b), if Participant is a Key Employee (as determined pursuant to the definition of the term “Key Employee” in the Zoetis Supplemental Savings Plan), any amounts which constitute “deferred compensation” under Internal Revenue Code Section 409A payable in connection with Participant’s Termination of Service shall not be paid upon such Participant’s Termination of Service, but instead shall be paid on the day that is six months following such Participant’s Termination of Service, or upon Participant’s death, if earlier.
2.Company’s Obligation to Pay. Each Earned Performance Restricted Stock Unit represents the right to receive a Share of Common Stock if the Performance Restricted Stock Unit vests. Unless and until the Performance Restricted Stock Units have been Earned and vested in the manner set forth in Section 1 above, Participant will have no right to payment of any Shares. Prior to actual payment of any Shares, such Performance Restricted Stock Unit will represent an unsecured obligation of the Company. Unless subject to a deferral election under the Company’s Equity Deferral Plan, Earned Performance Restricted Stock Units will be automatically settled and paid to Participant in Shares (cash will be paid in lieu of any fractional Shares) upon the Settlement Date (or earlier vesting date provided in Section 1(b)) of such Performance Restricted Stock Units, subject to Participant satisfying any applicable tax, tax withholding or other obligations as set forth in Section 5, and any other requirements or restrictions that may be imposed by the Company to comply with applicable laws or facilitate administration of the Plan.
3.Forfeiture upon Termination of Service. Subject to Section 1(b) hereof, in the event of Participant’s Termination of Service for any or no reason, the vesting of the Performance Restricted Stock Units will immediately cease and the balance of the Performance
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Restricted Stock Units that have not vested as of the date of Participant’s Termination of Service and do not vest as a result of Participant’s Termination of Service will be immediately forfeited without consideration. The Company shall have the sole discretion to determine when and under what circumstances Participant’s Termination of Service occurs, for purposes of this RSU Award.
4.Inappropriate Activity; Clawbacks.
(a)    Forfeiture for Inappropriate Activity. If at any time Participant engages in any of the activities listed below, this Award (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited without consideration, subject to applicable law. The activities subject to this paragraph are any activity inimical, contrary or harmful to the interests of the Company or any Affiliate, including, but not limited to: (A) conduct related to Participant’s employment for which either criminal or civil penalties against Participant may be sought, (B) violation of Company or any Affiliate policies, including, without limitation, the Company’s insider trading policy, (C) accepting employment with or serving as a consultant, advisor or in any other capacity to a person or entity that is in competition with or acting against the interest of the Company or any Affiliate while employed by the Company or an Affiliate, and, for senior leaders (global job level 110 or above), within one year following a termination of employment for any reason1 (D) disclosing or misusing any confidential information or material concerning the Company or any Affiliate, or (E) participating in an attempted hostile takeover of the Company.
(b)    Clawbacks. Subject to applicable law, (A) if either the grant or the compensation realized under this Award was based on the achievement of financial results that were subsequently materially restated (other than a restatement due to a change in accounting principles) and such restatement caused the Company to reissue previously audited financial statements and the related audit opinions, (B) if Participant was determined to have altered the financial or operational results used to determine the amount earned under any Award under the Plan through fraud or material misconduct, (C) if Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company has or might reasonably be expected to have significant business or reputational harm to the Company or any Affiliate, or (D) if Participant violates section 4 (a) (C) of this agreement, then (i) any compensation realized by Participant under this Award (as determined by the value of Shares and accumulated dividend equivalents received upon settlement) within three years prior to the date of such financial restatement, determination of financial misconduct or violation of section 4 (a) (C) of this agreement shall be recoverable by the Company, and (ii) all unpaid portions of this Award (whether or not vested) shall be cancelled and forfeited. In addition, with respect to circumstances or time periods not covered by the preceding sentence, the Company shall recover all or a portion of any compensation realized by Participant under this Award as defined in and to the extent required by regulations or stock exchange requirements adopted pursuant to the Dodd-Frank Act, subject to applicable law.
5.Tax Obligations. Regardless of any action the Company or Participant’s employer (the “Employer”) takes with respect to any or all applicable national, local, or other taxes or social contributions, withholdings, required deductions, or other payments, if any, that arise upon the grant, vesting, or settlement of the Performance Restricted Stock Units or the holding or subsequent sale of Shares, and the receipt of dividends (or dividend equivalent units), if any (“Tax-Related Items”), Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Participant is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant agrees
1 Not applicable to Participants employed by the Company or its Affiliates in the state of California or Oklahoma in the United States
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to make adequate provision for (and indemnify the Company and any Subsidiary or Affiliate for) any Tax-Related Items. Participant further acknowledges and agrees that Participant is solely responsible for filing all relevant documentation that may be required in relation to this Award or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to applicable law, such as but not limited to personal income tax returns or reporting statements in relation to the grant or vesting this Award, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Participant further acknowledges that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Restricted Stock Units, including grant, vesting, settlement, the holding or subsequent sale of Shares acquired under the Plan, and the receipt of dividends (or dividend equivalents), if any; and (b) do not commit to and are under no obligation to structure the terms of the Performance Restricted Stock Units or any aspect of this Performance Award to reduce or eliminate Participant’s liability for Tax-Related Items, or achieve any particular tax result. Participant also understands that applicable laws may require varying Share or Performance Restricted Stock Unit valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation.  The Company is also not responsible or liable for any calculation or reporting of income or Tax-Related Items that may be required of Participant under applicable laws. Further, if Participant has become subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Notwithstanding any contrary provision of this Performance Award, no Shares will be issued (or other payment made) to Participant, unless and until satisfactory arrangements (as determined by the Administrator) have been made by Participant with respect to the payment of any Tax-Related Items that the Company determines must be satisfied with respect to such Shares.
The Company may require Participant to satisfy applicable tax withholding obligations by (a) paying cash, (b) having the Company withhold Shares otherwise deliverable to Participant to satisfy the minimum withholding obligation (but only limited to such minimum to the extent required to avoid adverse tax consequences), (c) having the Company or the Employer withhold the required amount from Participant’s wages or other cash compensation, or any other payment of any kind otherwise due to Participant (d) surrendering already-owned Shares having a Fair Market Value equal to the minimum statutory withholding (but only limited to such minimum to the extent required to avoid adverse tax consequences), or (e) pursuant to such other procedures as may be specified by the Administrator from time to time. The Company in its discretion will have the right (but not the obligation) to satisfy any Tax-Related Items by reducing the number of Shares otherwise deliverable to Participant or by withholding such amounts from other compensation payable to Participant. If Participant fails to make satisfactory arrangements for the payment of any required Tax-Related Items hereunder at the time any applicable Performance Restricted Stock Units otherwise are scheduled to be settled, Participant will permanently forfeit such Performance Restricted Stock Units and any right to receive Shares thereunder and the Performance Restricted Stock Units will be returned to the Company at no cost to the Company.
6.Rights as Stockholder. Until the issuance of the Shares subject to this Award (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


capital stock shall exist with respect to this Award. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 7 below and Section 3.2 of the Plan.
7.Dividend Equivalent Units. Unless otherwise set forth in the Country-Specific Addendum, if the Company declares a cash dividend on its Common Stock, Participant will be entitled to be credited with dividend equivalent units equal to (i) the amount of such dividend declared and paid with respect to one share of Common Stock, multiplied by (ii) the number of Target Performance Restricted Stock Units subject to this Performance Award plus the number of dividend equivalent units previously credited with respect to such Target Performance Restricted Stock Units, that are outstanding on the applicable dividend record date with respect to such dividend payment date, divided by (iii) the Fair Market Value of a Share of Common Stock on the dividend record date. Dividend equivalent units will not be credited with interest. Each dividend equivalent unit represents one Share of Common Stock, and will be paid in Shares at the same time and to the same extent to which the Company issues the Shares underlying the Performance Restricted Stock Units with respect to which they were credited, as set forth in Exhibit A. The Administrator may prospectively change the method of crediting dividend equivalent units as it, in its sole discretion, determines appropriate from time to time.
8.No Guarantee of Continued Service or Grants. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE PERFORMANCE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY ACHIEVING THE PERFORMANCE GOALS AND CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF PERFORMANCE RESTRICTED STOCK UNITS OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS PERFORMANCE AWARD, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE (SUBJECT TO APPLICABLE LAWS).
Participant also acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (b) the grant of Performance Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Restricted Stock Units, or benefits in lieu of Performance Restricted Stock Units even if Performance Restricted Stock Units have been granted repeatedly in the past , and all decisions with respect to future grants of Performance Awards or other Awards, if any, will be at the sole discretion of the Company; (c) all decisions with respect to future awards of Performance Restricted Stock Units, if any, will be at the sole discretion of the Company; (d) Participant’s participation in the Plan is voluntary; (e) the Performance Restricted Stock Units and the Shares subject to the Performance Restricted Stock Units are extraordinary items that do not constitute regular compensation for services rendered to the Company or the Employer, and that are outside the scope of Participant’s employment contract, if any; (f) the Performance Restricted Stock Units and the Shares subject to the Performance Restricted Stock Units are not intended to replace any pension rights or compensation; (g) the Performance Restricted Stock Units and the Shares subject to the Performance Restricted Stock Units are not part of normal or
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer.
9.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying this Award. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
10.Address for Notices. Except as required under Section 16, any notice to be given to the Company under the terms of this Performance Award shall be addressed to the Company, in care of its General Counsel at Zoetis Inc., 10 Sylvan Way, Parsippany, New Jersey 07054, or at such other address as the Company may hereafter designate in writing.
11.Non-Transferability of Performance Restricted Stock Units. The Performance Restricted Stock Units shall not be transferable other than by will or the laws of descent and distribution. The designation of a beneficiary does not constitute a transfer.
12.Binding Agreement. Subject to the limitation on the transferability of this grant contained herein and to the other terms and conditions of the Plan, this Performance Award, will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
13.Additional Conditions to Issuance of Shares. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of this Award or the Shares upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the grant of this Award or the issuance of Shares to Participant (or his or her beneficiary or estate), such grant or issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the grant of this Award or the delivery of the payment of any Shares will violate federal securities laws or other applicable laws, the Company will defer the grant of this Award or the delivery of the Shares until the earliest date at which the Company reasonably anticipates that the grant of this Award or the delivery of Shares will no longer cause such violation. The Company shall have no obligation, and will have no liability for failure, to satisfy the requirements of any such state, federal or foreign law or securities exchange or to obtain any such consent or approval of any such governmental authority. The Company shall not be obligated to treat this Award as outstanding or issue any Shares pursuant to this Award at any time if the grant of this Award or the issuance of Shares pursuant to this Award violates or is not in compliance with any laws, rules or regulations of the United States or any state or country.
Furthermore, Participant understands that the applicable laws of the country in which Participant is residing or working at the time of grant, vesting, and/or settlement of the Restricted
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


Stock Units (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the vesting and/or settlement of the Restricted Stock Units, and neither the Company nor any Subsidiary or Affiliate assumes any liability in relation to this RSU Award in such case. As a condition to the vesting and settlement of the Restricted Stock Units, the Company may require Participant to make any representation and warranty to the Company as may be required by applicable laws.
14.Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with applicable law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Participant understands that the laws of the country in which he or she is resident at the time of grant or vesting or settlement of this Award or the holding or disposition of Shares or receipt of dividends (or dividend equivalent units), if any (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the grant of this Award or the issuance of Shares or may subject Participant to additional procedural or regulatory requirements he or she is solely responsible for and will have to independently fulfill in relation to this Award or the Shares. Notwithstanding any provision herein, this Award and any Shares issuable hereunder shall be subject to any special terms and conditions or disclosures as set forth in any addendum for Participant’s country (the “Country-Specific Addendum”), which forms part of this Performance Award.
15.Administrator Authority. The Administrator has the power to interpret the Plan and this Performance Award and to adopt such rules for the administration, interpretation and application of the Plan and this Performance Award as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Performance Restricted Stock Units have been Earned and/or vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Performance Award.
16.Electronic Delivery and Language. The Company may, in its sole discretion, decide to deliver any documents related to this Award, any future performance restricted stock units or other equity awards granted by the Company, whether under the Plan or otherwise, or any other Company securities by electronic means or request Participant’s consent to participate in the Plan by electronic means. By accepting this Award, whether electronically or otherwise, Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions. If Participant has received this Performance Award, including appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


17.Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Performance Award.
18.Severability. In the event that any provision in this Performance Award will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Performance Award.
19.Modifications to the Performance Award and the Plan.
(a)    This Performance Award and the Plan constitute the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Performance Award in reliance on any promises, representations, or inducements other than those contained herein.
(b)    In the event of a Change in Capitalization (as defined in Section 3.2 of the Plan), the Administrator shall make equitable adjustments to this Award as provided in Section 3.2 of the Plan. Except as provided in the preceding sentence, modifications to this Performance Award can be made only in an express written contract executed by a duly authorized officer of the Company.
(c)    The Administrator expressly reserves the right to terminate this Performance Award prior to the end of the Performance Period, in which case the number of Earned Performance Restricted Stock Units and related dividend equivalent units shall be calculated as if the last day of the Performance Period was the trading day immediately prior to the date of such termination (without proration to reflect the shortened Performance Period). Notwithstanding the foregoing sentence, if the termination is in connection with a Change in Control and Section 1(b)(v) does not apply, the number of Performance Restricted Stock Units that shall be settled shall be 100% of the Target Performance Restricted Stock Units subject to this Award (as adjusted to reflect the transaction, if termination of the Award occurs after the Change in Control), including dividend equivalents with respect thereto. In either case, the applicable number of Performance Restricted Stock Units (as determined under the preceding two sentences) shall be settled immediately upon termination of this Award, except that if immediate settlement is not permitted under Section 409A of the Code, such Performance Restricted Stock Units and related dividend equivalent units shall be converted to cash based on the Fair Market Value of a Share of Common Stock on the date of termination of the Award and such amount shall be paid to Participant at the earliest date permitted under Section 409A of the Code.
(d)    Notwithstanding anything to the contrary in the Plan or this Performance Award, the Company reserves the right to revise this Performance Award as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with this Award of Performance Restricted Stock Units.
(e)    Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time, subject to the terms of the Plan.
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


20.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s Personal Data (as described below) by and among, as applicable, the Company, any of its Affiliates, and third parties as may be selected by the Company, for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that refusal or withdrawal of consent will affect Participant’s ability to participate in the Plan; without providing consent, Participant will not be able to participate in the Plan or realize benefits from this Award.
Participant understands that the Company and its Affiliates and any designated third parties may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Performance Restricted Stock Units, Shares, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”). Participant understands that Personal Data may be transferred to any Affiliates or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Participant’s country (if different than the United States), or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate that is Participant’s Employer and its payroll provider.
Participant should also refer to the Zoetis Privacy Policy (which is available to Participant separately and may be updated from time to time) for more information regarding the collection, use, storage, and transfer of Participant’s Personal Data.
21.Foreign Exchange Fluctuations and Restrictions. Participant understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease. Participant also understands that neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Performance Restricted Stock Units or Shares received (or the calculation of income or Tax-Related Items thereunder). Participant understands and agrees that any cross-border remittance made to transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Participant to provide such entity with certain information regarding the transaction.
22.Governing Law. This Performance Award will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Performance Award or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of New Jersey and agree that such litigation will be conducted in the state courts of Morris County, New Jersey, or the federal courts of the United States for the District of New Jersey, and no other courts.
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


23.Acceptance of Award. By Participant’s acceptance of this Performance Award, Participant and the Company agree that this Award of Performance Restricted Stock Units is granted under and governed by the terms and conditions of this Performance Award (including Exhibit A hereto and any Country-Specific Addendum hereto) and the Plan, and any ancillary documents, all of which are being delivered simultaneously with, and made a part of, this Performance Award. In addition, Participant acknowledges and agrees that Participant has reviewed the Plan and this Performance Award in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting this Performance Award and fully understand all provisions of the Plan and this Performance Award. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Performance Award. Participant further agrees to notify the Company upon any change in Participant’s residence address.

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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


EXHIBIT A
PERFORMANCE RESTRICTED STOCK UNIT AWARD

Performance Goal:
Zoetis, Inc.’s relative Total Shareholder Return (“TSR”) as compared to the TSR of the companies in the S&P 500 Group measured over the Performance Period, in accordance with the vesting provisions and definitions below.
Earning and Vesting:
Subject to the terms, definitions and provisions of this Performance Award and the Plan, Participant will be entitled to receive a number of shares of Common Stock as of the Settlement Date equal to the number of Earned Performance Restricted Stock Units and the Dividend Equivalent Units credited with respect thereto. The number of shares of Common Stock to be delivered will be determined by multiplying the number of Target Performance Restricted Stock Units plus the number of Dividend Equivalent Units credited with respect thereto by the Applicable Vesting Percentage correlated to the Company’s Relative TSR Percentile (as such terms are defined below) for the Performance Period in accordance with the table as follows (with linear interpolations between the 25th and 50th percentiles and between the 50th and 75th percentiles):

Upon Achievement of this Relative TSR Percentile:Applicable Vesting Percentage:
Below 25th percentile
0%
25th percentile
50%
50th percentile
100%
75th percentile or above
200%
Notwithstanding the foregoing, if the Administrator determines that due to unusual circumstances such as takeover rumors or other factors that result in a temporary increase in the Company’s stock price during all or part of the period used for determining the Company’s Ending Stock Price, the Company’s Relative TSR Percentile does not reflect the Company’s actual performance over the Performance Period, the Administrator shall reduce the number of shares of Common Stock to be delivered upon settlement of the Performance Restricted Stock Units below the number determined pursuant to the above table.
Any Performance Restricted Stock Unit that was eligible to vest with respect to a completed Performance Period and was not Earned or did not vest in accordance with this Exhibit A shall be forfeited and cancelled as of the Settlement Date.
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


“Performance Period” will begin on the January 1 of the year of grant and end on the December 31 of the third calendar year thereafter.
“Beginning Stock Price” shall mean the average of the closing prices of common shares during the twenty (20) consecutive trading days ending on the trading day prior to the beginning of the Performance Period.
“Ending Stock Price” shall mean the average of the closing prices of common shares (as appropriately adjusted to reflect stock splits, spin-offs, and similar transactions that occurred during the Performance Period) during the twenty (20) consecutive trading days ending on the last trading day of the Performance Period.
“S&P 500 Group” shall mean the companies comprising the S&P 500 stock market index as of the beginning of the Performance Period, excluding companies that during the Performance Period are acquired or are no longer publicly traded.
“Total Shareholder Return” or “TSR” shall mean the appreciation of share price during the Performance Period, plus any Dividends Paid on the common stock during such Performance Period, calculated as follows:
[ Ending Stock Price minus Beginning Stock Price plus Dividends Paid ]
divided by
[ Beginning Stock Price ]
“Relative TSR Percentile” shall mean the percentile rank of the Company’s TSR relative to the TSR of the companies in the S&P 500 Group for the Performance Period as determined by such third-party reporting service as the Administrator may designate within the first 90 days of the Performance Period or, in the event that such firm ceases to perform such service or fails to meet its obligations, such other reporting service as the Administrator may designate. Relative TSR Percentile will be determined by ranking the TSR of the Company and each of the companies in the S&P 500 Group (with the company having the lowest TSR being ranked number 1, the company with the second lowest TSR being ranked number 2, and so on) and determining the Company’s percentile rank based upon its position in the list by dividing the Company’s position by the total number of companies (including the Company) in the S&P 500 Group and rounding the quotient to the nearest hundredth.
“Dividends Paid” shall mean all dividends paid with respect to an ex-dividend date that occurs during the Performance Period (whether or not the dividend payment date occurs during the Performance Period), which shall be deemed to have been reinvested in the underlying common shares and shall include dividends paid with respect to such reinvested dividends, appropriately adjusted to reflect stock splits, spin-offs, and similar transactions.
“Settlement Date” shall mean the later of (i) the third anniversary of the Date of Grant or (ii) the date on which the Human Resources Committee of the Board of Directors determines the extent to which the Performance Goals have been achieved, which determination shall occur no later than 2½ months after the end of the calendar year in which the Performance Period ends.
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07-2022 Zoetis Inc. Performance RSU Award Agreement (A&R Equity Plan)


ZOETIS INC.
2013 EQUITY AND INCENTIVE PLAN
CASH AWARD

Zoetis Inc. (the “Company”) has granted to the person named below (the “Participant”), a cash award (“Cash Award”), subject to all of the terms, definitions and provisions of this Cash Award and the Zoetis Inc. 2013 Equity and Incentive Plan, as amended and restated (the “Plan”), which is incorporated herein by reference, as follows:
Participant Name        
Date of Grant        
Number of Underlying Shares         
Fair Market Value per Share on
Date of Grant:    $USD ____________ per Share
Unless otherwise defined in this Cash Award, the terms used in this Cash Award shall have the meanings defined in the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Cash Award, the terms and conditions of the Plan will prevail.

1.Vesting Schedule.
    (a)    Regular Vesting Schedule. Subject to any acceleration provisions contained in the Plan or set forth below, 100% of the Cash Award shall vest and be settled on the third anniversary of the Date of Grant (the “Settlement Date”); provided that, except as set forth in Section 1(b) below, this Award shall cease vesting immediately upon Participant’s Termination of Service.
Except as set forth in Section 1(b) below, Cash Awards scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest on such date or occurrence unless Participant has continuously and actively been employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates from the Date of Grant until the date such vesting occurs. For non-U.S. Participants and for purposes of this Award only, except as determined by the Administrator (or any delegate) in its sole discretion, Termination of Service will be deemed to be as of the date that Participant is no longer actively providing services and will not be extended by any notice period or “garden leave” that may be required contractually or under applicable law. For U.S. Participants and for purposes of this Award only, such Participants shall be deemed to be continuously and actively employed with, or providing services to, the Company or any of its Subsidiaries or Affiliates during any notification period required by the Worker Adjustment and Retraining Notification Act of 1988 (or any analogous state law) or during any such other period determined by the Administrator (or any delegate) in its sole discretion. Notwithstanding the foregoing, the Administrator (or any delegate) shall have

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


the sole discretion to determine when Participant is no longer employed or providing services for purposes of this Award and participation in the Plan.
        (b)    Accelerated or Special Vesting Conditions. Subject to the general provisions above, in the event of the following circumstances, the following vesting and settlement provisions shall apply:

(i)    Death. In the event of Participant’s Termination of Service due to Participant’s death, 100% of the Cash Award will vest and be settled immediately upon such termination. The person named in Participant’s will or Participant’s beneficiary, as the case may be, will receive payment upon settlement of Participant’s Cash Award, subject to applicable law.
(ii)    Total and Permanent Disability. In the event of Participant’s Termination of Service due to Participant’s Total and Permanent Disability (as defined below), 100% of the Cash Award will vest and be settled immediately upon such termination. For purposes of this Award, “Total and Permanent Disability” shall mean that Participant is receiving long-term disability benefits under the Company’s long-term disability program.
(iii)    Retirement. In the event of Participant’s Termination of Service due to Participant’s Retirement (as defined below) on or after the first anniversary of the Date of Grant, a pro-rata portion of the Cash Award will vest and be settled immediately upon such Termination of Service. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was an active Employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant For purposes of this Award, “Retirement” means Participant has attained a minimum of sixty-five (65) combined years of age and service with the Company or any Affiliate and a minimum age of fifty-five (55).
    (iv)    Termination as a Result of a Plant Closing or Restructuring Event. In the event of Participant’s Termination of Service as a result of a plant closing or Restructuring Event (as defined below), a pro-rata portion of the Cash Award will vest and be settled immediately upon such Termination of Service. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was an active Employee from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. For purposes of this Award, a “Restructuring Event” means an involuntary Termination of Service without Cause and not related to performance, that is the direct result of (i) a “restructuring event” as determined for financial statement reporting purposes, (ii) a divestiture or sale of a site or a business/business unit of the Company or its Affiliates, or (iii) a position elimination or a job restructuring including, but not limited to, a change in required competencies or qualifications for a position, as determined by the Plan Administrator, in its sole discretion.
    (v)    Termination without Cause or Resignation for Good Reason following a Change in Control. In the event of Participant’s Termination of Service by the Company or an Affiliate without Cause (as defined below) or as a result of Participant’s resignation for Good Reason (as defined below), in either case, upon or within twenty-four (24) months following the consummation of a Change in Control, 100% of the Cash Award, as assumed or substituted by the acquiring company and adjusted to reflect the transaction if applicable will immediately vest and be settled upon such termination.
    For purposes of this Award, “Cause” means (i) an act of dishonesty, fraud or misrepresentation made by Participant in connection with Participant’s responsibilities to the

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


Company, (ii) Participant’s willful, material violation of any law or regulation applicable to the business of the Company; (iii) Participant’s conviction of, or plea of nolo contendere to, a felony or any crime that, in either case, has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company, (iv) Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company, (v) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Participant owes an obligation of nondisclosure as a result of Participant’s relationship with the Company; (vi) Participant’s willful breach of any obligations under any written agreement or covenant with the Company that is injurious to the Company; (vii) Participant’s violation or disregard of any Company policy that has resulted in or is reasonably expected to result in material injury to the business or reputation of the Company; or (viii) Participant’s failure or refusal to perform Participant’s duties and responsibilities to the Company. For purposes of clarity, all references herein to the Company shall include references to any Affiliate and any successor to the Company or any Affiliate, and a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability.
    For purposes of this Award, “Good Reason” means Participant’s resignation due to the occurrence of any of the following conditions which occurs without Participant’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material reduction of Participant’s base compensation (other than as part of an across-the-board salary reduction applicable to all similarly situated employees); (ii) a material reduction of Participant’s duties, authority, responsibilities or reporting relationship, relative to Participant’s duties, authority, responsibilities or reporting relationship as in effect immediately prior to such reduction; or (iii) the Company (or a successor, if appropriate) requires Participant to relocate to a facility or location more than twenty-five (25) miles away from the location at which Participant was working immediately prior to the required relocation and such relocation increases Participant’s one way commute by thirty (30) minutes or more during normal commuting hours and under typical traffic conditions.  In order for Participant to resign for Good Reason, Participant must provide written notice to the Company of the existence of the Good Reason condition within sixty (60) days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have thirty (30) days during which it may remedy the Good Reason condition. If the Good Reason condition is not remedied within such thirty (30) day period, Participant may resign based on the Good Reason condition specified in the notice effective no later than thirty (30) days following the expiration of the Company’s thirty (30) day cure period.
    (vi)    Delay for Key Employees. Notwithstanding the foregoing provisions of this Section 1(b), if Participant is a Key Employee (as determined pursuant to the definition of the term “Key Employee” in the Zoetis Supplemental Savings Plan), any amounts which constitute “deferred compensation” under Internal Revenue Code Section 409A payable in connection with Participant’s Termination of Service shall not be paid upon such Participant’s Termination of Service, but instead shall be paid on the day that is six months following such Participant’s Termination of Service, or upon Participant’s death, if earlier.
2.Company’s Obligation to Pay. This Cash Award, to the extent vested, represents the right to receive, for each underlying Share subject to this Award (as set forth on page 1 hereof) a cash lump sum payment equal to (i) the Fair Market Value of a Share on the vesting date minus (ii) the Fair Market Value of a Share on the Date of Grant. No Shares shall be issued to Participant with respect to the Cash Award. Unless and until the Cash Award has vested in the manner set forth in Section 1 above, Participant will have no right to payment under this Cash Award. Prior to actual payment of this Award, this Cash Award will represent an unsecured

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


obligation of the Company, payable (if at all) only from the general assets of the Company. The Cash Award will be automatically settled and paid to Participant in cash in a lump sum upon the Settlement Date ((or earlier date for settlement as provided in Section 1(b)) of this Cash Award, net of all applicable Tax-Related Items (as defined in Section 5 below) and subject to Participant satisfying any other requirements or restrictions that may be imposed by the Company to comply with applicable laws or facilitate administration of the Plan. Payment of this Cash Award shall be made through local payroll.
3.Forfeiture upon Termination of Service. Subject to Section 1(b) hereof, in the event of Participant’s Termination of Service for any or no reason, the vesting of the Cash Award will immediately cease and the balance of the Cash Award that has not vested as of the date of Participant’s Termination of Service and does not vest as a result of Participant’s Termination of Service will be immediately forfeited without consideration. The Company shall have the sole discretion to determine when and under what circumstances Participant’s Termination of Service occurs for purposes of this Cash Award.
4.Inappropriate Activity; Clawbacks.
(a)    Forfeiture for Inappropriate Activity. If at any time Participant engages in any of the activities listed below, this Award (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited without consideration, subject to applicable law. The activities subject to this paragraph are any activity inimical, contrary or harmful to the interests of the Company or any Affiliate, including, but not limited to: (A) conduct related to Participant’s employment for which either criminal or civil penalties against Participant may be sought, (B) violation of Company or any Affiliate policies, including, without limitation, the Company’s insider trading policy, (C) accepting employment with or serving as a consultant, advisor or in any other capacity to a person or entity that is in competition with or acting against the interest of the Company or any Affiliate while employed by the Company or an Affiliate, and, for senior leaders (global job level 110 or above), within one year following a termination of employment for any reason1, (D) disclosing or misusing any confidential information or material concerning the Company or any Affiliate, or (E) participating in an attempted hostile takeover of the Company.
(b)    Clawbacks. Subject to applicable law, (A) if either the grant or the compensation realized under this Award was based on the achievement of financial results that were subsequently materially restated (other than a restatement due to a change in accounting principles) and such restatement caused the Company to reissue previously audited financial statements and the related audit opinions, (B) if Participant was determined to have altered the financial or operational results used to determine the amount earned under any Award under the Plan through fraud or material misconduct, (C) if Participant’s willful misconduct or gross negligence in connection with carrying out Participant’s job responsibilities to the Company has or might reasonably be expected to have significant business or reputational harm to the Company or any Affiliate, or (D) if Participant violates section 4 (a) (C) of this agreement, then (i) any compensation realized by Participant under this Award within three years prior to the date of such financial restatement, determination of financial misconduct or violation of section 4 (a) (C) of this agreement shall be recoverable by the Company, and (ii) all unpaid portions of this Award (whether or not vested) shall be cancelled and forfeited. In addition, with respect to circumstances or time periods not covered by the preceding sentence, the Company shall recover
1 Not applicable to Participants employed by the Company or its Affiliates in the state of California or Oklahoma in the United States

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


all or a portion of any compensation realized by Participant under this Award as defined in and to the extent required by regulations or stock exchange requirements adopted pursuant to the Dodd-Frank Act, subject to applicable law.
5.Tax Obligations. Regardless of any action the Company or Participant’s employer (the “Employer”) takes with respect to any or all applicable national, local, or other taxes or social contributions, withholdings, required deductions, or other payments, if any, that arise upon the grant, vesting, or settlement of the Cash Award (“Tax-Related Items”), Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Participant is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant agrees to make adequate provision for (and indemnify the Company and any Subsidiary or Affiliate for) any Tax-Related Items. Participant further acknowledges and agrees that Participant is solely responsible for filing all relevant documentation that may be required in relation to this Award or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to applicable law, such as but not limited to personal income tax returns or reporting statements in relation to the grant, vesting, or settlement of this Award, or any bank or brokerage account. Participant further acknowledges that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Cash Award, including grant, vesting, or settlement; and (b) do not commit to and are under no obligation to structure the terms of the Cash Award or any aspect of the Cash Award to reduce or eliminate Participant’s liability for Tax-Related Items, or achieve any particular tax result. Participant also understands that applicable laws may require varying Share valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation.  The Company is also not responsible or liable for any calculation or reporting of income or Tax-Related Items that may be required of Participant under applicable laws. Further, if Participant has become subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. In addition, the Company may require Participant to satisfy applicable tax withholding obligations by having the Company or the Employer withhold the required amount from Participant’s wages or other cash compensation or any other payment of any kind otherwise due to Participant, subject to applicable law.
6.No Rights as Stockholder. No right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to this Award. No adjustment will be made, except as provided in Section 3.2 of the Plan.
7.No Guarantee of Continued Service or Grants. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE CASH AWARD PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS CASH AWARD OR RECEIVING PAYMENT HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS CASH AWARD, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE (SUBJECT TO APPLICABLE LAWS).
Participant also acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (b) the grant of Cash Awards is voluntary and occasional and does not create any contractual or other right to receive future grants of Cash Awards, or benefits in lieu of Cash Awards even if Cash Awards have been granted repeatedly in the past, and all decisions with respect to future grants of Cash Awards or other Awards, if any, will be at the sole discretion of the Company; (c) all decisions with respect to future awards of Cash Awards, if any, will be at the sole discretion of the Company; (d) Participant’s participation in the Plan is voluntary; (e) the Cash Awards and the cash payments subject to the Cash Awards are extraordinary items that do not constitute regular compensation for services rendered to the Company or the Employer, and that are outside the scope of Participant’s employment contract, if any; (f) the Cash Awards and the cash payments subject to the Cash Awards are not intended to replace any pension rights or compensation; (g) the Cash Awards and the cash payments subject to the Cash Awards are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer.
8.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
9.Address for Notices. Except as required under Section 14, any notice to be given to the Company under the terms of this Cash Award shall be addressed to the Company, in care of its General Counsel at Zoetis Inc., 10 Sylvan Way, Parsippany, New Jersey 07054, or at such other address as the Company may hereafter designate in writing.
10.Non-Transferability of Cash Award. The Cash Award shall not be transferable other than by will or the laws of descent and distribution. The designation of a beneficiary does not constitute a transfer.
11.Binding Agreement. Subject to the limitation on the transferability of this grant contained herein and to the other terms and conditions of the Plan, this Cash Award will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
12.Additional Conditions to Payment. If at any time the Company will determine, in its discretion, that any additional steps or qualification in relation to this Award under any state, federal or foreign law or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the grant of this Award or payment thereunder to Participant (or his or her estate), such grant or payment will not occur unless and until such steps,

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the grant of this Award or the delivery of the payment will violate any applicable laws, the Company will defer the grant of this Award or the delivery of payment until the earliest date at which the Company reasonably anticipates that the grant of this Award or the delivery of payment will no longer cause such violation. The Company shall have no obligation to satisfy the requirements of any such state, federal or foreign law or to obtain any such consent or approval of any such governmental authority. The Company shall not be obligated to treat this Award as outstanding or make any payment pursuant to this Award at any time if the grant of this Award or payment pursuant to this Award violates or is not in compliance with any laws, rules or regulations of the United States or any state or country.
Furthermore, the Company reserves the right to impose other requirements on Participant’s participation in the Plan, this Award and on any payment made under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with applicable law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Participant understands that the laws of the country in which he or she is resident at the time of grant or vesting or settlement of the this Award, if any (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the grant of this Award or the payment thereunder or may subject Participant to additional procedural or regulatory requirements he or she is solely responsible for and will have to independently fulfill in relation to this Award.
13.Administrator Authority. The Administrator will have the power to interpret the Plan and this Cash Award and to adopt such rules for the administration, interpretation and application of the Plan and this Cash Award as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any portion of the Cash Award has vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Cash Award.
14.Electronic Delivery and Language. The Company may, in its sole discretion, decide to deliver any documents related to this Award, any future cash awards or other awards granted by the Company, whether under the Plan or otherwise, or any Company securities by electronic means. By accepting this Award, whether electronically or otherwise, Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance or terms and conditions. If Participant has received this Cash Award or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


15.Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Cash Award.
16.Severability. In the event that any provision in this Cash Award will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Cash Award.
17.Modifications to the Cash Award and the Plan.
(a)    This Cash Award and the Plan constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Cash Award in reliance on any promises, representations, or inducements other than those contained herein.
(b)    In the event of a Change in Capitalization (as defined in Section 3.2 of the Plan), the Administrator shall make equitable adjustments to this Award as provided in Section 3.2 of the Plan. Except as provided in the preceding sentence, modifications to this Cash Award can be made only in an express written contract executed by a duly authorized officer of the Company.
(c)    The Administrator expressly reserves the right to terminate this Cash Award prior to the Settlement Date, in which case the Fair Market Value of the underlying Shares subject to this Cash Award shall be calculated for purposes of clause (i) of Section 2 hereof as if the Settlement Date was the trading day immediately prior to the date of such termination (without proration to reflect the shortened vesting period), and shall be settled immediately, provided, however, that if immediate settlement is not permitted under Section 409A of the Code, payment with respect to this Cash Award shall be paid to Participant at the earliest date permitted under Section 409A of the Code.
(d)    Notwithstanding anything to the contrary in the Plan or this Cash Award, the Company reserves the right to revise this Cash Award as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with this Cash Award.
(e)    Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time, subject to the terms of the Plan.
18.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s Personal Data (as described below) by and among, as applicable, the Company, any of its Affiliates, and third parties as may be selected by the Company, for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that refusal or withdrawal of consent will affect Participant’s ability to participate in the Plan; without providing consent, Participant will not be able to participate in the Plan or realize benefits (if any) from this Award.
Participant understands that the Company and its Affiliates and any designated third parties may hold certain personal information about Participant, including, but not limited to,

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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)


Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Cash Awards, Shares, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”). Participant understands that Personal Data may be transferred to any Affiliates or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Participant’s country (if different than the United States), or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate that is Participant’s Employer and its payroll provider.
Participant should also refer to the Zoetis Employee Privacy Policy (which is available to Participant separately and may be updated from time to time) for more information regarding the collection, use, storage, and transfer of Participant’s Personal Data.
19.Foreign Exchange Fluctuations and Restrictions. Participant understands and agrees that the future value of Shares is unknown and cannot be predicted with certainty and may decrease. Participant also understands that neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Cash Award or payment received (or the calculation of income or Tax-Related Items thereunder).
20.Governing Law. This Cash Award will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Cash Award or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of New Jersey and agree that such litigation will be conducted in the state courts of Morris County, New Jersey, or the federal courts for the United States for the District of New Jersey, and no other courts.
21.    Acceptance of Award. By Participant’s acceptance of this Cash Award, Participant and the Company agree that this Cash Award is granted under and governed by the terms and conditions of this Cash Award and the Plan, and any ancillary documents, all of which are being delivered simultaneously with, and made a part of, this Cash Award. In addition, Participant acknowledges and agrees that Participant has reviewed the Plan and this Cash Award in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting this Cash Award and fully understand all provisions of the Plan and this Cash Award. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Cash Award. Participant further agrees to notify the Company upon any change in Participant’s residence address.


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07-2022 Zoetis Inc. Cash Award Agreement (A&R Equity Plan)

ZOETIS INC.
2013 EQUITY AND INCENTIVE PLAN
DIRECTOR RESTRICTED STOCK UNIT AWARD

Zoetis Inc. (the “Company”) has granted to the person named below (the “Participant”), an Award of Restricted Stock Units under Section 8.1 of the Zoetis Inc. 2013 Equity and Incentive Plan, as amended and restated (the “Plan”). This Award is subject to all of the terms, definitions and provisions of this Restricted Stock Unit Award (this “RSU Award”) and the Plan, which is incorporated herein by reference, as follows:
Participant Name:            _______________
Date of Grant:    _______________
Number of Restricted Stock Units:     _______________
Unless otherwise defined in this RSU Award, the terms used in this RSU Award shall have the meanings defined in the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this RSU Award, the terms and conditions of the Plan will prevail.

1.Vesting Schedule.
    (a)    Regular Vesting Schedule. Subject to the acceleration provisions set forth below, 100% of the total Number of Restricted Stock Units subject to this Award shall vest and be settled on the third anniversary of the Date of Grant (the “Settlement Date”); provided that, except as set forth in Section 1(b) below, this Award shall cease vesting immediately upon Participant’s Termination of Service.
        Except as set forth in Section 1(b) below, Restricted Stock Units scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest on such date or occurrence unless Participant has continuously and actively been providing services to the Company from the Date of Grant until the date such vesting occurs. The Administrator (or any delegate) shall have the sole discretion to determine when Participant is no longer employed or providing services for purposes of this Award and participation in the Plan.
        (b)    Accelerated or Special Vesting Conditions
    Subject to the general provisions above, in the event of the following circumstances, the following vesting and settlement provisions shall apply:
(I)    Death. In the event of Participant’s Termination of Service due to Participant’s death, 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest immediately and be settled within 60 days following such Termination of Service. The person named in
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



Participant’s will or Participant’s beneficiary, as the case may be, will receive the Shares issued upon settlement of Participant’s Restricted Stock Units, subject to applicable law.
(ii)    Disability. In the event of Participant’s Termination of Service due to Participant’s Disability (as defined below), 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest immediately and be settled within 60 days following such Termination of Service. For purposes of this Award, “Disability” shall mean that Participant is unable to perform his or her duties as a Director due to disability or incapacity of more than a temporary nature, as determined by the Board of Directors.
(iii)    Termination of Service at Conclusion of Term. In the event of Participant’s Termination of Service at the conclusion of the term for which he or she was elected, 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest immediately and be settled within 60 days following such Termination of Service.
    (iv)    Other Termination of Service. In the event of Participant’s Termination of Service before the conclusion of the term for which he or she was elected other than by reason of death, Disability, or a Change in Control, a pro-rata portion of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will vest immediately and be settled within 60 days following such Termination of Service. For this purpose, the pro-rata portion of the Award that vests will be determined based on the number of days that Participant was a Director from the Date of Grant through the date of Participant’s Termination of Service as compared to the total number of days from the Date of Grant to the third anniversary of the Date of Grant. The balance of the Restricted Stock Units that have not vested as of the date of Participant’s Termination of Service and do not vest as a result of Participant’s Termination of Service will be immediately forfeited without consideration. The Company shall have the sole discretion to determine when and under what circumstances Participant’s Termination of Service occurs for purposes of this RSU Award.
    (v)    Change in Control. In the event of a Change in Control while Participant is serving as a Director, 100% of the Restricted Stock Units subject to this Award (including dividend equivalents with respect thereto credited pursuant to Section 7 below) will immediately vest and be settled; provided, however, that if the Change in Control does not qualify as a “change of control” under Section 409A of the Internal Revenue Code of 1986 (“Section 409A”), settlement of such Restricted Stock Units will be delayed until, and will occur on, the earliest of: (i) the Settlement Date (as defined in Section 1(a)), (ii) the date of Participant’s Termination of Service, or (iii) the occurrence of a Change in Control which qualifies as a “change of control” under Section 409A.
(vi)    Section 409A. Notwithstanding the foregoing provisions of this Section 1(b), settlement upon Participant’s Termination of Service shall not occur unless such Termination of Service is also a “separation from service” (within the meaning of Section 409A).
2.Company’s Obligation to Pay. Each Restricted Stock Unit represents the right to receive a Share of Common Stock if the Restricted Stock Unit vests. Unless and until the Restricted Stock Units have vested in the manner set forth in Section 1 above, Participant will have no right to payment of any Shares. Prior to actual payment of any Shares, such Restricted Stock Unit will represent an unsecured obligation of the Company. Restricted Stock Units will
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



be automatically settled and paid to Participant in Shares (cash will be paid in lieu of any fractional Shares) upon the Settlement Date (or earlier date for settlement provided in Section 1(b)) of such Restricted Stock Units, subject to Participant satisfying any applicable tax, tax withholding or other obligations as set forth in Section 5 and any other requirements or restrictions that may be imposed by the Company to comply with applicable laws or facilitate administration of the Plan.
3.Inappropriate Activity; Clawbacks.
(a)    Forfeiture for Inappropriate Activity. To the extent permitted by applicable law, if at any time Participant engages in any of the activities listed below, this Award (including any vested portion thereof) shall immediately terminate in its entirety and be forfeited without consideration. The activities subject to this paragraph are any activity inimical, contrary or harmful to the interests of the Company or any Affiliate, including, but not limited to: (A) conduct related to Participant’s service as a Director for which either criminal or civil penalties against Participant may be sought, (B) violation of Company or any Affiliate policies, including, without limitation, the Company’s insider trading policy, (C) accepting employment with or serving as a consultant, advisor or in any other capacity to a person or entity that is in competition with or acting against the interest of the Company or any Affiliate while serving as a Director, (D) disclosing or misusing any confidential information or material concerning the Company or any Affiliate, or (E) participating in an attempted hostile takeover of the Company.
(b)    Clawbacks. The Company shall recover all or a portion of any compensation realized by Participant under this Award as defined in and to the extent required by regulations or stock exchange requirements adopted pursuant to the Dodd-Frank Act.
4.Tax Obligations. Regardless of any action the Company takes with respect to any or all applicable national, local, or other taxes or social contributions, withholdings, required deductions, or other payments, if any, that arise upon the grant, vesting or settlement of the Restricted Stock Units or the holding or subsequent sale of Shares, and the receipt of dividends (or dividend equivalent units), if any (“Tax-Related Items”), Participant acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Participant is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company. Participant further acknowledges that the Company (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this RSU Award , including grant, vesting, settlement, the holding or subsequent sale of Shares acquired under the Plan, and the receipt of dividends (or dividend equivalents), if any; and (b) does not commit to and is under no obligation to structure the terms of the Restricted Stock Units or any aspect of the Restricted Stock Units to reduce or eliminate Participant’s liability for Tax-Related Items, or achieve any particular tax result. Further, if Participant has become subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction. Notwithstanding any contrary provision of this RSU Award, no Shares will be issued (or other payment made) to Participant, unless and until satisfactory arrangements (as determined by the Administrator) have been made by Participant with respect to the payment of any Tax-Related Items that the Company determines must be satisfied with respect to such Shares.
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



The Company may require Participant to satisfy applicable tax withholding obligations (if any) by (a) paying cash, (b) having the Company withhold Shares otherwise deliverable to Participant to satisfy the minimum withholding obligation (but only limited to such minimum to the extent required to avoid adverse tax consequences), (c) having the Company withhold the required amount from Participant’s cash compensation or any other payment of any kind otherwise due to Participant,, (d) surrendering already-owned Shares having a Fair Market Value equal to the minimum statutory withholding (but only limited to such minimum to the extent required to avoid adverse tax consequences), or (e) pursuant to such other procedures as may be specified by the Administrator from time to time. The Company in its discretion will have the right (but not the obligation) to satisfy any applicable tax withholding obligations by reducing the number of Shares otherwise deliverable to Participant or by withholding such amounts from other compensation payable to Participant. If Participant fails to make satisfactory arrangements for the payment of any applicable tax withholding obligations hereunder at the time any applicable Restricted Stock Units otherwise are scheduled to be settled, Participant will permanently forfeit such Restricted Stock Units and any right to receive Shares thereunder and the Restricted Stock Units will be returned to the Company at no cost to the Company.
5.Rights as Stockholder. Until the issuance of the Shares subject to this Award (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to this Award. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 7 below and Section 3.2 of the Plan
6.Dividend Equivalent Units. Unless otherwise set forth in any applicable Country-Specific Addendum, if the Company declares a cash dividend on its Common Stock, Participant will be entitled to be credited with dividend equivalent units equal to (i) the amount of such dividend declared and paid with respect to one share of Common Stock, multiplied by (ii) the number of Restricted Stock Units subject to this Award plus the number of dividend equivalent units previously credited with respect to such Restricted Stock Units that are outstanding on the applicable dividend record date with respect to such dividend payment date, divided by (iii) the Fair Market Value of a Share of Common Stock on the dividend record date. Dividend equivalent units will not be credited with interest. Each dividend equivalent unit represents one Share of Common Stock and will be paid in Shares at the same time and to the same extent to which the Company issues the Shares underlying the Restricted Stock Units with respect to which they were credited. The Administrator may prospectively change the method of crediting dividend equivalent units as it, in its sole discretion, determines appropriate from time to time.
7.No Guarantee of Continued Service or Grants. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OF RESTRICTED STOCK UNITS OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS RSU AWARD, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY TO TERMINATE
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE (SUBJECT TO APPLICABLE LAWS).
Participant also acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time; (b) the grant of Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units even if Restricted Stock Units have been granted repeatedly in the past, and all decisions with respect to future grants of Restricted Stock Units or other Awards, if any, will be at the sole discretion of the Company; (c) all decisions with respect to future awards of Restricted Stock Units, if any, will be at the sole discretion of the Company; (d) Participant’s participation in the Plan is voluntary; (e) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are extraordinary items that do not constitute regular compensation for services rendered to the Company, and are outside the scope of Participant’s service contract, if any; (f) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not intended to replace any pension rights or compensation; (g) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company.
8.No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying this Award. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.
9.Address for Notices. Except as required under Section 15, any notice to be given to the Company under the terms of this RSU Award shall be addressed to the Company, in care of its General Counsel at Zoetis Inc., 10 Sylvan Way, Parsippany, New Jersey, or at such other address as the Company may hereafter designate in writing.
10.Non-Transferability of Restricted Stock Units. The Restricted Stock Units shall not be transferable other than by will or the laws of descent and distribution. The designation of a beneficiary does not constitute a transfer.
11.Binding Agreement. Subject to the limitation on the transferability of this grant contained herein and to the other terms and conditions of the Plan, this RSU Award will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
12.Additional Conditions to Issuance of Shares. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of this Award or the
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



Shares upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the grant of this Award or the issuance of Shares to Participant (or his or her beneficiary or estate), such grant or issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the grant of this Award or the delivery of the payment of any Shares will violate federal securities laws or other applicable laws, the Company will defer the grant of this Award or the delivery of the Shares until the earliest date at which the Company reasonably anticipates that the grant of this Award or the delivery of Shares will no longer cause such violation. The Company shall have no obligation, and will have no liability for failure, to satisfy the requirements of any such state, federal or foreign law or securities exchange or to obtain any such consent or approval of any such governmental authority. The Company shall not be obligated to treat this Award as outstanding or issue any Shares pursuant to this Award at any time if the grant of this Award or the issuance of Shares pursuant to this Award violates or is not in compliance with any laws, rules or regulations of the United States or any state or country.
Furthermore, the Company reserves the right to impose other requirements on Participant’s participation in the Plan, this Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with applicable law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Participant understands that the laws of the country in which he or she is resident at the time of grant or vesting or settlement of this Award or the holding or disposition of Shares or receipt of dividends (or dividend equivalent units), if any (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent the grant of this Award or the issuance of Shares or may subject Participant to additional procedural or regulatory requirements he or she is solely responsible for and will have to independently fulfill in relation to this Award or the Shares. Notwithstanding any provision herein, this Award and any Shares issuable hereunder shall be subject to any special terms and conditions or disclosures as set forth in any addendum for Participant’s country (the “Country-Specific Addendum”), which forms part this RSU Award.
13.Administrator Authority. The Administrator has the power to interpret the Plan and this RSU Award and to adopt such rules for the administration, interpretation and application of the Plan and this RSU Award as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this RSU Award.
14.Electronic Delivery and Language. The Company may, in its sole discretion, decide to deliver any documents related to this Award, any future restricted stock units or other
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



equity awards granted by the Company, whether under the Plan or otherwise, or any other Company securities by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company. If Participant has received this RSU Award, including appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.
15.Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this RSU Award.
16.Severability. In the event that any provision in this RSU Award will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this RSU Award.
17.Modifications to the RSU Award and the Plan.
(a)    This RSU Award and the Plan constitute the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award in reliance on any promises, representations, or inducements other than those contained herein.
(b)    In the event of a Change in Capitalization (as defined in Section 3.2 of the Plan), the Administrator shall make equitable adjustments to this Award as provided in Section 3.2 of the Plan. Except as provided in the preceding sentence, modifications to this Award can be made only in an express written contract executed by a duly authorized officer of the Company.
(c)    The Administrator expressly reserves the right to terminate this RSU Award prior to the Settlement Date, in which case the number of Restricted Stock Units and related dividend equivalent units shall be calculated as if the Settlement Date was the trading day immediately prior to the date of such termination (without proration to reflect the shortened vesting period), and shall be settled immediately; provided, however, that if immediate settlement is not permitted under Section 409A of the Code, such Restricted Stock Units and related dividend equivalent units shall be converted to cash based on the Fair Market Value of a Share of Common Stock on the date of termination of the Award and such amount shall be paid to Participant at the earliest date permitted under Section 409A of the Code.
(d)    Notwithstanding anything to the contrary in the Plan or this RSU Award, the Company reserves the right to revise this RSU Award as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with this RSU Award.
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



(e)    Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time, subject to the terms of the Plan.
18.Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s Personal Data (as described below) by and among, as applicable, the Company, any of its Affiliates, and third parties as may be selected by the Company, for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan. Participant understands that refusal or withdrawal of consent will affect Participant’s ability to participate in the Plan; without providing consent, Participant will not be able to participate in the Plan or realize benefits (if any) from this Award.
Participant understands that the Company and its Affiliates and any designated third parties may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, compensation, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Restricted Stock Units, Shares, or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”). Participant understands that Personal Data may be transferred to any Affiliates or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Participant’s country (if different than the United States), or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Participant’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate and its payroll provider.

Participant should also refer to the Zoetis Privacy Policy (which is available to Participant separately and may be updated from time to time) for more information regarding the collection, use, storage, and transfer of Participant’s Personal Data.
19.Foreign Exchange Fluctuations and Restrictions. Participant understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease. Participant also understands that neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Restricted Stock Units or Shares received (or the calculation of income or Tax-Related Items thereunder). Participant understands and agrees that any cross-border remittance made to transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require the Participant to provide such entity with certain information regarding the transaction.
20.Governing Law. This RSU Award will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this RSU Award or the Plan, the parties hereby submit to
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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)



and consent to the jurisdiction of the State of New Jersey and agree that such litigation will be conducted in the state courts of Morris County, New Jersey, or the federal courts of the United States for the District of New Jersey, and no other courts.
21.Acceptance of Award. By Participant’s acceptance of this RSU Award, Participant and the Company agree that this Award of Restricted Stock Units is granted under and governed by the terms and conditions of this RSU Award (including any Country-Specific Addendum hereto) and the Plan, and any ancillary documents, all of which are being delivered simultaneously with, and made a part of, this RSU Award. In addition, Participant acknowledges and agrees that Participant has reviewed the Plan and this RSU Award in their entirety, has had an opportunity to obtain the advice of counsel prior to accepting this RSU Award and fully understands all provisions of the Plan and this RSU Award. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this RSU Award. Participant further agrees to notify the Company upon any change in Participant’s residence address.


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07-2022 Zoetis Inc. Director RSU Award Agreement (A&R Equity Plan)

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kristin C. Peck, certify that:
1.    I have reviewed this Quarterly Report of Zoetis Inc. on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)    evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)    disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
November 3, 2022
By:/s/ KRISTIN C. PECK
Kristin C. Peck
Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Wetteny Joseph, certify that:
1.    I have reviewed this Quarterly Report of Zoetis Inc. on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)    evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)    disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
November 3, 2022
By:
/s/ WETTENY JOSEPH
Wetteny Joseph
Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350, I, Kristin C. Peck, Chief Executive Officer, hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Zoetis Inc. for the period ended September 30, 2022 (the "Report") (1) fully complies with Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zoetis Inc.
November 3, 2022
By:
/s/ KRISTIN C. PECK
Kristin C. Peck
Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. §1350, I, Wetteny Joseph, Executive Vice President and Chief Financial Officer, hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Zoetis Inc. for the period ended September 30, 2022 (the “Report”) (1) fully complies with Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zoetis Inc.
November 3, 2022
By:
/s/ WETTENY JOSEPH
Wetteny Joseph
Executive Vice President and Chief Financial Officer